Recently, there have been commentaries in Taiwan's media comparing Taiwan-China economic integration with that of the US and Mexico, and expressing worries that further economic integration between the two sides across the Strait will profoundly influence society in Taiwan (as has happened in Mexico). Accord-ing to those commentaries, establishment of direct links and the easing of the "no haste, be pa-tient" (戒急用忍) policy will create new social discord.
A big problem with this analogy is that it ignores the fact that Taiwan is a nation with a net outflow of resources, a far cry from Mexico's situation, which has a net inflow of resources. The direction of the resource net outflow is positive and active, mean-ing that resource allocators (the government, firms and individuals) readjust production factors such as physical capital, human capital and technology, and distribute resources across geographical regions so that each factor can generate maximum economic return.
Judged from this perspective, Taiwan should be like the US, instead of Mexico; Taiwan should demand, not resist, further regional economic integration, like the US has done.
Hong Kong's experience serves as a good example. The territory has benefited from resource outflows and reorganization. Beginning in 1980, almost all of Hong Kong's manufacturing industry relocated northward to the Shenzhen Special Economic Zone, resulting in surging unemployment. But the aggressive development over the past 20-plus years have demonstrated that, by transferring labor-intensive manufacturing industry to China, Hong Kong has gradually trans-formed from a manufacturing-based, export-oriented economy into a service-based economy.
Hong Kong has become an international financial center, and a communications and transportation hub in southern China.
During the same period, Shenzhen has miraculously changed from a small town to an important city in China. Shenzhen has surpassed Shanghai, Beijing and Guangzhou in terms of the gross local product per capita and average annual income. It has its own international airport, local bourse and high-tech industrial park.
Shenzhen has become a city capable of competing with Hong Kong on its own, not a hinterland for the territory's economic development.
The cooperative and competitive development between Hong Kong and Shenzhen is worth anticipating -- amid the talk about cross-strait economic integration -- as a positive by-product of closer cross-strait ties.
From a long-term point of view, cross-strait economic links are not only inevitable, but also mutually beneficial. The establishment of direct links and easing of the "no haste, be patient" policy are merely a question of time in a longer historical context.
Although for the time being, society is still skeptical about further economic integration and its potential problems, such as unemployment, investment outflows and slumps in the stock and housing markets.
In the short term, due to cost differences and the movement of resources, living standards on the two sides of the Strait will gradually draw together, justifying the above worries. If Taiwan can make good use of its advantages, characteristics and competitive strategies, and strengthen its capability of information R&D and financial innovation, the long-term interests brought by an integrated regional economy will also help Taiwan maintain high living standards.
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