Fri, Jan 20, 2006 - Page 8 News List

Forming a Taiwan economic circle

By Tung Chen-yuan 童振源

In his New Year's address, President Chen Shui-bian (陳水扁) told the people of Taiwan that "although we cannot turn a blind eye to China's market, we should not view the China market as the only or the last market." In particular, Chen stressed that "`globalization' is not tantamount to `sinicization,'"and that Taiwan must not "`lock in' our economic lifeline and all our bargaining chips in China."

Chen's hard work has indeed been aimed at creating sustainable economic development for Taiwan. I wonder, however, if he has not mixed up the concept of "market" with the concept of "production" and neglected the complexities of the international division of labor across the Taiwan Strait, something that might cause Taiwan to miss the opportunity to build sustainable development.

Former vice minister of economic affairs Yin Chi-ming (尹啟銘) has said that, "The globalization idea sees the whole world as one factory where one has to make good use of the comparative advantages of every location. The idea of globalization also sees the whole world as one market, where one has to make use of every local business opportunity."

This statement is an idealistic description of Taiwanese and other foreign businesspeople investing in China. China is playing factory to the world, so of course Taiwanese and other foreign businesspeople want to take advantage of its cheap production resources.

But China is not the whole world market, it is merely a newly developing market with unlimited potential business opportunities where businesses from various countries are engaged in all-out competition. Today, a majority of products manufactured by foreign businesses investing in China are exported to the US, Japan and the EU, and they make up more than 50 percent of all China's exports.

The fact that Taiwanese businesspeople invest in production in China does not mean that China is Taiwan's "only or ... last market." The question of whether Taiwanese businesses see China as their best investment destination involves many factors.

From an economic perspective, Taiwanese businesses are certain to consider the risks, including the political risk, of doing business in China, and they may be clearer than even the Taiwanese government on where the real risks lie. The government's good will should be manifested by offering Taiwanese better information and risk assessments instead of restricting their investments.

Macroeconomically speaking, Taiwan's resources are limited and its domestic market is small. The economy of a growing Taiwan therefore requires the integration of global resources and global market operations. That is why China's cheap production factors and rapidly growing market offer a good opportunity for developing and transforming Taiwan into a platform for Asia-Pacific cooperation that integrates global resources.

"Globalization" and "sinicization" are not diametrically opposed concepts. Sometimes they work to reinforce each other. Just as Chen said in his New Year address, "The complex cross-strait economic and trade policies should not be simplified as a dichotomy of either `opening up' or `tightening up.'"

Seeing the competitive pressures and opportunities offered by globalization and in response to the goal of Taiwan's economic development, a "Greater Taiwan Economic Circle" (GTEC) could be established to function as a blueprint for Taiwan's development and avoid confusion between "globalization" and "sinicization."

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