AI Boom Deepens K-Shaped Economy, Central Bank Warns of Monetary Policy Transmission Challenges

The “K-shaped economy” has drawn attention since the COVID-19 pandemic in 2020. High-income earners, asset holders and the AI-driven electronics sector have prospered, while lower- and middle-income households and traditional industries have struggled with inflation, debt and weak demand. TSMC generates value equivalent to about 9% of Taiwan’s GDP, while Taiwanese companies are also planning $250 billion in U.S. investments, underscoring the heavy concentration of capital and growth.

On June 5, 2026, Taiwan’s central bank identified three effects: widening wealth and credit divides, mixed economic signals and uneven policy transmission. It said interest-rate tools must be combined with prudential measures such as selective credit controls. On June 18, Governor Yang Chin-long said traditional industries were not in recession; rather, the electronics sector was exceptionally strong. Taiwan’s traditional-industry exports rose 7.7% year on year in 2026, below South Korea’s 8.3% growth.