Taiwan facts of the day

Taiwan may be small, but the island has emerged as a financial superpower thanks to the thriftiness of local savers and an eye-watering current account surplus of about 15 per cent of gross domestic product. The country now has the second-largest financial system in the world, relative to gross domestic product. And its life insurance industry is the biggest, with assets-to-GDP of 145 per cent, according to JPMorgan.

The local economy is not big enough to accommodate these enormous sums, so Taiwanese financial institutions have funnelled a whopping $1.2tn abroad.

…Taiwanese insurers hold about 4 per cent of the entire US investment-grade corporate bond market, and 14 per cent of longer-term corporate bonds, according to JPMorgan. Insurers’ holdings of US mortgage-backed securities have nearly doubled over the past five years, to $260bn. That makes Taiwan the second-biggest foreign owner of such securities.

Here is the FT piece by Robin Wigglesworth.

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Insurance industry indeed - ensuring that China cannot get its hands on Taiwan's array of savings must be a high priority.

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Does anyone know how much of the Chinese cash showing up in cities int he west driving up real estate prices is Taiwanese vs mainland Chinese parking their money out of reach of the Communists?

I know that pre 1999 Hong Kong hand over we saw something similar.

Significant impediments to mainlanders owning assets of any kind in Taiwan. Crazy property prices in Taipei largely a result of local tech tycoons who made a killing in China.

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I would think that USA builders could build faster than foreigners can save.

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Hologram effect. They have a tree trunk with constrained, nearly vertical flow, the consistent surplus. They will make a hologram somewhere.

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It's a pity those Taiwanese have such lousy personalities.

Everyone with a high savings rate has a lousy personality.

(So ... if Taiwan is doing "good" what does that do to the "paradox of thrift?")

It's not just me. No less an authority than Harvard says they have bad personalities.

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The paradox of thrift is a Wikipedia article you read. And misunderstood.

However, you are a liberal and I do believe you hate Asians. If there’s any truism or 2019, it’s that liberals are incredibly racist against Asians.

They hate asians because they make other "people of color" look bad, and illustrate that cultural backwardness rather than racism may be the source of their woes.

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Robin WIGGLESWORTH HAHAHAHAHA

Wasn't that the name of Dr Evil's cat?

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Life insurance premiums constitute about 19% of Taiwan's GNP! So what's motivating Taiwanese to buy life insurance: an aging population is a major factor. But it is a sector with dark clouds on the horizon, with price competition, the absence of innovation, and low interest rates together with the day of reckoning (i.e., mortality). https://www.asiainsurancereview.com/Magazine/ReadMagazineArticle

Life insurance is not altogether different from a pyramid, many new (younger) customers to offset the mortality of the old. New insurance companies generate heaps of cash flow (it's the law of numbers), but the longer they are in business, the greater the need to grow (again, it's the law of numbers). Anyone familiar with the industry knows why it's a magnet for charlatans: in the early years the heap of cash flow pays enormous salaries and bonuses, but as the company ages along with the age of its insureds, the pyramid eventually collapses. Can the sector in Taiwan, already at 19% of GNP, grow fast enough to avoid the day of reckoning?

Life insurance can be run on an actuarially sound basis, and I have no information as to whether Taiwan's is or not. I'm also not familiar with the industry collapses that you describe. Some people make the same pyramid criticism of social security, of course.

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rayward: Two words: "Financial Intermediary."

Many US states regulate and "supervise" insurance companies; and maintain "insurance funds" to back up insurance companies that go broke.

The financial assets ratios to GDP and to population seem reminiscent of Iceland's ratios before the 2008 [unexpected!] world financial collapse. Not saying this the same.

Iceland was holding a pile of foreign money, though, not domestic savings.

True.

To me more importantly probably alone on the Planet, Iceland was forced not to shift onto its government and people Iceland's insolvent banks' losses. The banks' creditors got in line with everyone else to pro-rata recover their investments as the insolvent banks' assets are liquidated. The international wailing and gnashing of teeth were stupendous. It was not perfect setup; but it's starkly different to how Western governments met the fiasco and the results are noteworthy.

Fair point.

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Iceland is a 'country' with about as many people in it as Bakersfield, CA.

If you think the financial hegemon with the world's reserve currency could handle 2008 the same way, well, maybe you should read a book.

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Sorry, GDP not GNP. It's in the linked article in my comment. But think about that: life insurance premiums account for nearly 20% of Taiwan's GDP. That is an astounding statistic.

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Too bad at 0.9 children per woman they have the lowest TFR in the world. Modern societies die of success while utter failures reproduce and multiply.

If they don't have kids then why would they buy all that life insurance? Something doesn't add up.

I presume it is the type of life insurance that pays out in old age. Maybe this isn't common in the US. So I guess it's a type of retirement savings. In Australia our dedicated retirement savings is called superannuation and it's about 100% of GDP.

we are thinking it could be an aussie
https://www.mirror.co.uk/news/uk-news/woman-strangled-swan-death-public-16259534

That's a reasonable assumption. In Australia swans are black, so she probably mistook it for a noxious goose.

+1+1=2!

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It's curious that societies (among OECD countries) were babies are born outside of marriage have relatively higher fertility rates. https://www.oecd.org/els/family/SF_2_4_Share_births_outside_marriage.pdf

Perhaps conservatives can relax a bit and be less critical of women having babies regardless of marital status =)

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The "thriftiness of local savers" implies no public safety net for old age or disability. The heavy overhang of life insurance implies some sort of tax advantage over other forms of investment.

a financial superpower thanks to the thriftiness of local savers

Pretty much the opposite of the debt-fueled USA where saving is considered hoarding unless the savings are advanced to "financial advisors" who get to take their share. Of course, with a Fed-designed 2% inflation goal, cash saving is the same as flushing your wealth down the toilet one dollar bill at a time.

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"Taiwan may be small": but it isn't. It has a land area 1.75 times that of Wales.

But my penis isn’t small it has a length 1.75 times that of a mosquito’s.

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Everything is relative. Grab a map and look at the neighbors: China 1300 million people, Japan 130 million, South Korea 50 million, Philippines 100 million, Vietnam 90 million.

Taiwan 24 million people. So?

Guess I got cucked again!

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The national debt of Taiwan is 35% of GDP compared to 200% in Japan. In general, a small country of 24 million will be less corrupt than a large one of 130 million.

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I highly recommend visiting Taiwan. Very vibrant civil society, but also interesting from a development angle. I went to Taipei more or less blind and imagined to visit a modern city akin to every other (as Tyler often complains). And while the zone around Taipei 101 does look a little like that, most of the city is not like that at all, and reminds me of developing countries such as Thailand or Vietnam with its street markets and rough construction. Think more developing Hong Kong than Developed Japan. Another way of observing this is comparing Taiwan's ranking on GDP per capita and GDP per capita adjusted for price differences; the former well lower than the latter, as everything is super cheap.

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And they have a Total fertility rate of: 1.13 children born/woman. So each person will own more and more until there is one person who owns it all. Wink.

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