Mon, Dec 01, 2014 - Page 13 News List

Election outcome to slow China exchanges: experts

UNCERTAIN FUTURE:Professor Hsu Chih-chiang said that a Cabinet reshuffle is bound to lead to economic uncertainty after Premier Jiang Yi-huah offered to resign

By Crystal Hsu  /  Staff reporter

The Chinese Nationalist Party’s (KMT) defeat in Saturday’s nine-in-one elections is bound to slow economic exchanges between Taiwan and China, with no solution in sight for the stalled cross-strait service trade agreement until the 2016 presidential election, academics said yesterday.

The KMT lost elections of mayors and local council members, reflecting the nation’s discontent with rising living costs and stagnant wages despite decent economic growth.

“Uncertainty is bound to set in as the Cabinet reshuffle pans out and wins the support of the legislature,” National Central University economics professor Hsu Chih-chiang (徐之強) said by telephone.

It is unclear who President Ma Ying-jeou (馬英九) will appoint at the helm of the Cabinet after Premier Jiang Yi-huah (江宜樺) resigned to take the blame for the defeat, Hsu said.

Major public policies — free economic pilot zones, the Taoyuan Aerotropolis (桃園航空城) project and other infrastructure works — might need more time to be realized as some require the cooperation of local governments, let alone the cross-strait service trade agreement, Hsu said.

The Ma administration is likely to take a more conservative approach to policy proposals frowned on by opposition parties, including the Democratic Progressive Party, after the public essentially cast a no-confidence vote on its leadership, he said.

Taiwan has seen reasonable GDP growth in recent years despite external headwinds, but most people are not able to share the benefits, due to increasing manufacturing activity overseas, mainly in China, said Liu Shih-chung (劉世忠), a research fellow at Taiwan Brain Trust, a Taipei-based think tank.

Overseas production climbed to a record high of 55 percent in October and above 50 percent for the first three quarters, making little contribution to the local job market, nor improving wages, despite being favorable for GDP, the Directorate-General of Budget, Accounting and Statistics said on Friday.

“Taiwan must cut its reliance on China and encourage firms to upgrade and diversify investments so they can better compete on the world stage,” Liu said by telephone.

Heavy exposure to a single nation runs counter to the principle of risk diversification, Liu said, adding that the trade pact with China is not a necessary requirement for Taiwan’s bid to join regional trade blocs such as the proposed Trans-Pacific Partnership.

A more equitable distribution of wealth poses a tough challenge for governments around the world including Taiwan, as the trend of globalization deepens, Taiwan Research Institute (台灣綜合研究院) researcher Day Jaw-yang (戴肇洋) said.

A small and open economy like Taiwan cannot afford to ignore regional economic integration, which would have negative impact on certain sectors, Day said.

Heavier taxation plans would drive fund flight to other nations in the absence of joint efforts by global governments, he added.

“It takes great wisdom and determination to achieve GDP growth that is most beneficial,” Day said.

The voter revolt is likely to sink the central government into an inactive state until the 2016 presidential election, Day said.

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