The CBC released the balance of payments figures for 2005 on February 20. According to the statistics, Taiwan's overall balance of payments in 2005 registered a surplus of US$20.06 billion, the lowest in four years, down by US$6.54 billion from the previous year.

Local analysts said the dwindling surplus could be the result of strong outflow of capital for investment in foreign securities. According to CBC, Taiwan residents' investment in foreign securities in 2005 amounted to a record-high US$35.8 billion. Some US$10.4 billion was remitted abroad in the fourth quarter of last year, the second-highest figure for any single quarter.

The surge in the amount of outgoing funds is believed to be the result of a constant gap between the interest rates for New Taiwan (NT) dollar and U.S. dollar deposits, executives of local banks pointed out. Although the CBC has been raising the interest rate for NT dollar deposits since the fourth quarter of 2004, the average rate for a 30-day certified NT dollar deposit remains at a low 2 percent, while a 30-day certified deposit in U.S. dollars can be as high as 4.5 percent. This pattern has encouraged Taiwan residents to invest abroad.

Meanwhile, under current laws, residents' income from abroad is not subject to taxation in Taiwan, which may have contributed to the outflow of private funds, said CBC officials.

Foreign investors and institutions, however, have been similarly zealous about investing in Taiwan's securities market last year. CBC statistics showed that in 2005, non-Taiwanese investors poured a net US$31.26 billion into Taiwan's securities, or US$4.5 billion less than the amount of NT dollars remitted abroad. Of that amount, a net US$13.27 billion of foreign equity funds came into the island's stock market during the fourth quarter of last year, the highest-ever figure for a single quarter.

The influx of foreign capital continued in January of this year, with foreign investors injecting more than US$3 billion into the island's stock market, said CBC officials. The CBC said that if foreign institutions continue to be bullish about Taiwan's stock market, the inbound investment figure for the current quarter is expected to exceed that of the last quarter.

Meanwhile, steady expansion of the global economy also led the island's exports to grow rapidly last year. According to CBC statistics, Taiwan's exports during the fourth quarter of 2005 were up 14.1 percent over the same period in 2004, with a value reaching US$52 billion, a record-high quarterly figure. CBC officials said the growth was mainly attributable to an increase orders from neighbouring Asian countries, China included.

As a result, Taiwan's 2005 fourth-quarter current account, which includes only the net balance of payments in connection with exports and imports, registered a record-high quarterly surplus of US$9.22 billion, up US$7.48 billion from the same period a year earlier. The current account for 2005 registered a surplus of US$16.37 billion, down US$2.13 billion from the previous year.