Last week the Ministry of Economic Affairs announced new regulations governing Chinese investment in Taiwan. This latest move by the government is fraught with problems. Has the administration of President Ma Ying-jeou (馬英九) really thought these questions through and is it capable of dealing with them?
First, is opening Taiwan up to Chinese investment really the speediest remedy for the current recession? There was no agreement on Chinese investment in Taiwan among the accords signed at the three meetings held between Taiwan’s Straits Exchange Foundation and its Chinese counterpart, the Association for Relations Across the Taiwan Strait, since Ma took office last year. Now Taiwan is opening up to Chinese investment with no existing bilateral agreement. Why is the Ma administration in such a rush, and for whose sake?
Taiwan has no lack of investment capital. Taiwan’s problem right now is that exports have nosedived, so the economy needs to be restructured to serve the domestic market. In what way will Chinese investment stimulate domestic demand?
Second, what do Chinese businesses want to invest in? What is it that has up to now been beyond their reach in cross-strait trade and investment? What is it that they can only get by investing in Taiwan? Construction of harbors and other infrastructure is closed to Chinese investment because of security concerns. As to Taiwan’s contract manufacturing industry, most have already relocated to China, forming a new industrial cluster.
What China really wants is to tap Taiwan’s technology in the fields where it excels, including display panels, integrated circuits, semiconductor packaging, assembly and testing and wafer making. China has coveted this intellectual property for a long time. How can it be in Taiwan’s interests to open these sectors up to Chinese investment?
Third, China’s money supply is excessive. Will this money flow into investment in Taiwan? China’s money supply shot up in the first quarter of this year as new loans reached a record high. New loans in the first four months of this year were equal to 87 percent of all new loans in the whole of last year. However, most of these are short-term loans — not medium or long-term loans. If this money is not being invested in the manufacturing industry in China, why would one expect it to be invested in manufacturing in Taiwan? Apart from the key high-technology industries mentioned above, it will go into the stock market and real estate, helping Ma’s government to create a bubble economy.
Fourth, is the Ma government in a position to know where this Chinese investment comes from? China has thousands of state-owned enterprises and multiple state-run bank groups. State-owned enterprises account for about 35 percent of China’s GDP. Even if the companies are privately owned, many of their shareholders are important party and state officials. The Chinese State Council’s regulations governing investment in Taiwan state that Chinese business investment should not harm national security or prospects for unification. Businesses investing in Taiwan will be monitored by the Chinese Ministry of Commerce and punished if they fail to carry out the mission of promoting unification. How does the Ma administration propose to manage investors who are following government orders?