Beijing should not bully business

Many business leaders lent their support to Chen Shui-bian (陳水扁) during his campaign. As a result, China has begun to criticize these businesses and threaten to punish those that do business in China.

One official from the State Council Taiwan Affairs Office (國台辦) said that some Taiwanese tycoons were reaping profits from China while supporting Taiwanese independence and that this must stop. Another said that if Taiwan does not admit to being part of China, China will reduce Taiwan's yearly trade surplus of over NT$10 billion, and there would be no talk about the"three links." It appears that China has shifted towards using economic measures to pressure Taiwan into accepting the "one China" policy.

China's choice of tactics is not surprising. This attempt to realize their political goals is one of the main reasons that past Taiwanese governments and the majority of the Taiwanese public have been in favor of setting limits on economic and trade relations with China. If, however, China keeps a cool head and anchors its policies in its own interests, it will see that such a policy is not only irrational, but also harmful to long-term cross-strait relations.

Economic relations are based on mutual benefit. Taiwan's investment and trade with China is beneficial for both Taiwanese and Chinese firms. Investment from Taiwan provides direct and indirect employment to well over 10 million Chinese workers, and is an important source of technical expertise. If China decides to disrupt this cooperative relationship for political reasons, the damage to China's economy will far exceed any damage that Taiwan would suffer. Taiwanese firms are much more internationalized than in the past, and there are other developing countries that could provide these firms with labor and markets. At the same time, there are few other foreign investors that are able to invest in China's interior and promote economic growth there. Taiwanese firms in China provide the country with unique and irreplaceable benefits. It would, however, be relatively easy for Taiwanese firms to find a similar investment environment in other countries.

Taiwan at present hopes to promote cross-strait peace and understanding through increased economic ties, and is willing to enter into negotiations over these issues. If China does not accept this gesture and threatens to break off economic cooperation because it believes that Taiwan is economically dependent upon it, then this will set back bilateral talks, slowing investment by Taiwan firms and perhaps even foreign firms as well. China's economy and people will bear the brunt.

The Chinese government believe that Taiwan's large trade surplus with China is a concession that China has made in Taiwan's interest, or that Taiwan is profiting at China's expense. But in fact, each dollar of Taiwan's trade surplus with China is generated by a dollar's worth of goods exported under voluntary transactions that meet the interests of firms in both countries. If trade deficits are just transfers of benefits to countries with surpluses, then China should thank the US for soaking up its exports.

Moreover, China should remember that much of its surplus with the US comes from components that are exported from Taiwan to China, reprocessed, then exported to the US. Such exports are essentially Taiwanese exports to the US. China's trade surplus with the US would shrink without a trade surplus from Taiwan. If a trade surplus is a positive thing, then China should thank Taiwan, not punish it.