The Economist recently featured a cover story claiming that the New Taiwan Dollar is undervalued, using the term “Formosan flu” to describe phenomena such as rising housing prices and stagnant wages. However, Jiann-Chyuan Wang, Vice President of the Chung-Hua Institution for Economic Research (CIER), points out that this analysis overlooks the distinctive characteristics of Taiwan’s industrial structure. Attempting to resolve these issues through currency appreciation would be akin to “asking a phantom to fill a prescription”—an entirely misguided approach.
The CIER held the “2025 Seminar on Current International Economic and Trade Dynamics” on November 25. During the seminar, Vice President Jiann-Chyuan Wang highlighted that, due to strong demand for AI, Taiwan’s economic growth rate for 2025 is projected to be 5.45%. This figure suggests that the country’s economic fundamentals remain strong. However, the widening performance gap between high-tech and traditional industries has created a pronounced “M-shaped” polarization, reflecting Taiwan’s genuine structural challenges.
Vice President Jiann-Chyuan Wang emphasized that The Economist fails to acknowledge the fragile competitiveness of traditional industries. Should the New Taiwan Dollar appreciate under current conditions, the adverse impact on exports would fall primarily on traditional manufacturing sectors. Meanwhile, returning capital inflows could elevate market liquidity, driving housing prices even higher and producing outcomes contrary to the publication’s stated intentions.
Regarding wages and purchasing power, he stressed that the crux of the problem lies not in the exchange rate but in insufficient R&D investment in the service sector. Over 80% of college graduates in Taiwan work in the service industry. However, most service providers are small-scale operations with outdated business models, which hinders their ability to offer high salaries or invest in talent development. This situation has resulted in what can be described as “degree inflation.”
Vice President Jiann-Chyuan Wang recommends promoting the industrialization and scaling of the service sector. For example, channeling insurance funds into the long-term care industry and establishing high-quality institutional models could stimulate growth in related sectors such as medical equipment and healthcare services, thereby fundamentally improving the wage structure.
Taiwan’s current challenges are not a matter of “exchange rate flu” but rather inadequate industrial upgrading and insufficient innovation in the service sector. The Economist’s recommendations do not align with Taiwan’s present circumstances.
Author: CIER Editorial Team
Date: November 26, 2025