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Keep investment capital in Taiwan

The most successful link in China's "unrestricted warfare" strategy against Taiwan has been its use of local media to bestow almost sacred status on the idea of moving to China.

Talking about "the Divine Continent" and "the Land of Abundance," the media have used a series of distorted and false catch phrases such as "integration of resources," "win-win," "cross-strait division of labor" and so on to beautify the idea of moving to China and to sanctify new concepts such as "the rise of China," "the long river of the international economy," "new cross-strait thinking," and "irresistible."

As if in a trance pro-China academics have to the tune of China's unrestricted warfare strategy.

The Cabinet's lightning-fast decision following the Taipei and Kaohsiung mayoral elections to allow local semiconductor companies with eight-inch wafer manufacturing lines to make chips in China using 0.18-micron processing technology is one clear example of the idea that moving to China is an irresistible trend.

Pro-unification media outlets had no choice but to praise this move, and those who were laying the groundwork behind the scenes also rushed to praise the decision.

They claim that allowing the establishment of 0.18-micron manufacturing lines in China will help improve the competitiveness of semiconductor companies that are already investing in China, that Taiwan already has 10 12 inch wafer plants and that this manufacturing process is much superior to China's, that the 2004 Wassenaar Arrangement already allows setting up 0.18-micron manufacturing lines in China and that as a result the deregulation policy would not narrow the competitiveness gap between Taiwan and China.

At first glance, promoting industrial relocation to China may seem to make sense, but uncritical acceptance of this reasoning is tantamount to falling into the trap of believing that Taiwan has upstream manufacturing while China has downstream manufacturing -- in other words cutting-edge technology remains in Taiwan while less advanced technology naturally moves to China.

When the traditional and home electronics industries began moving to China in the early 1990s, some people argued that the move would integrate resources and improve industrial competitiveness.

When the computer peripherals industry moved there in the late 1990s, the computer industry said that low technology went to China while high technology stayed in Taiwan.

The results however have been different. After 15 years of industrial relocation to China, the negative effects are clear.

The traditional and home electronics industries are all gone and not a single computer or notebook production line remains. Taiwan's economic independence is slowly being destroyed by the exodus to China, and the "no haste, be patient" and "active management" policies have become nothing but empty slogans.

History is repeating itself, and it is difficult to understand the logic of government officials who claim that as long as Taiwan has a technological advantage and as long as the Wassenaar Arrangement allows, we should continue deregulation.

They have forgotten that China has almost a thousand missiles aimed at Taiwan and that it is pursuing a national policy aimed at elbowing Taiwan's semiconductor industry out of the global market.

During the 1990s, China wanted Taiwan's traditional industries to help Chinese exports and Taiwan hurriedly complied. After 2000, they wanted the IT industry and we generously deregulated the computer industry to help China become a manufacturing country in possession of advanced technology, thus helping it earn a whopping US$1 trillion -- the sum of its foreign exchange reserves.

China's new five-year plan calls for wafer manufacturing. At a time when yields are low and China is considering how to deal with high rates of flawed products, it seems the government is magnanimously preparing to give them the 0.18-micron production management technology it took Taiwan a dozen years to master. Yield rates in Taiwan's 0.18-micron manufacturing are reaching 90 percent.

This is, of course, a technology China is dying to get its hands on.

Those who advocate opening up toward China should stop bragging about how Taiwan already has 10 12-inch wafer plants or that capital expenditure keeps growing, because that is only the result of the forceful efforts of pro-localization academics, lawmakers and the TSU to oppose the wafer industry's relocation to China.

Instead of continuing to deride them as narrow-minded, the critics should thank these people, who are show real concern for Taiwan, for the fact that the nation's semiconductor industry remains No. 1 in the world.

We only have so much capital to invest. Instead of sending it to China, we should invest in Taiwan to develop even more advanced manufacturing processes.

This will be of greater benefit to the nation's competitiveness than relocating to China, and it will allow all Taiwanese to enjoy the benefits of the nation's economic growth.

Huang Tien-lin is a former national policy adviser to the president.

Translated by Perry Svensson
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