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Weak service sector constrains Taiwan's economy

Monday, February 1, 2016


Taiwan's service sector.


The services sector has assumed a dominant role in Taiwan's GDP (63%) and employment (59%). However, this reflects hollowing out of the manufacturing sector rather than a strengthening of services. Like the manufacturing sector, Taiwan's services sector is characterised by low profit margins and salaries, and dominated by small and medium-sized enterprises (SMEs) with weak R&D capability.


  • Limited salary growth in the services sector will restrain private consumption.
  • The incoming government's industrial policies will create demand for services connected with several advanced manufacturing sectors.
  • The FTAs the new government seeks with advanced countries may help reinvigorate Taiwan's uncompetitive, inward-looking services sector.

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