Wednesday was an historical day. It was the day the Taiwanese government started processing applications for Chinese investment in Taiwan and, coincidentally, the 12th anniversary of Hong Kong’s official return to China and the beginning of “one country, two systems.”
Only time will tell whether Chinese investment in Taiwan represents an opportunity or a risk. From a business perspective, I welcome sincere foreign direct investment that is in accordance with market principles and mechanisms, and that is not backed by political motives.
It will also be interesting to see whether Taiwan’s industries will be able to move ahead and make themselves stronger, and whether cross-strait industrial cooperation will take off.
However, I am firmly against Chinese investment that is politically motivated, aimed at “unification” and speculative in nature. A look at Hong Kong shows that China employed three methods to implement the “one country, two systems” formula.
First, China actively saved Hong Kong’s stock market on several occasions, for example during the 1997 Asian Financial Crisis and the 2003 SARS epidemic. Second, China took control of and injected capital into Hong Kong’s public utilities and infrastructure. Third, Beijing actively supported capitalists of ethnic Chinese background.
Twelve years after its return to China, not only are Hong Kong’s industries being undermined, it also faces serious problems with economic transformation. In addition, Hong Kong’s social diversity, which once represented a mix of eastern and western cultures, is now becoming more uniform with the “interior.” Hong Kong is no longer the cosmopolitan “pearl of the east” it once was.
Taiwan does not suffer from a lack of funds, and according to data compiled by the Directorate-General of Budget, Accounting and Statistics, it is expected that the excess savings rate this year will reach a six-year high of 9.24 percent, at an all-time high of NT$1.1544 trillion (US$35 billion).
The ruling party has been unable to build public confidence, which has resulted in an unwillingness to invest among the private sector. This in turn has caused a decline in private investment much larger than the overall economic drop off, creating an excess of idle funds. Therefore, the government should try to reinstill confidence into private investors.
The decision to allow Chinese investment into Taiwan was not part of the nine agreements reached between China’s Association for Relations Across the Taiwan Strait Chairman Chen Yunlin (陳雲林) and Straits Exchange Foundation Chairman Chiang Pin-kung (江丙坤) during their three meetings. The decision is in fact a “consensus” reached at their third meeting only two months ago.
I seriously doubt whether the agreements implemented over the past year have passed policy impact assessments. How can the government recklessly implement a “consensus” on allowing Chinese investments in Taiwan, something that will have a huge impact on Taiwan’s industries and economy, simply by referring to “legal authority.”
The ruling party has opened Taiwan to Chinese investment without any form of oversight by non-governmental organizations or broader social debate. Economically, it was a rushed and mistaken decision that will only have short-term benefits with no real long-term gain.