Since Aug. 8, citizens from Hong Kong visiting Taiwan have been eligible for a 14-day landing visa. This measure is a further indicator of Taiwan and Hong Kong's intention to help one another economically.
The recent US-induced economic downturn has nearly destroyed the legendary growth of East Asia's "four dragons." In the first quarter of last year, the economic growth rates of South Korea, Singapore and Hong Kong were 12.6 percent, 9.8 percent and 14.1 percent respectively. By the first quarter of this year, their growth figures had dropped to 3.7 percent, 4.6 percent and 2.5 percent respectively. Taiwan, due to added domestic factors, saw its economic growth rate drop from 7.92 percent to 1.06 percent during the same period.
Very clearly, these four economic entities have reached the point where they need to find stimulation for economic development outside of US markets.
At this crucial juncture, it has been rumored that Hong Kong will take further steps toward promoting economic integration with the Pearl River Delta, making possible the free flow of people, goods and capital. Although Hong Kong's chief secretary for administration, Donald Tsang (曾蔭權), stated that this idea was just a "draft," this plan is still a significant revelation for Taiwan, which urgently seeks to break through its own economic predicament and dissolve the political and economic pressure exerted by China.
A forecast by scholars basing their conclusions on statistical data from 1996 indicates that if Hong Kong and Guangdong Province were to form a so-called "Hong Kong-Guangdong Trade Zone" -- and if average annual growth in the zone were to rise dramatically to 10 percent -- in 20 years time, the zone's GDP, calculated in terms of average buying power (purchasing power parity, PPP), could grow to six or seven times its current level of US$500 billion, to reach US$3.364 trillion.
Even if Taiwan and South Korea were able to maintain an average growth rate of 6 percent during the same period, in 20 years, their respective GDP in terms of PPP would be only US$990 billion and US$1.688 trillion. This means that when the "draft" under consideration finally succeeds, the economic scale of the Hong Kong-Guangdong Trade Zone will be three to four times that of Taiwan, and 1.9 times larger than that of South Korea.
Hong Kong's decision to engage in economic integration with a specially designated area of China reveals something else: the territory's government is planning to adopt a new development strategy that involves regional integration with China. Finding a new means to stimulate economic growth and striving to gain more resources, Hong Kong is defining anew its political and economic status in China.
Since the days of reform, the Chinese Communist Party has basically adopted a development policy of localizing economic authority. It hoped that handing decision-making power for economic and trade policy down to the local level would facilitate a natural formation of regional economies, centered around several major cities.
Following financial localiza-tion, however, came the rise of strong local protectionism, which restricted economic regionalization. In addition, under the restrictions imposed by complex natural conditions, China's policy of economic development was never suited to single or homogeneous markets.
A simple example: if China obstinately insisted on development on a national scale, the resulting long-distance transport networks (including railroads and highways) and urbanization would require land that, by 2010, would amount to about 8 percent of China's total area. Using China's limited plains area (currently comprising about 12 percent of the total area) in such a manner would surely reduce the amount of land that could be used for agricultural production, and affect the food supply.
Simply put, attempting to use the "single market" concept to map out strategies for economic development in China is not only unwise but also impossible. The integration of Hong Kong, known chiefly for its financial and service industries,?and Guangdong, whose production industry and trade are burgeoning, forms an economic entity whose industrial structures become more integral and relatively independent. The integrated entity can successfully continue to develop amid stiff international competition. Moreover, it can take advantage of the power of egocentric regionalism to obtain more room for political and economic maneuvers, taking the opportunity to ease off the heavy political and economic pressure from Beijing.
Looking into the future, a trend has already begun to take shape, whereby China develops its economy in blocks consisting of adjacent big cities. Experts generally believe that nine or 10 economic regions will spring up in China. It seems that Taiwan should reject the myth that China is "a big cake," and instead adopt more flexible, forward-looking and comprehensive political and economic strategies. Taiwan should, on the basis of its own political and economic interests, implement different
policies for different regions.
If Taiwan and Fujian Province were to integrate economically, it is predicted that the resulting regional economy would grow by 10 percent annually over the next 20 years. Its GDP in terms of PPP could even reach US$3 trillion by 2016.
Taiwan should therefore adopt more proactive, open policies toward Fujian, Guangdong and even the greater Shanghai region. It should also proceed with regional integration with the coastal provinces, and with other regions taking shape in the future, so as to stimulate its own economic development. In addition, during the integration process, Taiwan should keep track of all the regionalisms and precisely maneuver the conflict between local and central governments. This way, Taiwan should be able to control more political and economic interests inside China. With proper use of these interests, Taiwan will be able effectively to ease the pressure from Beijing.
Developments in the international economic environment have forced East Asia nations to seek new pastures in China. Amid this wave of adjustment, Taiwan should try to derive benefits and prevent itself from being annexed or hurt by the magnetic power of China's economy. The momentum of Chinese regional development actually provides Taiwan with a watershed opportunity. If Taiwan can draw up more flexible policies for economic and trade integration with China, it will naturally be able to weather the storm.
Lee In-ming is a professor at the Graduate Institute of East Asian Studies, National Chengchi University. Tu Chih-chien is director of the preparatory office of the Association for Cross-strait Regional Development.
Translated by Scudder Smith and Jackie Lin
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