Sun, Oct 03, 2004 - Page 8 News List

China fever,not weapons plan, is the real problem

By Huang Tien-lin黃天麟

After 11 Academia Sinica members publicly criticized the proposed arms procurement plan, those who oppose the plan launched a large demonstration on Sept. 25. They stressed that although the budget of NT$610.8 billion (US$18 billion) will be spread over 15 years, the annual expenditure of NT$40.72 billion will crowd out other domestic expenditures, decreasing Taiwan's GNP by about 0.27 percent.

Strangely, they did not mention the nation's massive investment in China (about NT$408 billion per year), which is the equivalent of 4 percent of the nation's GDP. Not to mention that Taiwan's total investment in China over the past decade already exceeds NT$5.44 trillion.

The yearly investment of NT$408 billion in China is not a small amount, and it is 10 times Taiwan's proposed weapons purchase budget per year. By the opposition's calculations, such investment may decrease the country's GNP by about 2.7 percent. Therefore, if they really care about people's livelihood, and the sustainable development of Taiwan's economy, they should oppose the enormous capital outflow to China first, not the arms procurement plan.

People may argue that the national defense budget is considered a "non-productive expenditure," while investing in China is considered an economic activity. But if we calmly examine the situation, we will find that a large portion of the budget will circulate back to Taiwan and stimulate domestic demand and consumption. On the contrary, experience tells us that the capital of the Taiwanese businesspeople operating in China has never flowed back over the past 14 years. Such an investment pattern is not helpful to Taiwan's economy, and it only strengthens China's national power.

Moreover, those who advocate "marching west" (to China) often say that "Taiwan's trade surplus with China has exceeded US$200 billion in recent years, and the nation will suffer a trade deficit without its large exports to China." The fact is, Taiwan has given up its US, European and Southeastern Asian markets in an effort to march west.

In particular, the nation's market share in the US has already dropped from 5.8 percent in 1987 to 2.8 percent in 2002. The reduction of exports to these places is estimated at US$300 billion, which is much higher than Taiwan's trade surplus with China.

Recently, some also said that Taiwan can avoid the "hollowing out" of its industry only by using relatively cheap Chinese resources. Experiment is the best way to test a theory. The 14-year experiment has come up with an answer: Taiwan's investment of NT$5.44 trillion in China has failed to boost our competitiveness or economy, which is now inferior to that of South Korea.

The investment of South Korea in China is less than one-tenth of Taiwan's. However, since it does not solely rely on cheap Chinese resources, it has advanced its technologies, and is catching up with, or even surpassing Taiwan in terms of its average GNP. Have those who oppose the arms procurement plan noticed that?

If we really care about public welfare and the nation's economy, we should oppose "China fever." If we can reduce our excessive investment in China, we will be able to stimulate various domestic economic activities, increase tax revenues, resolve the current financial difficulties, lower the unemployment rate and raise national income. The annual weapons purchase budget of NT$40.72 billion will then no longer be a problem.

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