President Ma Ying-jeou (馬英九) and Straits Exchange Foundation Chairman Chiang Pin-kung (江丙坤) have started talking about the cross-strait economic relationship in terms of dependence. Ma says the Taiwanese and Chinese economies are interdependent. Chiang has reinforced this by saying that it would not necessarily be a bad thing for Taiwan’s economy to be dependent upon China. Ma is the highest decision-maker for cross-strait policy and Chiang is in charge of the practical implementation of these policies. By echoing each other, they are saying that economic dependence on China has become the centerpiece of government policy.
Economic relations between countries is a normal state of affairs, and close and frequent exchanges between nations is a good thing. However, Taiwan’s degree of trade dependence on China has reached 40 percent, while China’s dependence on Taiwan is 9 percent. This imbalance is an indication of the gravity of Taiwan’s dependence on its larger neighbor. Ma’s talk about mutual dependence is not true, and such asymmetric dependence is all but certain to bring trade or exchange rate friction or conflict.
Ma’s economic policy has focused on China, and the disappointing results of opening Taiwan to Chinese tourism and the direct links are far removed from any earlier predictions, evidence that dependence on China is not a panacea for Taiwan’s economy.
With China still bent on annexing this country, economic independence will translate into social and political dependence. When that happens, Beijing can achieve its goal of unification peacefully by using Hong Kong’s dependence on China as a model.
When Chiang says that economic dependence on China is not a bad thing, he shows that he is blind to the realities of international trade and national security.
A wave of bankruptcies has swept across China in the past year, while the international financial crisis has led to greatly reduced exports. Taiwanese businesspeople are now moving out of the Chinese market in droves, aggravating the problems with foreign capital outflows, factory closures and unemployment in China’s coastal regions.
But even as Taiwanese capital is flowing back into Taiwan, the government is encouraging Taiwanese businesses to go to China. This runs counter to the principles of a free economy, even though there are not many successful examples of governments distorting the economy.
Taiwan’s economic miracle was created by international trade, and Taiwan should once again make the world its market. China is only one small part of that global market, not its mainstay. The Ma administration is neglecting the importance of international markets to gamble Taiwan’s future on China.
In the past, the government made efforts to expand Taiwan’s trade opportunities and avoid international isolation by trying to negotiate free-trade agreements with Japan, the US and other countries and gain entry into the ASEAN plus three. Such efforts appear to have been sidelined by the Ma administration’s interest in a common Chinese market and closer economic cross-strait relations.
Whether we take a theoretical, realistic, national security, sovereignty, or industrial perspective, dependence on China will put Taiwan in immeasurable danger. It is a flawed policy that will only assist China in its attempts to annex Taiwan.