Mon, Jun 28, 2004 - Page 10 News List

China unlikely to act on sanctions threat: analysts

TOO RISKY Researchers say that sanctions against Taiwan would also harm China's economy, taking into account the nation's rising investments there


Despite China's mounting calls for economic sanctions to prevent Taiwan drifting away from the "motherland," Beijing is unlikely to adopt dramatic measures which analysts say might do it more harm than good.

But individual Taiwanese businesses operating in China may still be harassed to stop them crossing the "red line" of backing Taiwanese independence and to provide a proper outlet for rising nationalist sentiment in China, they warned.

"Unless it is crazy, Beijing is not likely to push that far for now," said Chang Hsien-chao (張顯超), professor of National Sun Yat-sen University's Graduate Institute of Mainland China Studies.

"There are lots of factors Beijing will have to weigh in launching economic sanctions. I assume the Chinese government leaders are rational enough not to do that."

Since the March re-election of President Chen Shui-bian (陳水扁), China has ratcheted up its rhetoric, reiterating its long-standing vow to take Taiwan by force should he move the island towards a formal separation from Beijing.

Researchers at Chinese universities and think tanks have called on their government to use sanctions to cripple Taiwan's economy in a bid to snuff out moves towards independence, China's state media said earlier this week.

"It is high time that we should mobilize all resources, including economic measures, to crack down on pro-independence forces," Xu Bodong (徐博東), director of the Institute of Taiwan Studies at Beijing Union University, was quoted by the China Daily as saying.

However analysts said they believed the warning might be a bluff rather than a prelude to immediate action, given the close "industrial division of labor" between Taiwan and China.

Many Taiwanese firms in China import raw materials from Taiwan for processing and then sell the products abroad, earning Beijing dozens of billions of US dollars in foreign exchange each year.

Should sanctions be adopted, losses could account for 1.8 percent to 3.1 percent of Taiwan's total GDP, said Tung Chen-yuan (童振源), fellow researcher of National Chengchi University's Institute of International Relations, citing a study he carried out in 1999.

But China would feel the pain as well: Such losses could make up for 2.4 percent to 2.8 percent of its GDP, Tung said.

"The reasonable ratio of such losses may further rise to account for 3.0 percent of China's total GDP if Taiwan's increased China-bound investments over the past few years are taken into consideration," Tung said.

With or without official permission, Taiwanese businesses have funnelled at least US$70 billion for investment projects in China.

China could also see numbers of jobless surge.

"Just imagine the immense pressure from local governments, if so many people lost their jobs overnight," Chang said.

In 1999, Taiwanese firms as a whole hired some nine million people in China. The number was estimated at 12 million this year.

Since the Taiwanese businesses have played a key role in the global information technology supply chain, sanctions would also cause international concerns, particularly in the US.

Instead, Beijing could continue to harass Taiwanese businesses which have close ties with Chen, Tung suggested.

"There is no need to `slash.' All they have to do is make the gesture of `raising their knives,' a move already giving Taiwanese businesses the jitters," Tung said.

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