Taipei Times: The government is mulling the opening of direct transport links with China for people and goods . What stance do you have on this issue?
Day Sheng-tung (
Currently, around US$40 billion worth of goods are channelled between Taiwan and China via Hong Kong. If the government allows direct cargo links with China, it will probably save Taiwanese companies 5 percent on cargo handling fees charged by Hong Kong, or as much as NT$70 billion a year.
However, if the government decides to open passenger links first without any supporting measures, it will seriously damage Taiwan's economy, because Taiwanese people will spend their leisure time and money in China due to convenient transportation. This will damage the nation's tourism and retail sectors. Therefore, my estimate is that our unemployment rate will get worse, soaring to 15 percent from around 5 percent now.
Some people wrongly expect that more Chinese will visit Taiwan after the government lifts the ban on direct links. Actually, with a lower living standard, most Chinese will not be able to visit Taiwan very often.
TT: There are some bans imposed by the government on China-bound investments. Is there any restriction that you consider unreasonable and should be lifted?
Day: The government's policy on China-bound investment seems pretty lax to me. For example, the government has requested companies to register their China-bound investments at the Ministry of Economic Affairs, but actually, only those plans to invest NT$1.7 billion or above in China need to be registered The fact is that only a few Taiwanese conglomerates are financially capable of coming up with such big investment projects. As a result, many small and medium-sized Taiwanese companies have taken advantage of the policy loophole to invest in China. The government should instead employ stricter measures to stem further capital from flowing to China.
TT: Taiwan's 1.08 million small and medium-sized companies are facing increasingly strong competition from China and other countries. What is the major predicament they are facing?
Day: The first predicament for our small and medium-scale companies, as well as for Taiwan's economy, is a never-ending China fever. People are simply too crazy about the Chinese market. It can't be denied that China is a rising economy, but as China's exports are expected to exceed US$1 trillion within the next five years -- with most of them shipping to the US -- Washington will definitely pressure Beijing to revalue the Chinese yuan in order to balance a huge trade deficit. If China is forced to appreciate its currency sometime in the future, many Taiwanese companies in China will face grave exchange losses if they are not well-prepared to hedge that risk. We need to look beyond China because it is not our only foreign market. We need to internationalize, not "Sinicize."
The second problem the nation's small and medium-sized companies are encountering is tight credit imposed by the banks. The government has encouraged banks to clean up their bad loans to maintain competitiveness. But banks ended up tightening their lending to our companies. Small and medium companies shouldn't be blamed for the bad loan problem because around 95 percent of the non-performing loans were legacies left by big enterprises many years ago.
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