The Economist recently published an article titled “The Hidden Risks in Taiwan’s Boom,” claiming that Taiwan has long undervalued the New Taiwan Dollar and relies too heavily on exports and the technology sector. The article used the term “Formosan Flu” to summarize issues such as soaring housing prices, the wealth gap, and financial distortions. In response, the Central Bank refuted these claims. It pointed out that the Big Mac Index cited in the report has limitations and is not an appropriate basis for judging currency undervaluation.
Ya-Hui Yang, an Advisory Committee Member at the Chung-Hua Institution for Economic Research (CIER), stated that The Economist’s description risks oversimplification. The term “Formosan Flu” implies that these problems are unique to Taiwan. However, high housing prices, income inequality, and an aging population are common challenges faced by most advanced economies. The export-oriented model has been a key driver of Taiwan’s growth over the past few decades. Therefore, viewing exports as a defect is unfair.
Structural Issues Require Long-Term Governance; Exchange Rate Policy Should Not Be Oversimplified
Advisory Committee Member Ya-Hui Yang noted that Taiwan’s robust export performance fundamentally reflects the high international competitiveness of its products. Without strong exports, Taiwan’s economic performance would likely be far less favorable. Regarding exchange rates, while Taiwan operates under a floating exchange rate system, central bank intervention in special circumstances is the norm. The report’s characterization of this as “artificial manipulation” is unreasonable. Whether the New Taiwan Dollar is undervalued requires additional supporting evidence, and policy must be determined based on Taiwan’s own interests.
Taiwan currently faces genuine structural challenges, including uneven distribution of industrial resources, development gaps between high-tech and traditional industries, and limited capacity among small and medium enterprises to withstand external tariff pressures and cost impacts. With the United States recently emphasizing market-determined exchange rates and increasing scrutiny of other countries’ policies, Taiwan must strike a balance between international pressure and domestic stability.
Advisory Committee Member Ya-Hui Yang believes that addressing wealth distribution, housing prices, and burdens on young people requires policy approaches rooted in industrial structure, social investment, and long-term development thinking rather than understanding Taiwan’s economy through single indicators or an oversimplified “disease” framework. She urges external observers to return to fundamentals when discussing risks associated with Taiwan and to examine its governance and reform directions from multiple perspectives.
Author: CIER Editorial Team
Date: November 20, 2025