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A warning signal for Taiwanese businesses

Academic concern for the democratization of China seems to have given way to talk about China's rise. Many Chinese and some Taiwanese have told me that the Chinese people are too uneducated, that the economy remains at the level of low to medium development, and that the regional development differences are too great to implement a democratic political system right now.

Some Chinese have told me that the introduction of democracy to China would lead to chaos that would damage economic reform, and that China's current steady economic growth rate is proof that China is developing in the right direction. The Chinese are also using international pro-Chinese media -- including media in Taiwan -- to further strengthen the legitimacy of the Chinese Communist Party's leadership.

The results of China's economic reform in recent years are commendable, but I have a different view of Beijing's reluctance to pursue political reform.

We all know that India has a functioning multi-party political system. Could it really be that the Chinese are less developed than the Indians, or is that it that China is poorer than India? Both the Chinese people and many in the international media believe, however, that China's competitiveness has continued to develop faster than India's.

I don't know whether to laugh or cry when I hear such arguments. Does Beijing's so-called "economic growth rate" really represent overall competitiveness? Does the performance of the few Chinese cities that foreign journalists have visited represent China as a whole?

Let's look at some figures. The recent World Competitiveness Yearbook compiled by the Lausanne, Switzerland-based business school, the Institute for Management Development (IMD), shows that in 2003, India was 21 places behind China, while last year it ranked only 10 places behind China.

In addition, the Growth Competitiveness Index (GCI), released by the World Economic Forum, which predicts a country's competitiveness over the next five to 10 years, put India 12 places behind China in 2003 but predicted it would overtake China by 11 places last year. It should be noted that the GCI adjusted its formula last year, but not in a way that would affect India's lead over China.

The Corruption Perception Index, released by the Germany-based Transparency International, placed India 17 places behind China in 2003 but ranked it the same as China, in 70th place, last year.

According to the German Bertelsmann Transformation Index, a global ranking that analyzes and evaluates political and economic transformation in 119 countries, India led China by 48 places in 2003, a lead that had increased to 61 places by last year. In terms of political performance, India had also left China far behind, leading by 38 places.

The global press freedom index, released by the Paris-based group Reporters Without Borders, placed India 33 places ahead of China in 2003 and 58 places ahead last year.

These statistics refute the argument that China is rapidly leaving India behind and show that the opposite is in fact true. If China cannot conduct a future overhaul of its political system, Taiwan, whose businesspeople currently focus on China, will be the first to be affected.

It is also worth noting that Japan for the first time last year overtook Taiwan in the competitiveness indexes released by the IMD and the World Economic Forum. Japan greatly reduced its China-bound investment and increased its India-bound investment last year. Shouldn't this be a warning signal to Taiwan?

David Su is a doctoral student in the department of economics at the University of Rhode Island. Translated by Daniel Cheng.
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