In recent months, Taiwan's stock market has performed very well. Stock holders are happy about this. But as money comes into your pockets, please consider the causes and processes leading to the bull market.
In May, the government listened to the pro-China media and began planning for the Conference on Sustaining Taiwan's Economic Development to satisfy the dream of Taiwanese enterprises to conquer the Chinese market.
I suspect the public is already familiar with the line proposed by the pro-unification media and stock market analysts: The future of Taiwan's economic development and stock market lies in a cross-strait breakthrough. Naturally, the pan-blue camp and the pro-China media could not give up such an opportunity, and they pushed the government into loosening restrictions on Taiwanese companies investing in China and improving cross-strait relations. This was, apparently, the only way to achieve an economic breakthrough.
They also demanded that the government immediately open cross-strait direct links, allow Taiwan's banking sector to go to China and cancel the 40 percent investment cap on Taiwanese enterprises. Hypnotized by the blue camp, the government set the conference agenda and suggested solutions. However, deregulation did not cause the market to surge, and instead selling pressure emerged. On July 17, the TAIEX index closed at 6,232 points, 146 points lower than the 6,378 points on Jan. 1.
The conference got underway in early July. After July 17, the conclusions of the financial and China committees became increasingly clear, but the proposals favoring China investment in complete disregard of national sovereignty and economic security were blocked by the Taiwan Solidarity Union and pro-localization Democratic Progressive Party (DPP) academics. The TAIEX has gone up ever since. It is clear that putting a damper on the outflow of capital has stabilized the stock market.
In terms of the local economy, the pro-unification camp claims that if Taiwan isolates itself from China, it will suffer economically and foreign capital will withdraw.
But the result was the opposite. In late July, the TAIEX reached 6,454 points, 222 points higher than on July 17. In August, foreign investors stopped selling Taiwanese shares and bought shares to a net value of NT$73.6 billion (US$2.3 billion). On Sept. 30, Standard Chartered said it would buy a controlling stake in Hsinchu International Bank (新竹商銀) for US$1.2 billion, proving that fears of foreign capital being withdrawn were groundless.
In October, foreign investors continued to buy a net total of NT$58.1 billion of local shares, and the figure expanded to NT$123.3 billion last month. Since the pro-China proposals were vetoed four months ago, foreign investors have bought a net total of NT$333.8 billion of local shares.
Citibank and some Japanese capital also poured into local banks, while international private funds entered Taiwan. On Nov. 24, the Carlyle Group announced its intention to buy Advanced Semiconductor Engineering Inc, the world's biggest chip packager, for NT$210 billion. This massive influx of money shows that foreigners are increasingly confident in Taiwan and have faith in its future.
The joy of opening to China is only temporary, and the interests of businesses do not equal those of the government and the public. The country needs enterprises, but enterprises must also show concern for the nation. If the government focused its attention on Taiwan rather than seeking a cross-strait breakthrough, the TAIEX index would surely surge upward.
Huang Tien-lin is a former national policy adviser to the president.
Translated by Eddy Chang
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