Last Wednesday, after Chinese Premier Wen Jiabao (溫家寶) proposed to cool China's breakneck economic growth, Taiwan's stock market plunged 10 percent in three days. The NT dollar also continued to lose ground. But his announcement came as no surprise.
The possibility of China losing control of its overheated economy has posed a long-standing problem for officials. Economists around the globe have their eyes glued on China. The pegging of the Chinese yuan to the US dollar has kept the yuan quite strong, other governments are pressing China to revalue its own currencies. The strength of the yuan has also increased the flow of hot money into the Chinese market and has invited creeping inflation. Although a appreciated yuan had been expected, Wen's announcement that China's feverish economy would be calmed to some degree still managed to trouble stock markets across Asia.
Taiwan must pay close attention to China's economic situation. With the nation's exports to China exceeding 36 percent of total exports, China has overtaken the US as the nation's biggest trading partner. Therefore, the maintenance of a smooth trade relationship across the Taiwan Strait is becoming yet more critical in safeguarding national economic development.
Unlike the "trade over investment" approach to the Chinese market adopted by many other countries, Taiwan has been dumping valuable investment resources rather than engaging in trade with China. "China fever" has accelerated not only Taiwan's capital hemorrhage but also the outflow of talent and technology. Many Taiwanese businesspeople, after investing in and setting up factories in China, return to compete with domestic companies, thus weakening Taiwan's long-term competitiveness.
Indispensable as they are for cooling down an overheating economy, Wen's measures highlight the fact that China's economy is still curbed by an authoritarian government. In the face of economic fluctuation, governments of most capitalist economies let the market determine interest and exchange rates, and hence currency supply and demand. It is uncommon for a government to intervene too closely in economic activity, except when drastic changes occur in the market.
Ignoring market forces, Beijing is attempting to rein in its economy by executive order, putting a halt to major construction and investment projects both nationally and locally. Such strong-arm tactics may illustrate the Chinese government's determination, yet it totally disregards the market, thereby wreaking havoc on the interests of local and foreign investors. It is the non-economic risks of investing in China that most suffering foreign investors have neglected.
Beijing's measures hope to cause only short-term harm -- but with it long-term benefit. No one, however, can be sure that similar measures will not be adopted in future to tighten the economy, nor can one predict the scope, duration or impact of any other measures on industry.
There is one thing of which we can be sure: Beijing's heavy-handed policy has on this occasion served as valuable shock therapy for China-based Taiwanese businesspeople and foreign investors. Investing in China is not as profitable as it appears after all. The capitalist's gold mine is actually a minefield of concealed dangers of every variety -- and the economy is merely one of them.
Taiwan stands at the epicenter of a seismic shift that will determine the Indo-Pacific’s future security architecture. Whether deterrence prevails or collapses will reverberate far beyond the Taiwan Strait, fundamentally reshaping global power dynamics. The stakes could not be higher. Today, Taipei confronts an unprecedented convergence of threats from an increasingly muscular China that has intensified its multidimensional pressure campaign. Beijing’s strategy is comprehensive: military intimidation, diplomatic isolation, economic coercion, and sophisticated influence operations designed to fracture Taiwan’s democratic society from within. This challenge is magnified by Taiwan’s internal political divisions, which extend to fundamental questions about the island’s identity and future
The narrative surrounding Indian Prime Minister Narendra Modi’s attendance at last week’s Shanghai Cooperation Organization (SCO) summit — where he held hands with Russian President Vladimir Putin and chatted amiably with Chinese President Xi Jinping (習近平) — was widely framed as a signal of Modi distancing himself from the US and edging closer to regional autocrats. It was depicted as Modi reacting to the levying of high US tariffs, burying the hatchet over border disputes with China, and heralding less engagement with the Quadrilateral Security dialogue (Quad) composed of the US, India, Japan and Australia. With Modi in China for the
The Chinese Nationalist Party (KMT) has postponed its chairperson candidate registration for two weeks, and so far, nine people have announced their intention to run for chairperson, the most on record, with more expected to announce their campaign in the final days. On the evening of Aug. 23, shortly after seven KMT lawmakers survived recall votes, KMT Chairman Eric Chu (朱立倫) announced he would step down and urged Taichung Mayor Lu Shiow-yen (盧秀燕) to step in and lead the party back to power. Lu immediately ruled herself out the following day, leaving the subject in question. In the days that followed, several
The Jamestown Foundation last week published an article exposing Beijing’s oil rigs and other potential dual-use platforms in waters near Pratas Island (Dongsha Island, 東沙島). China’s activities there resembled what they did in the East China Sea, inside the exclusive economic zones of Japan and South Korea, as well as with other South China Sea claimants. However, the most surprising element of the report was that the authors’ government contacts and Jamestown’s own evinced little awareness of China’s activities. That Beijing’s testing of Taiwanese (and its allies) situational awareness seemingly went unnoticed strongly suggests the need for more intelligence. Taiwan’s naval
RSS