Brian Hioeby Brian Hioe
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Photo Credit: 中華民國總統府/WikiCommons/CC BY 2.0
RECENT REPORTS in international media have highlighted concern over Taiwanese taking out loans in order to pay for tech stocks. Specifically, it may be that the current growth in the tech sector in Taiwan, especially over the AI boom, is pushing young Taiwanese to take out loans with the belief that the tech sector will continually rise.
This is especially concerning when the current wave of growth in the economy, as driven primarily by AI, cannot last indefinitely. It is probable that the world will see a global impact similar to that of the dot-com bubble from the eventual bursting of the AI bubble, even if AI–as with the Internet–as a whole will continue to be influential as a technology, once investors realize that AI has not sufficiently found a way to monetize.
There have been waves of speculation in Taiwan in the past. During the authoritarian period, floating capital would end up diverted into the national lottery. Consequently, people would sink vast sums of money into lottery tickets, and the announcing of lottery numbers would see a great deal of public attention each day.
Otherwise, one has seen the real estate market become overheated as a market for investment, with the view that real estate prices will increase in the future and that this is a guaranteed form or return on one’s investment. This is one reason, among many, that housing is unaffordable for young people in Taiwan, with one having to not eat or drink for fifteen years in order to afford a home in Taiwan.
To this extent, one notes that Taiwanese society is decidedly tech-optimistic. While the government and central banking authorities are currently warning about the dangers of taking out loans for speculating on tech stocks, the government has sought to promote an image of Taiwan as tech-friendly in the past by encouraging the use of cryptocurrency.
Taiwan is certainly not alone in the rush of regional governments to get on board the AI trend. Nevertheless, Taiwan is sometimes quite uncritical of any new technology and rushes to get on board, with its international marginalization contributing to a deeply rooted fear of being left behind by new trends.
Likewise, one notes that Taiwan has structural vulnerabilities with regard to AI. Taiwan manufactures the majority of the world’s advanced semiconductors. But if the AI trend becomes less focused on being driven by hardware, and shifts instead to software-driven capabilities–as in China’s Deepseek–this could be dangerous to continued reliance on Taiwanese semiconductors by the world to fuel the AI boom.
Indeed, the Taiwanese economy is currently buoyed by AI. If not for the amount that AI contributes to the GDP, Taiwan would be in the midst of sluggish economic growth. In this sense, Taiwan is at risk of Dutch disease–overreliance on a single sector in investment. And should that sector go under, likely, too, will the Taiwanese economy.