Taiwan’s Undervalued NTD: Economic ’Illness’ or Strategic Defense?

An Economist cover story labels Taiwan’s long-standing policy of keeping the New Taiwan dollar (NTD) weak as “Formosa flu,” arguing that the strategy sacrifices domestic purchasing power to boost export competitiveness. Over the past five years, AI and semiconductor exports have tripled, with AI server shipments up 202.2% year-on-year in October 2025. Taiwan’s current account surplus reached 16% of GDP—higher than Germany’s—while the central bank intervenes heavily to prevent the NTD from appreciating. Economist warnings highlight three pressures: higher import costs acting as a hidden tax, surging property prices—Taipei’s house-price-to-income ratio hits 16—and a $200 billion (25% of GDP) currency mismatch in life insurers’ balance sheets. Their prescription: emulate Singapore’s gradual NTD appreciation. Critics counter that a weaker NTD is a critical element of Taiwan’s economic “defense,” allowing TSMC, Foxconn and other exporters to maintain profit margins in global competition. Sudden or large-scale NTD gains could trigger profit shocks akin to Japan’s post-Plaza Accord “lost decades.” The real debate, they argue, lies in wealth distribution and fiscal reform—not FX policy alone.