The Democratic Progressive Party (DPP) is going to hold a debate on lifting the restrictions on cross-strait economic and trade exchanges. For the manufacturing industry, this debate has come too late.
It seems that the Taiwanese public believe in the myth that investing in China has become a must for all countries. Many think that the nation's sluggish economic performance over the last decade and the reason why it trails behind other advanced economies is because it opposes this global trend. They further believe that South Korea's economic success, which has surpassed Taiwan's in recent years, is a result of the former's investments in China.
Taiwan's policy of moving westward toward China was initiated by former president Lee Teng-hui (李登輝) in the early 1990s. Not until after 1996 did Lee change this to a "no haste, be patient" policy. But it was easier to adopt an opening-up policy than to scrap it. Despite the government's imposition of restrictions on China-bound investment in wafer foundries and infrastructure and although Taiwanese statistics show that investments from 1996 to 1999 were much lower than those from 1992 to 1995, Chinese statistics still show NT$7 billion (US$215.8 milliion) in accumu-lated investments in the period from 1992 to 1999, implying that the restrictions were ineffective.
When President Chen Shui-bian (
As of 2004, Taiwan's capital investments in China had reached an accumulated US$55 billion, or more than 65 percent of its foreign investments. This compares with South Korean investments in China of less than US$13.2 billion, or a mere 22.98 percent of its foreign direct investments as of last year.
According to the OECD's Handbook on Economic Globalization Indicators, the more concentrated a nation's foreign investment is, the lower is its level of globalization. Taiwan has thus effectively lowered its level of globalization as a result of excessive investment in and trade with China.
Fortunately, up to 90 percent of information-technology (IT) products produced with Taiwanese investments in China are exported to other nations, rather than concentrated on domestic sales. Therefore, investing in and exporting to China is only one part of Taiwanese businesspeople's globalization operation strategies.
What draws our attention to South Korea is that 25.72 percent of its foreign direct investment went to the US, compared with Taiwan's 9.8 percent. According to IMF's estimates, a reasonable investment rate for Taiwan would be at least 23.8 percent of its GDP, a standard that Taiwan met prior to 2000. But records show that from 2001 to 2004, Taiwan's overall investment rate was less than 23.8 percent, despite large-scale Taiwanese investments in China, and in 2003 it even dipped to 16.9 percent.
Not only was this far below South Korea's average of more than 29 percent, but it was also lower than the percentage posted by the US, Japan and France -- all mature economies.