Sun, Jun 13, 2004 - Page 8 News List

Business blockade threat is real

After China criticized Taiwanese businessmen who support the Democratic Progressive Party (DPP), a Chinese newspaper suggested imposing economic sanctions against Taiwan, causing concerns about national economic security to resurface.

We worry that one day China will decide to impose economic sanctions against Taiwan. Although the general consensus is that China will not abruptly and wantonly make such a decision -- not to mention the fact that in doing so, China will hurt itself -- the general consensus is not necessarily right, because the economic injuries to the two sides resulting from such sanctions would be substantially different.

If an appraisal reveals that the level of injuries sustained by the two sides are disproportionate -- for example, China suffers only a minor skin abrasion while Taiwan is hit with a lethal blow -- Taiwan cannot rely on the belief that sanctions are a from of mutually assured destruction for comfort, and as a result become careless. In view of the totalitarian nature of the Chinese regime, Beijing may very well launch a campaign that it perceives as comparatively advantageous. Taiwan's top priority is to prevent this, and in the event that it happens, minimize the damage to Taiwan. This is the responsibility of those in power, and it should never be evaded with excuses such as market liberalization or economic freedom. The safety of this country is not something that should be overlooked or left to be dealt with by our next generation.

So what is the likelihood of China imposing economic sanctions against Taiwan?

What is the level of potential damage to each country?

The following information should help people judge accurately for themselves, and thereby become immediately alarmed.

Investments are obviously a type of asset, and Taiwanese investors have many investments in manufacturing facilities in China. From the standpoint of assets, acquisitions and associated risks, the market appraisal of the accumulated investments by Taiwan in China is US$160 billion. Even the most conservative appraisals come up with the figure of around US$120 billion. Also, as many Taiwanese hold US passports; as these investors are identified as American or Hong Kong businessmen, the actual figure should be much higher.

In terms of the accumulated percentage of GDP invested in China (Taiwan's 2002 GDP was US$282 billion), the figure is 49.6 percent for Taiwan. The figure is 2.7 percent in Korea, 0.6 percent in Japan, and 0.3 percent in the US (2001 figures). Taiwan's 49.6 percent figure reveals that Taiwanese assets in China amount to almost half of our annual GDP, while the figure is less than 1 percent for both the US and Japan. If China launched an economic blockade, the damage sustained by the US and Japanese economies would be minuscule, while Taiwan's economic injury would be significant.

Let us now look at regular economic exchanges. This year, Taiwan's exports to China have grown to 37.4 percent of the nation's total exports, while the exports to the US are only 15 percent, and to ASEAN member nations they are only 11.1 percent. Thus, the percentage of Taiwan's total exports to the US, Japan and ASEAN countries combined is still far smaller than than the percentage of exports to China. This concentration of exports to a hostile country is obvious. Japan's export dependency on China is 12.3 percent, while the US' dependency is 4.6 percent and Korea's is 18.6 percent.

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