In recent days, many people in China and abroad have voiced concerns that the large number of blind investments and repetitive development projects within China will necessarily create serious production problems and wasteful facilities.
They also believe that this problem will result in economic and investment growth rates declining massively, causing the momentum of economic growth to vaporize entirely.
Facing such a crisis, the Chinese government has taken the initiative in declaring a comprehensive adjustment of the situation, so as to hit the brakes to slow down investment.
However, it is no easy task to decrease excessive investment in a calm and orderly manner. This policy could very well cause a drastic decline across the entire economy, referred to as a "hard landing."
Therefore, when high-ranking Chinese officials indicated an intention to adopt measures to forcibly cool off Chinese economy, the stock markets of Taiwan and other Asian countries endured significant declines. Some such drops were real, while others were caused by the erroneous beliefs of our countrymen.
Some of these downturns came from the reliance of Taiwan's manufacturers on the Chinese market. Currently 36 percent of Taiwan's total exports go to Hong Kong and China. In addition, on average each year 4 percent of Taiwan's GNP is invested in China. Each year 4 million visits are made by Taiwanese to China.
Taiwan's level of dependence on China is far higher than that on other countries.
In terms of individual industries or manufacturers, the level of reliance may far exceed the above-described reliance at the national level.
In the past, our countrymen have ignored cautions about the need for risk diversification and the possibility of great fluctuations in China's economy and official policies. Those who believed in the lie about "boldly going west" are now paying a hefty price. We hope that this experience will encourage caution about the Chinese market's risks.
In addition to losses resulting from a market decline, these manufacturers may also suffer losses resulting from lost expectations. Many people in Taiwan have been blindly optimistic about the Chinese market. Therefore, they invest large sums of capital in China. Stock investors also purchase the so-called stocks of China-related firms with high prices. When the Chinese economy begins to rapidly cool off, some investors naturally cannot avoid suffering serious unexpected losses.
In fact, many businesses may become trapped in some very difficult situations. Facing losses created by such erroneous appraisals of China, in the future everyone must come to a more objective understanding of China's economic development potential and no longer be misled by all those excessively optimistic reports.
Besides these losses crashes, the tightening Chinese economy has led to some illusory conflicts regarding Taiwan as well.
Because some of our countrymen exaggerate the importance of the Chinese economy to the world economy and to Taiwan's economy, some economic conflicts come about due to psychological factors. Many people treat Taiwan's exports to China as China's contributions to Taiwan's economy.
Therefore, when the Chinese economy turns bad and such excessive exports decrease, they think that our economy will suffer major harm. Such mentalities are reflected in the decline of the stock market. But Taiwan's exports to and trade with China are not contributions by China to our economy. Therefore, decreases in these investments will not result in that much injury to Taiwan's economy.
Most of Taiwan's exports to China were exports that Taiwan was making to other countries anyway. The exports were simply shifted to China. A typical situation is when Taiwanese businesspeople move production of goods in Taiwan to China, where they then export the goods but still have Taiwan supply the materials and facilities. Therefore Taiwan's exports increase, while exports to other countries decrease and China's exports to other countries climb.
Anyone who understands how this works realizes that the increase of exports to China was no blessing from China to us. Instead, it is the result of China taking away much of Taiwan's industry. Therefore, the cooling-off of the Chinese economy, which should slow down the pace of industrial relocation to China from Taiwan, is not necessarily a bad thing for Taiwan.
China plans to cool off its economy because it hopes to decrease the number of blind and excessive investments. Many such investments originated from blindly optimistic Taiwanese businessmen. The cooling-off of China's economy will also decrease the chances of erroneous investments on the part of such Taiwanese businessmen. Gen-erally speaking, in terms of the waste from such investments that may be reduced, ultimately this is good for Taiwan.
As for businesses that are already in China, if they are in excessively invested or speculative industries, they face grave business risks to begin with. Even if China does not adopt a policy of cooling-off its economy, these industries will sooner or later have problems.
As for other investments, they may benefit from the eased competition due to the slowing of new entrants into these industries. This is true especially since the demand of export industries is not only unimpacted, but may enjoy less risk from cost increases and currency appreciation as a result of the new policy.
Based on the above, the cooling-off measures of China hold no apparent damaging impacts for Taiwan's economy and Taiwanese businessmen.
However, when those in Taiwan who see China's economy as a development miracle or China as the only place in the entire world where there are chances for development see how the Chinese economy grows or declines, they will naturally think that not only Taiwan but even the entire world will be impacted.
The cooling-off measures of China are actually a chance for Taiwan's economic development. In the past few years, many Taiwanese businessmen have come to understand that investing in China is not as profitable as they had hoped. The competitiveness built on utilization of cheap Chinese labor has caused excessive production and price declines. Therefore many Taiwanese businessmen are thinking about returning to Taiwan to upgrade their businesses.
The cooling-off of China's economy may decrease willingness by manufacturers to invest in China due to their overly opti-mistic appraisal about the development potential or competitiveness of China.
Therefore the government should actively assist these manufacturers in upgrading their investments in Taiwan, and in investing in other countries, so as to reap the benefits of market and investment diversification. As for the land, manpower and legal environment needed, the government should overcome all obstacles to meet such demands as soon as possible.
The Legislative Yuan should also approve the government's plan to increase public construction projects and improve the investment environment so as to make business enterprises keep their roots in Taiwan and make contributions here.
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