The exchange rate of the New Taiwan Dollar has surged, and Taiwanese media reports indicate that the machinery and machine tool industries in Taiwan are at risk of collapsing.
According to a report by China Times, Tsai Yung-yu, the chairman of the Taiwan Screw Industry Association, stated on the 5th that the average gross profit margin of the screw industry is only 15%. The recent sharp rise in the New Taiwan Dollar has wiped out the industry's gross profit overnight, even turning it negative, making it less costly to stop production entirely.
Tsai Yung-yu is concerned that if the upward trend of the New Taiwan Dollar continues, there will be a massive wave of bankruptcies in the Taiwanese screw and fastener industry.
Chang Ta-li, chairman of the Taiwan Machine Tool & Accessory Builders’ Association, said that the global economic downturn has made it tough for Taiwan's machinery industry to compete with Japan and South Korea. He urges the government to support export industries and asks banks not to "take away the umbrella on a rainy day" by cutting credit, but rather to ease lending terms for land and factory mortgages to aid liquidity for businesses to get through the current difficulties.
Since early May, the New Taiwan Dollar has risen sharply. On Monday, Taiwanese citizens scrambled to exchange currency, causing major banks' networks to crash, with the New Taiwan Dollar temporarily touching 29.59 against 1 US dollar.
In the past month, the New Taiwan Dollar has appreciated by 10%. The Central Bank of Taiwan only intervened to curb the appreciation at the beginning of May. It is speculated that Taiwan is engaged in trade negotiations with the United States and may be allowing the New Taiwan Dollar to appreciate to avoid high tariffs from the US.