Sat, Jan 15, 2005 - Page 10 News List

Business ties ensure security: magazine

CROSS-STRAIT TRADE Declaring war on Taiwan would hurt China's international prestige and incur a terrible economic price, `The Economist' says in a new survey

By Joyce Huang  /  STAFF REPORTER

In a 10-page survey of Taiwan entitled "Dancing with the enemy," to be published today, The Economist magazine argues that growing economic interaction between China and Taiwan is actually leading to greater security for Taiwan.

"For all the hostility between Taiwan and mainland China, their respective economies are now deeply interdependent ... That should help to keep the peace," James Miles, author of the report, said in his introduction.

The report argues that the chances of military confrontation across the Taiwan Strait will be slim, but if war were to break out, it would come at a terrible economic price for both countries and seriously hurt China's international prestige.

China has too many economic benefits to lose by jeopardizing its rapidly growing trade relationship with Taiwan, which is a contributor to its economic growth -- something that the newest generation of leaders in Beijing depend on to consolidate their grip on power, according to the report.

"Economic considerations and interests are now paramount in their [China's] calculation in dealing with other countries, including Taiwan and America," Miles, the magazine's Beijing bureau chief, told the Taipei Times yesterday.

Ratings agency Standard & Poor's, on the other hand, said in a statement on Thursday that cross-strait tensions are rising as a result of increasing Chinese nationalism and trends toward independence in Taiwan.

Standard and Poor's, which lowered its outlook on Taiwan to negative from stable on Nov. 30 last year owing to cross-strait concerns, believes China's booming economy mitigates the likelihood of war, as socio-political ideals continue to take a back seat to the economic reality in Taiwan.

"Tighter economic links will continue to provide incentives to leaders on both sides to avoid any destabilizing military moves, while the very nature of deepening economic ties provides China with a newer, subtler lever to influence Taiwanese politics," S&P said.

Indeed, China depends considerably on Taiwan in its information-technology (IT) exports, since more than 60 percent of its IT exports are produced in China by Taiwanese companies, according to The Economist, which said that the latest list of China's top 200 export companies is headed by subsidiaries of Taiwanese IT firms such as Hon Hai Precision Industry Co (鴻海精密), Quanta Computer Inc (廣達電腦), Asustek Computer Inc (華碩) and 25 other firms.

Taiwan is currently of particular significance to China, which has vowed to triple its IT output by 2010, the survey said.

Likewise, Taiwanese businesses also count on China to keep down their manufacturing costs in order to remain competitive while tapping into external markets, including China. Domestically, the magazine advised Taiwan to move up the technological ladder by developing into a value-added center of research and development "based on the exploitation of ideas, logistics, financial services and globally recognized brands."

Although the survey did not elaborate on KMT Chairman Lien Chan's (連戰) proposal of constructing a common market with China, Miles yesterday said he endorses such a trade model on the grounds that it would be risky for Taiwan to be excluded from a regional free-trade zone, which could put the nation at a disadvantage compared with other regional competitors in gaining access to the Chinese market.

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