The risk to the global economy comes from national debt crises. Before the COVID pandemic, there were many countries in poor financial helath, and the subsidies give during the pandemic will eventually come at a price. After the recent period of interest rate hikes by central banks, debt problems will follow. In the past two years, countries have injected as much as US$17 trillion in subsidies, and the side effects of China's Belt and Road spending prior to the pandemic are starting to brew in countries with poor capital structures.
Opposition leaders in Maldive, with a population of 540,000, and in neighboring Sri Lanka, have been accusing China of economic aggression. While Iceland can emerge from its debt crisis, these South Asian countries will not be able to recover from the rainy days. Once US interest rates are pushed above 3%, how will the countries heavily in debt in US dollar terms respond? South Korea, with a foreign debt of nearly US$500 billion, and Taiwan, with a foreign exchange reserve of more than US$500 billion, will face very different scenarios.
Businesses started after World War II would expect to last for more than half a century, but the average life span of a business started in 2015 may only be around for 15 years, compared to seven years in a survey conducted by the Taiwan Small and Medium Enterprises Department. According to a survey, 75% of the companies listed in the S&P 500 will drop out of the top 500 companies within 10 years (2015-2025), indicating that the risk of business operation is higher than usually expected, and employees' loyalty to companies will also change based on their own rights and interests.
If we look at the national debt and inflation crises in various countries, we will be even more frightened. Before the pandemic, people were concerned about the US National Debt Clock. But now the US is raising interest rates, and even claims that to control the inflation, interest rates could go up to 3%. And many countries have lowered their economic growth forecasts, and 89% of respondents are pessimistic about the economic outlook for the next two years!
In terms of the industrial structure of major industrial countries, automobile and real estate are the important sectors driving economic development. However, for two consecutive years, automobile production has been lower than expected by tens of millions of units due to semiconductor shortages and supply-demand imbalances. These problems have not only directly affected the operations of car manufacturers, but also the after-sales services.
The local service industry is emerging, and countries with larger young populations are likely to be in a favorable position. In the construction industry, buildings that do not meet the requirements of the environmental regulations may not be able to obtain a building license. In addition to the environmental costs of steel and cement, if dock workers have to deal with port congestion, the home decor and furniture sectors, which are symbiotic with the real estate industry, may also see labor shortages.
Does Taiwan need to bring in more migrant workers from other countries? Business owners are eager to do so, but we have to address the potential social problems. Countries with young populations are beginning to use migrant worker policies as a strategic weapon to gain more business opportunities or resources. Subsidies and even corruption in emerging countries may affect the efficiency of the global economy and industry, and these problems will emerge in the process of industry transformation and development.
