The Taiwan dollar has gained a reputation over the years as a stable currency in the Asian region owing to the country’s steady economic management, and open investment and trade policies. It is symbolised by NT$ and has a currency code of TWD. There is currently NT$1.8 trillion in circulation, and a volume of approximately US$24 billion in Taiwan dollars is traded daily on global foreign exchange markets.1)Retrieved 4 February 2016 http://www.cbc.gov.tw/mp.asp?mp=2
The currency is regulated by the Central Bank of the Republic of China (Taiwan). Single Taiwan dollars are issued as coins. The currency has banknotes of NT$2000, NT$1000, NT$500, NT$100 and NT$200, and it features images of important Taiwanese historical leaders on one side and images of Taiwanese cultural icons on the other.
The History Of The Taiwan Dollar
The island nation that today is Taiwan is believed to have been inhabited dating back 20,000 to 30,000 years by aboriginal hunter-gatherer populations. The Dapenkeng culture, dating from around 3,000 B.C., is believed to be the first permanent agricultural society in the region. While the country lies only 100 miles off the mainland of China, official records of Chinese visits to the territory that is now Taiwan date only to about the third-century A.D.
The island was taken over by Dutch settlers in 1622. At the time of their arrival, they found a population of about 70,000 aboriginal inhabitants and around 2,000 Chinese and Japanese fishermen and merchants who used the area as a trading outpost. Following the Dutch settlement, the Chinese population grew to about 35,000, and in 1661 the Chinese-Japanese sea lord Koxinga drove the Dutch off the island. In 1683, the Chinese emperor Shengzu of the Qing dynasty wrested control of Taiwan from Koxinga’s grandson Cheng K’o-shuang, and the rule over the island was transferred to the Chinese Qing dynasty.
The original inhabitants of Taiwan lived off of subsistence agriculture and hunting, but sugar and rice farming gained prominence on the island with the arrival of the Dutch. The Dutch and visiting Spanish merchants on the island brought with them European gold and silver currency, including Dutch Guilders and Spanish 8 Real coins. With Chinese rule, silver Chinese Tael coins and copper coins such as Yongle Tongbao coins were in circulation.
Chinese coins remained in use in Taiwan until 1895, when the island was taken over by the Japanese during the Sino-Japanese war. From that time, the Taiwanese yen, which was placed on par with the Japanese yen, was used in the country.
Japanese rule in Taiwan ended in 1945 with the end of WWII, and the Chinese Nationalists took over the island. At that time, the Chinese Nationalist government adopted the Taiwan dollar, known now as the old Taiwan dollar, as the country’s currency.
In 1949, with the beginning of Communist rule in mainland China, the Chinese Nationalists moved their capital to Taiwan from Nanjing under the leadership of Chiang-Kai Shek. In an effort to rein in runaway inflation that had assailed the old Taiwan dollar, the Taiwanese government introduced the new Taiwan dollar at a rate of 1 to 40,000 of the previous currency. The new Taiwan dollar effectively became the Taiwan dollar that remains in use to the present.
In the aftermath of WWII and the Communist takeover of mainland China, Taiwan was heavily dependent on aid from the U.S. for military and economic development. In this environment, the country developed a strong manufacturing and export base and robust economic growth ensued, helping the country maintain a stable currency.
In the 1960s and 1970s, the country’s economy grew at averages of around 10% annually and the savings rate reached more than 30%. This helped boost Taiwan into the league of what became known as the “Asian tiger” economies.
Until 1978, Taiwan used a fixed-rate exchange system, pegging its currency to the U.S. dollar, but in that year switched over to a floating exchange rate system. Despite this policy change, the Taiwan central bank is thought to resort to currency market intervention on occasion to stabilise domestic prices and the exchange rate, and to promote exports and economic growth. For this reason, the bank’s policy is frequently classified by analysts as a managed floating exchange rate system.2)Retrieved 4 February 2016 https://eh.net/encyclopedia/the-economic-history-of-taiwan/
Taiwan’s monetary policy is carried out by the Central Bank of Taiwan’s 15-member board of directors at quarterly monetary policy meetings. The Taiwanese central bank customarily uses a monetary targeting system to seek to achieve economic growth and inflation goals. Under this system, the bank sets a target range for the country’s M2 aggregate money supply in order to determine an appropriate discount rate.
In practice, the bank uses several operational instruments to fine-tune the daily figures of reserve money and the interbank overnight loan rate. These include required bank reserve deposits, discounts, open market operations, re-deposits from financial institutions and selective credit management.3)Retrieved 4 February 2016 http://www.cbc.gov.tw/np.asp?ctNode=443&mp=2
Economy Of Taiwan
Taiwan is the 21st-largest economy in the world, according to GDP.4)Retrieved 4 February 2016 https://www.cia.gov/library/publications/the-world-factbook/geos/tw.html The country is known to have a dynamic capitalist economy with reduced government guidance of investment and foreign trade.
The country’s main industries include electronics, communications and information technology products, petroleum refining, chemicals and textiles, among others. Its top exports include semiconductors, petrochemicals, automobile/auto parts and ships, among others.5)Retrieved 4 February 2016 https://www.cia.gov/library/publications/the-world-factbook/geos/tw.html
As part of its efforts to promote foreign trade, Taiwan has been a strong participant in bilateral and multilateral foreign trade agreements. Among these include accords with Singapore, New Zealand, Panama, Nicaragua, Honduras, El Salvador, Guatemala and mainland China under the Economic Cooperation Framework Agreement (ECFA) signed in June 2010. With opening of greater trade with mainland China, the country has become Taiwan’s top destination of exports and second-largest source of imports after Japan.
Taiwan’s foreign reserves have risen to the world’s fifth-largest (behind China, Japan, Saudi Arabia and Switzerland) as a result of strong foreign trade and the successive accumulation of trade surpluses.6)Retrieved 4 February 2016 https://www.cia.gov/library/publications/the-world-factbook/geos/tw.html
Foreign exchange and financial trading in Taiwan are regulated by the Ministry of Finance, the Central Bank of China (Taiwan), the Securities and Futures Bureau and the Financial Supervisory Commission. The current foreign exchange regulations are determined by the latest version of its Foreign Exchange Controls Act, which was last updated in 2009.7)Retrieved 4 February 2016 http://law.banking.gov.tw/Eng/FLAW/FLAWDAT01.asp?lsid=FL006404
Major Taiwan Dollar Currency Pairs
The Taiwan dollar is commonly traded in pairs with major world and Asian currencies, including USD, CAD, AUD, EUR, GBP, JPY, CNY, INR, ZAR and NZD.
Taiwan Dollar Bills And Coins
Since its introduction, the Taiwan dollar has been issued as coins, paper money and plastic polymer money. Taiwan’s currency is printed under authority of the Central Bank of China (Taiwan) and coins are manufactured at the Central Engraving and Printing Plant and the Central Mint, which are subordinated to the central bank.
Some local nicknames for the currency are kuài, máo and taibi. Coins in current use include NT$0.5, NT$1, NT$5, NT$10, NT$20 and NT$50 Taiwan dollars.8)Retrieved 4 February 2016 http://www.cbc.gov.tw/ct.asp?xItem=943&CtNode=502&mp=2
The Taiwan Dollar Around The World
The Taiwan dollar is widely accepted regionally and internationally because of the traditionally liberal economic positions of the nation’s government. The direct use of the currency, however, is mostly restricted to Taiwan and trade across the Strait of Taiwan.
As part of its expanded trade with mainland China, Taiwan signed a currency clearing agreement with China in 2012 that allows the two countries to hold direct currency trade and avoid the use of U.S. dollars, which increased currency conversion costs.9)Retrieved 4 February 2016 https://books.google.com.br/books?isbn=1317427947
Where Is The Taiwan Dollar Today?
Taiwan’s traditionally more flexible exchange rate policy has allowed its currency to weather international turbulence better than some of its counterparts in the region. This was particularly evident during the Asian currency crisis of the 1990s, when the Taiwan dollar emerged relatively unscathed despite a succession of depreciations seen in the currencies of some of Taiwan’s key Asian trade partners.
Despite its reputation as a strong and stable economy, Taiwan’s increased dependence on trade with mainland China, a declining local birthrate and an aging population have raised concerns from some analysts about whether the country will remain a top player in regional affairs and the economy of Southeast Asia.
In February 2016, the Taiwanese currency underwent some depreciation amid the impact of a weakened market for its exports and policy adjustments by the government of China to slow global demand and growth.10)Retrieved 4 February 2016 http://www.nber.org/chapters/c10148.pdf
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References [ + ]
|1.||↑||Retrieved 4 February 2016 http://www.cbc.gov.tw/mp.asp?mp=2|
|2.||↑||Retrieved 4 February 2016 https://eh.net/encyclopedia/the-economic-history-of-taiwan/|
|3.||↑||Retrieved 4 February 2016 http://www.cbc.gov.tw/np.asp?ctNode=443&mp=2|
|4, 5, 6.||↑||Retrieved 4 February 2016 https://www.cia.gov/library/publications/the-world-factbook/geos/tw.html|
|7.||↑||Retrieved 4 February 2016 http://law.banking.gov.tw/Eng/FLAW/FLAWDAT01.asp?lsid=FL006404|
|8.||↑||Retrieved 4 February 2016 http://www.cbc.gov.tw/ct.asp?xItem=943&CtNode=502&mp=2|
|9.||↑||Retrieved 4 February 2016 https://books.google.com.br/books?isbn=1317427947|
|10.||↑||Retrieved 4 February 2016 http://www.nber.org/chapters/c10148.pdf|