Investing in China not a panacea

"By investing in China Taiwanese manufacturers are helping Taiwan's economy and benefiting the Taiwanese people as a whole." While this faulty line of reasoning has been repeated so often over the years that it has almost become a truth, it is often a failure to understand the facts that leads people to believe it.

This reasoning has gained currency because the pan-blue camp and pro-unification media have been promoting it, but government officials should also take their share of the blame. Some of them have played along and treated "active opening" as politically correct behavior, caring only about "opening up" while ignoring the management aspect. Officials in charge of economic policies are most guilty in this respect.

Despite President Chen Shui-bian's (陳水扁) repeated declarations that priority should be given to local investment and his recent stress on "active management," the govenrment remains stuck, issuing approvals for applications to invest in China and, as yet, has been unable to come up with an "active management" methodology.

Some officials remain cautious about the "active opening" policy, but this caution is based on national security concerns, focusing on China's hostile behavior. They may be right, but appealing to national security concerns while relaxing restrictions on business investments in China on the other could easily be misleading -- it is a tacit agreement that investing in China is beneficial to Taiwan's economy, but that for the time being it must be restricted because of national security concerns.

But these approaches are just two different ways of endorsing a specious argument. The active relaxation of regulations on China-bound investment will not only jeopardize national security, but will also harm the economy and be a disaster for the general public.

China-bound investment takes advantage of cheap Chinese labor. This investment model takes funds that should be invested in transforming and upgrading Taiwanese industry and invests it in China. Companies moving to China create job opportunities there and push Chinese economic growth forward, while creating unemployment in Taiwan and drastically diminishing the government's tax income. Overall, it hurts Taiwan's economy and its workforce.

It should be noted that while some people's jobs will clearly be affected by industry moving abroad, the mantra of the pan-blue camp and the pro-unification media has misled them into believing they are benefiting from Taiwanese industrial investments in China.

On the one hand, they are happy to see investments in China as a result of the "active opening" policy, but on the other, they complain that the government is unconcerned that employment opportunities and salaries are falling in Taiwan. Isn't the contradiction clear for all to see?

At an economic forum organized by Taiwan Advocates last month, former president Lee Teng-hui (李登輝) put forward concrete data showing that standard salaries in Taiwan fell 1.2 percent for the second consecutive year last year. This highlights that not all Taiwanese are enjoying the fruits of the nation's economic growth, which has led to an increased income gap, the misery of card debt and a deterioration of society. The shrinking labor market as a result of industry moving overseas is hurting us all.

When it comes to the overall negative effect on industry, Lee believes Taiwanese businesspeople disregard research and development and industrial transformation as a result of the government's policy that lets industry move to China, where companies can enjoy a second spring. But if Taiwanese businesspeople pin their hopes on cheap Chinese labor instead of working actively to upgrade and transform their businesses, not only will they gradually lose their competitive edge, but they will begin to develop in tandem with local Chinese industry and -- instead of relying on cheap labor -- they will have to leave China.

The International Confederation of Free Trade Unions (ICFTU) has pointed out that salaries in China's manufacturing industry sit at beteen 38 percent and 75 percent of China's lowest legal salary levels and that products are too cheap, leading to unfair trade. To deal with this situation, the US and the EU are planning to file a joint complaint with the WTO.

Do Taiwanese businesspeople really want to become China's accomplice in exploiting Chinese workers? How long can China's labor force last? Those who feel that it is only natural to invest in China should give this issue some serious consideration.

Taiwanese businesspeople should take responsibility for their own success or failure. The government must consider the big picture of national development and the almost 10-million-strong local work force, and cannot only consider the fate of Taiwanese businesspeople in China.

The government's main task is to bring about development in all areas of the economy, increase employment opportunities and create a positive circle of production and consumption. The last few years of letting businesses move to China, and even encouraging them to do so, has kept domestic unemployment high, while salaries keep falling.

People who complain that their living standards are deteriorating must understand the cause-and-effect relationship between factors leading to this deterioration. If they don't, they will end up promoting the flow of capital to China, even though this is the cause of their suffering. To put it differently, they will be happy to help the people who sold them down the river count their money.

Translated by Perry Svensson