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UPDATE 4-Taiwan says larger U.S. trade surplus due to China trade war

(Recasts, adds comments from central bank governor)

TAIPEI, Dec 17 (Reuters) - Taiwan sees U.S. trade policies towards China as the reason why its trade surplus with the United States has grown but hopes to lower the surplus to address concerns about the Taiwan dollar’s exchange rate, its central bank said on Thursday.

The comments come after the U.S. Treasury on Wednesday added Taiwan to a “monitoring list” of countries whose currency practices have caused concern, the first time the island has appeared on the list since 2017.

Speaking to reporters, Taiwan central bank governor Yang Chin-long said the China-U.S. trade war had seen Taiwanese investors in China coming home, and boosted demand for Taiwan technology, considered by Washington to be a minimal security risk compared to China’s. “Trump’s trade policy and trade policy towards China have led to an increase of Taiwan’s trade surplus with the United States,” Yang said.

The Trump administration has cracked down on Chinese tech firms such as Huawei Technologies, viewing them as a security risk. It has also ramped up support for democratic Taiwan, and encouraged Taiwanese firms to invest in the United States and leave China.

Taiwan’s 2019 trade surplus with the United States hit $23 billion. The economy has benefited this year from global demand for Taiwan’s high-tech goods from people forced to work and study at home during the COVID-19 pandemic.

Speaking in parliament, central bank deputy governor Yen Tzung-ta said maintaining the stability of the foreign exchange rate was its obligation and priority, and that the U.S. decision was based on information for last year rather than the current exchange rate.

The U.S. Treasury’s decision is a reflection of the island’s trade surplus with the United States, he added.

“We hope to cut the trade surplus with the United States,” Yen said. “This is the long-term solution.”

Taiwan’s central bank has continued to stress to the U.S. Treasury that the benchmarks they use are disputed, Yen added.

The Taiwan dollar has strengthened 7% against the U.S. dollar this year. (Reporting by Liang-sa Loh, Writing by Ben Blanchard; Editing Ana Nicolaci da Costa and Jacqueline Wong)

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