The speed at which cross-strait exchanges have developed since President Ma Ying-jeou (馬英九) took office has surprised many in Taiwan and around the world.
A year ago, former president Chen Shui-bian (陳水扁) was still in office and cross-strait relations were tense. Now, Taiwan is sending a delegation to the Boao Forum in China’s Hainan Province, where it will meet with Chinese Premier Wen Jiabao (溫家寶), while another group is holding a meeting in Taiwan to prepare for the third meeting between representatives from Taiwan and China.
The latter meeting will discuss the liberalizing of Chinese investment in Taiwan’s manufacturing industry; probably sign a memorandum of understanding (MOU) on financial supervision; and touch on the issue of an economic cooperation framework agreement (ECFA).
The government believes China is the panacea for Taiwan’s economy, though this assertion continues to attract skepticism among many Taiwanese. The opening up of Taiwan to Chinese investment will be channeled through the stock market, which will give China control of Taiwanese companies and access to Taiwanese technology. This will slow Taiwan’s economic growth and sap it of the energy needed to transform industries.
The high-tech, food, textile and defense industries should remain closed to Chinese money, and even deregulated industries should have upper limits on cross-strait investments, while Chinese investors should not be allowed to hold boardroom posts that would facilitate technology flow to China.
In the past, the government encouraged developed countries to invest here to attract new technology and management and to ease entry into the global market. Since Chinese industrial technology lags behind Taiwan’s, Chinese investments will access technology at the expense of Taiwan’s stock market. Moreover, China could employ links through contractors to coopt local political figures and factions, thus corroding democratic processes.
If an MOU is signed and the government allows Chinese banks to open branches here, local banks will be their primary rivals and first targets. An added problem is that the MOU would not establish a firewall between the Taiwanese and Chinese financial systems, which means the specter of bad debt could enter the market. And if slowing economic growth in China heightens the present crisis, Taiwan will be dragged down with it.
Although the government has pledged not to open Taiwan to Chinese farm produce and not to harm local business interests, the Chinese premier, speaking at the Boao Forum, has called for a free market for Chinese products. Once Taiwan throws open its economic door, Ma will be faced with a choice: stick to his pledge and incur the anger of Beijing, or bow to Wen’s expectations.
If the government continues to focus on the economic side of cross-strait detente while ignoring its political, social and national security implications, it may find itself facing some rather unpalatable dilemmas. Cross-strait economic deregulation is an irreversible process; the government therefore should tread very cautiously and not sacrifice Taiwan’s long-term interests to see out a short-term recession.