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Editorial: Cross-strait policies lack coherence

The Control Yuan has censured the Executive Yuan for its inappropriate handling of Taiwanese business investments in China. But justice has come late on this matter, for Taiwan has paid a high price for poor policies on cross-strait trade and economic exchanges. Taiwan's economy has little chance of recovering if these policies are not changed.

According to statistics from the Ministry of Economic Affairs, 25.2 percent of Taiwan's exports went to China in the first half of this year. China has replaced the US as the top destination for Taiwan's exports. Up to March of this year, companies listed on Taiwan's stock exchange had moved NT$197.7 billion to China, but they have repatriated only NT$2.3 billion back into Taiwan. The inflow is only 1.18 percent of the outflow. And only 27 out of 490 listed companies investing in China have repatriated any money at all. In the first half of this year, the number of Taiwanese investment projects in China increased by 8.14 percent from the same period last year, while the investment value increased by 12.86 percent -- an indication that the China investment fever is rising. In fact, these are only official statistics. The actual figures are probably much higher. All these show that cross-strait capital and trade relations are in an extremely unhealthy state.

In its censure of the Executive Yuan, the Control Yuan cited two major lapses. First, Cabinet agencies have failed to establish an effective mechanism to monitor Taiwanese investments in China. They have also failed to promptly detect the strength of China's lure for Taiwanese investors, much less formulate policies to counter the effect. As a result, the migration of industry to China is speeding up. Meanwhile, Taiwan's domestic industries are declining and unemployment is on the rise.

The other failure has to do with the fact that Taiwanese businesses in China have repatriated only 1.18 percent of the money they moved out. This is a highly abnormal situation in any kind of foreign investment, but the authorities concerned have failed to tackle the issue. Companies are emptying their coffers and leaving their debts in Taiwan.

This newspaper has long called on the government to face up to the serious hemorrhaging of Taiwanese capital, which is damaging Taiwan's economic health. The government is aware of the seriousness of the situation and is trying to find ways to encourage local businesses to keep their roots in Taiwan, or invest in Southeast Asia in order to reduce the over-concentration of investments in China.

Nevertheless, the government seems to be talking more than doing when it comes to changing trade and economic policies. Now, with the future of direct links with China uncertain, the private sector does not know which way to turn. For example, the Ministry of Finance clearly knows the gravity of the capital drain, but it is still aggressively planning offshore banking units that will open more channels for outflows to China.

The Control Yuan's censure is limited to capital, trade and economic matters. But if we take national security into consideration, we could say that Taiwanese businesses are practically doing business under the gun -- this has got to be the strangest situation in the entire business world. The two sides are now highly dependent on each other economically, but they have no diplomatic relations, trade offices or any other mechanism for protecting the interests of investors. China, meanwhile, has been threatening Taiwan with the deployment of more than 400 ballistic missiles. If the government cannot straighten out its contradictory policies, it won't just be facing censure from the Control Yuan. It soon will be dumped by the electorate.
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