In recent years, China's economy has taken off, with an average annual economic growth rate of 7 to 9 percent. The rapid economic boom is a result of China's development of traditional labor-intensive industries, where it has an edge due to its low labor, land and material costs. At the same time, both the export-oriented market and massive foreign investment have caused a favorable "cluster effect."
Although China's huge consumer and investment markets have not been liberalized completely, the country still enjoys a dominant position today. Not only has this "magnet effect" pressured Taiwan and attracted numerous Taiwanese businesspeople to China, but it has also affected Southeast Asian countries and even South Korea and Japan -- most foreign capital is now flowing to China, rather than to their neighbors.
But the situation has changed this year. Due to excessive foreign investment, signs of an overheated economy have appeared. Hence, Chinese Premier Wen Jiabao (溫家寶) has vowed to push for "macroeconomic control measures" to cool down China's economy and achieve a soft economic landing. One of the indexes of this policy change is the growing pressure on the so-called "green" Taiwanese businesspeople in China who support Taiwan independence. To a degree, Beijing has signified that it no longer needs Taiwan's capital and technologies. Thus, it's time for businesspeople to return home.
In his book Taiwan's Economic Strategy: from Huwei to Globalization published in March, Taiwan Thinktank chairman Chen Po-chih (陳博志) views the issue from the history of the nation's economic development, arguing that the government's "go west" (to China) policy was a mistake. Chen points out that China is not a free economy at all, as the Chinese government monopolizes and interferes in the market. China is the most hostile country to Taiwan in the world, and has never given up the threat of military invasion. How can we develop close relations with such an enemy? The separation of politics and economics in cross-strait relations is also wrong. Beijing's recent crackdown on green Taiwanese businesspeople has proven that in communist China that separation is a myth.
As Chen states, the nation should seek cooperation with advanced countries and import their new technologies to upgrade its industries and improve its competitiveness. Through lowering their costs by moving to China instead of upgrading, the outflow of Taiwanese businesspeople will only increase the nation's unemployment rate, decrease wages and hollow out industries.
Why don't we make business arrangements with Southeast Asian countries or even India, and the gradually rising Eastern European countries? Why do we have to blindly "go west" and invest in China, a country where freedom, democracy, and the rule of law are absent -- and one that may attack Taiwan?
The massive Chinese market is certainly attractive. However, the fundamental weakness of Asia's economic miracle has already appeared in China, as predicted by US columnist Paul Krugman -- who claimed in 1995 that the miracle was not due to total factor productivity growth, but rather intensive use of inputs (eg, tremendous capital and labor inputs). Although China may not necessarily spark another Asian economic crisis like the one in 1997, it's surely impossible for it to maintain the high economic growth of the past. Unfortunately, even after economists have issued their warnings, we are still "going west" without vigilance, jumping one after the other into the black hole of autocratic China. This situation is truly worrying.
Chiou Chwei-liang is a visiting professor at the Graduate Institute of Southeast Asian Studies at Tamkang University.
TRANSLATED BY EDDY CHANG
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