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Editorial: When business is hostage to politics

China has come up with a new tactic in its battle to achieve unification with Taiwan. Besides voicing threats and military posturing, China has recently targeted pro-independence and pro-Democratic Progressive Party (DPP) business people operating in China. When China singled out the Chi Mei Corporation (奇美企業), the world's largest manufacturer of the plastic raw material ABS (acrylonitrile butadiene styrene), alarms started ringing for many other enterprises and individuals who support the DPP, for they fear similarly being swept up in the political storm.

The stock exchange has taken a sharp dive in recent days. Rising oil prices and a possible increase in US interest rates have doubtless contributed to this, but many people believe this slump's main cause is analysts' speculations incessantly disseminated over the Internet that China will impose further economic sanctions. There is also the news of China's military exercises around Dongshan Island (東山島) and Taiwan's live-fire maneuvers in Penghu (澎湖). These routine exercises have been played up by the media into a military standoff that could explode into war at any moment.

Taiwan and China have a high degree of commercial interdependence, with China accounting for almost 30 percent of Taiwan's total exports, so it is no surprise that China should use commerce to achieve its political goals by using economic sanctions to pressure Taiwan's businesses. But because there is such a high degree of commercial interdependence, Chinese sanctions against Taiwanese businesses or actions that block Taiwan's trade will exact a toll on China's own economic development.

Even if China did impose economic sanctions on Taiwan, their effects would be limited. Because Chi Mei Optoelectronics and other companies are multinational corporations, Taiwan's exports to China largely consist of intermediate raw materials that China itself requires -- and that it purchases from Taiwan. Even if China turned to other countries for these products, it would find a shortage on world markets that Taiwan is in a position to fill. Furthermore, much of Taiwan's exports to China are re-exported and not sold on the Chinese market. Not only do Taiwan's businesspeople provide job opportunities and tax revenues for China, they also contribute to China's economic growth. If China restricts their investments or creates problems for them, China will pay the cost of such policies.

The Chi Mei incident has raised the international business community's awareness of the political dangers of investing in China. By enforcing economic sanctions against Taiwan's businesses, China will persuade those businesses and others to transfer their investments to Southeast Asia. This retrogressive policy clashes with the business practices of democratic countries and with the spirit of free trade represented by the WTO, and could seriously damage China's economy, and both Taiwan and China will lose.

Despite Taiwan businesses' solid revenues, the stock market has still slumped due to lack of investor confidence. The slightest rumors are enough to cause a panic-stricken fall in the market. When China's remarks are supported by other politicians, scholars and businesses and disseminated by mass media, they serve as an extremely powerful weapon. The Taiwan stock market has been affected by such remarks, and now that the Chinese know how effective this method is, they will continue to use economic threats against Taiwan. To prevent repeated market crashes, the government should release accurate information and the public should build up its own confidence. Taiwan, which has developed under the shadow of China's threats, is a society with a strong sense of impending crisis. Although it is very sensitive to its environment, it is also exceptionally adaptable, and while it might panic momentarily, it will soon adapt to the new situation.
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