Sun, Jul 02, 2006 - Page 8 News List

Taiwanese economy leaves PRC's far behind

By David Su 蘇經綸

One of the main reasons the opposition parties launched a recall motion against President Chen Shui-bian (陳水扁) was the concern over Taiwan's "weak economy." The nation's pro-China media even concluded that compared with China's economic leap over the last decade, Taiwan's economy is in a shambles.

I think it natural that the outcome of the presidential recall should be determined by popular opinion, but the conclusion that Taiwan's economy lags behind China's is surely questionable.

First of all, the traditional definition of GDP is not an exact equivalent of economic prosperity. Consider the development of Lake Dianchi in Yunnan Province as an example. China has spent 4 billion yuan (US$500 million) in the last year to prevent and control water pollution in the lake, a figure twice as much as the total output of the region. Based on China's GDP calculations, however, this amounts to a total GDP of 6 billion yuan (US$750 million). Also, according to World Bank figures, the environmental cost that has accompanied China's GDP growth is estimated to reach 8 to 12 percent of its total GDP.

Since the transition of power in 2000, Taiwan has seen the relocation of pollution-intensive industries to China. In this context, Taiwan's annual GDP growth rate of 3.6 percent last year reflects real value-added production rather than a patchwork of dirty development alongside environmental clean-up. Furthermore, after taking into account medical and other costs resulting from environmental deterioration, the view that China's economic performance exceeds Taiwan's is clearly wrong.

Looking at bad debt, Germany's Bertelsmann Transformation Index 2006 shows that the bad debt rate of Chinese banks is 40 percent to 50 percent of total loans outstanding, or about US$500 billion. By contrast, Taiwanese banks' bad debt rates have fallen from a peak of 8.8 percent in 2002 to a stable 4.35 percent in 2004, about one-tenth of China's rates.

Finally, take a look at unemployment rates. A recent survey conducted by the US' Rand Corporation shows China's unemployment rate at a new high of 23 percent, whereas Taiwan's latest unemployment rate from April was only 3.78 percent, the lowest in five years. Taiwan's unemployment rate is only one-sixth of China's, and the average unemployment rate under the Democratic Progressive Party government is 1.9 percentage points lower than Hong Kong's. These figures make it even more difficult to understand in what way China's economy is outperforming Taiwan's.

According to the CIA World Factbook, Taiwan's net migration rate is relatively low, and significantly lower than that of China. Taiwan's green GDP growth rate is higher than China's, its bad debt rate is only one-tenth of China's, and its unemployment rate only one-sixth. All this begs the question of whether or not some media outlets in Taiwan have been massaging their view of China's economy.

David Su is a doctoral student in the Department of Economics at the University of Rhode Island.

Translated by Lin Ya-ti

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