Taiwan risks too much in relationship with China


POSTED: Sunday, February 08, 2009

Taiwan risks too much in relationship with China

Thank heaven and thank earth, as the Chinese expression goes, tensions across the Taiwan Strait have subsided during the first eight months of the Ma Ying-jeou presidency. Nevertheless, one wonders if Taiwan is leveraging its substantial resources to its greatest advantage or rushing into a false sense of greater economic dependence on the mainland while China ignores Taiwan's sovereignty.

With investments totaling nearly $150 billion, Taiwan is the largest investor in China. There are an estimated 50,000 Taiwan businesses in the mainland where one million business people and their families reside.

The Pearl River Delta is often considered the epicenter of China's export-based economy. According to Max Hirsch, writing for the Kyodo News Service, “;Taiwan holds the key to preventing Southern China's industrial based from flying off the rails.”;

Taiwan investment is playing a leading role in transforming the central China city of Wuhan into a modern industrial base, logistics center and transportation hub. Taiwan investment in Wuhan totals $2.42 billion. In addition, Taiwan's Foxconn Corp. plans to make Wuhan the digital camera production center of the world, creating 200,000 jobs.

A hallmark of the Hu Jintao and Wen Jiabao stewardship of China has been the development of Tianjin as a modern port facility and services center in Northern China. Joining in the effort have been more than 2,000 Taiwan enterprises. In December, Taiwan businesses decided to invest an additional $2.9 billion in Tianjin, bringing total Taiwan investment in the city to $8.2 billion.

Taiwan business in China gives China access to needed technology and managerial expertise. Despite China's obvious success in foreign trade, it still lacks the savvy to crack certain markets in which Taiwan has acquired much experience in the global economy.

Inexplicably, the ruling Nationalist Party seems to underrate Taiwan's bargaining chips when negotiating with China, preferring to exaggerate any agreement as a major breakthrough. Most of the negotiating for this new connectivity was done by the Democratic Progressive Party while still in power, leaving the Nationalists to put on the finishing touches.

It's too early to assess what long-term successes might come from greater interaction between Taiwan and China. Increased mainland tourism was promoted as a panacea to Taiwan's tepid service industry but has not lived up to expectations. Chinese investment in the Taiwan stock market, banks and real estate has yet to concretize . Charter flights, direct flights plus direct sea and air cargo have all begun. Such transportation links could help increase Taiwan bound tourism and allow business people from both sides to move back and forth across the strait less expensively and more quickly. President Ma has sought to de-emphasize the role of the military in cross-strait relations; however, China has offered only vague promises of removing any of the 1,100 to 1,400 missiles it has aimed at Taiwan.

Taiwan has long sought added “;international space”; or visibility on the global stage. Despite the rapprochement in Taiwan-China relations, the island's application for observer status in the World Health Organization was blocked by China. Instead it will be granted membership in the global health alert system. China continues to block Taiwan's participation in the Association of Southeast Asian Nations as a dialogue partner despite the economic advantages Taiwan can offer to the region.

From the perspective of pure economic benefit this might not be the right time for Taiwan to so determinedly seek to tie its economic future to China. Since 1978, the Chinese economy has grown at nearly 10 percent a year. The IMF predicts that it will only grow at half that rate this year. Exports will be off 6 percent in 2009, according to the Fitch Report. The Chinese Academy of Social Sciences expects unemployment will rise to 9 percent, although many predict the rate will actually be much higher because the prediction does not take into account the 200 million migrant workers who have been the backbone of China's economic development.

Then there is the question of just how deep-pocketed China really is. It promulgated an economic stimulus program that it couldn't or wouldn't fully fund, is committed to financing improvements in rural life, rebuilding Southwest China after last spring's devastating natural disasters, and claimed it will take care of Southeast Asia and Hong Kong in the wake of further economic fallout. At the same time such commitments were being made, China was increasing borrowing from abroad. According to the State Administration of Foreign Exchange, PRC debt stands at $442 billion, which is an 18.3 percent increase over the total at the end of 2007.

China is likely to see a rash of civil unrest this year. In the spring, when the migrant workers return from their villages to the factory towns where they have worked and find abandoned or bankrupted factories, and thus no work, wide-scale demonstrations are likely to envelop the country. Moreover, this year's calendar is rife with anniversary and commemoration dates ideally suited for political protest: It's the 60th anniversary of the founding of the People's Republic of China, the 20th commemoration of the Tiananmen Square incident, the 90th anniversary of the May Fourth Movement, and the 50th year since the Dalai Lama fled Tibet.

To help ward off social upheaval, there is an increase in use of Marxist rhetoric, urging of the public to obey the Chinese Communist Party, and ramped up discipline in the PLA, the ultimate guarantor of stability. All of this comes from a party which in recent years has felt much more at home talking about the benefits of market economics, rather than spewing out political slogans.

The exact nature of their motivation remains unclear. Nevertheless, the pro-China wing of the Taiwan's Nationalists led by one-time presidential candidate Lien Chan, party chairman Wu Po-hsiung and James Soong, a former Nationalist Party presidential aspirant who bolted to form his own People First Party, relentlessly rush on to create greater connectivity with China. The three seem to own the issue, with Ma exercising little discernible influence.

Moreover, popular dismay exists due to the lack of transparency in which negotiations are being carried on between the Taiwan's Nationalists and the China's Communists. Many, including legislative president and Nationalist member Wang Jyn-ping, would be more comfortable if relations were carried out with the support of the legislature. Others would prefer cross-strait relations to be carried out on a government-to-government basis.

While better economic relations with China are desired, Taiwan's Mainland Affairs Council polling shows that only 4.8 percent of the population would consider unification with their cross-strait neighbor in the future, while 1 percent want immediate unification.


Bill Sharp teaches classes about the domestic and international politics of East Asia at Hawaii Pacific University. He writes a monthly commentary for the Star-Bulletin. .(JavaScript must be enabled to view this email address)