These results should ensure policy continuity from Tsai’s first term. The biggest difference between Tsai and Han is in external policies. The reelection of Tsai means that Taiwan will keep affirming its willingness to decouple from China. We expect policy continuity, with prudent spending in energy, infrastructure and childcare, as well as more reshoring of Taiwanese businesses from abroad.

The relationship between Taiwan and China is likely to remain choppy, with tourism being the main victim. However, a significant disruption in the relationship is unlikely in the short to medium term, in our view, given the economic dependencies. Notably, China depends on Taiwan for more than 20% of its imports in the electronic sector and 10% in the chemicals sector. From Taiwan’s perspective, sectors vulnerable to an intensification of tensions could be metals, food, vehicles and energy.

Given that policy continuity is expected, we keep our economic outlook of a moderate rebound into 2021 unchanged. We expect Taiwan’s GDP to grow by +1.5% in 2020 and +1.9% in 2021, after +2.2% in 2019. A more benign external environment will be supportive, but the lack of a clear turnaround in the semiconductor cycle and the lack of policy easing will weigh on growth.

What does this mean for companies? Companies in sectors such as tourism and retail might be exposed to additional downside risks. Conversely, a continuation of Tsai’s policies of reshoring and denuclearisation could benefit companies in the technology and green energy sectors. Overall, we are forecasting a slight increase of +2% in insolvencies in Taiwan for 2020, after two consecutive years of a declining trend.