Taipei Times to President Chen: Editorial: Focus on economics, not wordplay

President Chen Shui-bian's (³¯¤ô«ó) "one country on each side" statement has stirred up a commotion both at home and abroad. Li Weiyi (§õºû¤@), spokesman of China's Taiwan Affairs Office, departed from Beijing previous line of intimidation in his response, for the first time appealing to the people of Taiwan by saying that Chen's remarks will affect Taiwan's economy and therefore the economic interests of the people. We can see from China's language that the two sides are gradually moving closer. Neither side is willing to compromise on the sovereignty issue, but economics will ultimately determine the real winner.

The TAIEX fell by a whopping 5.78 percent on Monday, the first business day after Chen's speech. The bourse's value shrank by NT$500 billion, putting enormous pressure on government officials and the financial authorities. Beijing, the KMT and the PFP all accused Chen of recklessness. Fortunately, the market quickly stabilized -- an indication that Monday's fall was just an emotional response and would not affect long-term investment prospects.

A side effect of Chen's statement was that the two sides have found a convergence in economics. To seek parity with China in terms of sovereignty, Taiwan must first maintain economic independence and continued stable development. However, Taiwan's growing dependence on China is a cause for concern. In recent years, China has become Taiwan's main export destination and source of trade surplus. Taiwan now enjoys an annual trade surplus of US$20 billion with China. As much as 25 percent of Taiwan's exports go to China. In terms of investment, more than 70,000 Taiwanese firms are now operating in China, having channeled US$100 billion there. Taiwanese businesses have contributed more than 70 percent of China's information-technology industry production -- which has made the country the world's third-biggest IT manufacturer. Economics has become a decisive bargaining chip in cross-strait relations, but it is also a sword that cuts both ways.

With Taiwan's economy and domestic investment still in the doldrums, the country is quickly losing capital, technology and talent to China. Beijing is using businesses as a weapon to pressure the government to open direct links. With the economic tilt toward China, Taiwanese investments in China are more of a liability than an asset. To reverse this, Taiwan must first revive its economy. Chen has stressed many times that the economy is his priority.

As a trade-oriented nation, Taiwan is deeply affected by fluctuations in the global economic situation. The US and European economies are not recovering as quickly as expected.

To improve its economy, Taiwan will first need to improve its domestic investment environment, increase incentives for private-sector investments, and continue to help strengthen local businesses. The government should also divert the excessive concentration of investment in China. The "go south" policy could be a feasible alternative, but the government needs to offer incentives and help create a beneficial environment for businesses to make such a move. The government should speed up talks on free-trade agreements with Southeast Asian nations and strengthen the competitiveness of Taiwanese firms in the region in order to prevent Taiwan being marginalized after the "ASEAN plus three" alliance becomes reality.

As the uproar over "one country on each side" subsides, the government must understand that there is no end to the cross-strait sovereignty dispute. The only choice for Taiwan is to increase its economic advantages. Only then will it have the means to wrestle with China in the international arena. The government should work to maintain stable cross-strait relations and quickly return to the key task of improving the economy, turning the power of business into Taiwan's assets in the cross-strait tussle.

This story has been viewed 631 times.
URL=[http://www.taipeitimes.com/news/2002/08/08/story/0000159453]

That Taiwan has a $20 billion trade surplus is astounding to me. Quite obviously there are things the Chinese will buy from other countries.

I find the trade surplus an interesting point as well. Actually, I see it as an ingenious ploy on the part of the mainland. Like it or not, Taiwan is dependent on the mainland. Military issues notwithstanding, Taiwan simply cannot afford to declare independence from its biggest customer. I would conjecture that whatever it imports from Taiwan could be easily replaced from other sources. The mainland Chinese government will likely use this economic weapon to keep Taiwan in line long before it uses military might.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Thursday, August 8th, 2002

w w w . t a i p e i t i m e s . c o m	A M e m b e r o f t h e L i b e r t y T i m e s G r o u p	36,609,005 v i s i t s