Wed, Jul 02, 2003 - Page 8 News List

China exchanges bad for economy

By Huang Tien-lin 黃天麟

Economists who embrace the idea of moving westward to China view the arguments that "bad cross-strait relations will boost Taiwan's economy" and "good cross-strait relations will hurt the economy" as nonsense. However, Taiwan's more than 400 years of history has proven the continuity and truthfulness of these arguments.

During the period of Dutch occupation of Taiwan, China adopted an isolationist policy, thereby turning the island into a regional hub of commerce for Dutch and Portuguese traders to make connections with Korea, Japan, China and South Asia (which proved that the economy would also do well in the absence of cross-strait relations). But once China adopted an open-door policy and retook Taiwan, Taiwan's position as a regional hub vanished (which proved that Taiwan would change for the worse if cross-strait relations improved).

Taiwan was ceded to Japan after the first Sino-Japanese War. As Taiwan departed from China's orbit, the island's economy was changed inside out. But after Taiwan was returned to China following World War II, it encountered a major economic calamity that lasted four years, undergoing unprecedented inflation with 40,000 old Taiwan dollars worth NT$1. Cash assets disappeared (another example of good cross-strait relations leading to a poor economy for the island).

Later Taiwan adopted the KMT government's "three no's policy" and severed relations with China for 50 years. During this period of separation, Taiwan created its own economic miracle that was admired by the world (which proved for the second time that bad cross-strait relations would improve the economy).

Taiwan resumed relations with China in 1987 when people were allowed to visit their relatives there. Next, a series of "opening-up" policies -- such as tourism -- compelled the government to open up indirect investment in China in late the 1990s. China fever then started to burn off Taiwan's economic power.

Around the time of the so-called 1992 consensus ("one China, with each side having its own interpretation"), our traditional industries started to move to China in great numbers. It was also a period in which the stock market had its darkest phase, with index falling to 3,098 in January 1993. People suffered great losses (which proved for the third time that good cross-strait relations would ruin the economy).

In 1995, when the Constitution was amended to allow for direct presidential elections, cross-strait tensions escalated. Then president Lee Teng-hui's (李登輝) "no haste, be patient" approach in 1996 worsened cross-strait relations, but Taiwan's economy took a favorable turn. In August 1997, the stock market soared to 10,256 points, its highest in 10 years (which proved for the third time that bad cross-strait relations would make Taiwan well). As the "no haste, be patient" policy began to ease in 1998, the Investment Commission of the Ministry of Economic Affairs rarely rejected any applications for investment in China. The nation's high-tech industries then moved quickly to China and Taiwan's stock market plunged (which proved for the fourth time that good relations would hurt Taiwan).

Tension resurfaced when Lee came up with his "state-to-state" model of cross-strait relations in July 1999, but Taiwan's stock market soared to 10,393 points seven months later (which proved for the fourth time that bad cross-strait relations would improve the economy).

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