Heavy investment in China by Taiwanese businesspeople will have many negative effects on Taiwan in the long run. I will limit my discussion to just two.
First, large amounts of investment in China by Taiwanese means that less money is invested in Taiwan, and this slows down the rate of domestic industrial upgrade. Since the majority of Taiwanese businesspeople can use their existing technologies to manufacture products in China, they have no need to conduct research and development or to invest in Taiwan, nor do they face any immediate pressure to improve the quality of their business operations, which means industrial upgrades here have slowed and will continue to do so.
The second problem is the risk that Taiwan’s exports will be replaced by Chinese exports. When Taiwanese invest in China they strengthen the competitiveness of Chinese products on the international market, and this poses a huge threat to Taiwan’s export sector. This began happening a long time ago and the way in which Taiwan is being disadvantaged and China is benefiting from this situation is already very clear.
Studies by the Taiwan Institute of Economic Research show that in 2004, the export replacement percentage for products made by Taiwan’s manufacturing sector that were replaced by Chinese products in the US and Japanese markets was 13.21 percent and 8.49 percent respectively. Taiwanese technology-intensive products were the item most frequently replaced by Chinese products.
In the US market in 2004, 19.26 percent of Taiwan’s exports of technology-intensive products were replaced by Chinese products, while 8.56 percent and 7.33 percent of less and moderately technology-intensive products were replaced by Chinese products.
In the Japanese market in 2003, 13.22 percent of technology-intensive Taiwanese products were replaced by Chinese products, while 7.35 percent and 10.87 percent of Taiwanese less and moderately technology-intensive products were replaced by Chinese products.
It is worth noting that the Taiwanese-made items most frequently replaced by Chinese products in the US and Japanese markets were the moderately and technology-intensive products, and that the export replacement percentage has been continuously increasing since 2000.
It is now obvious that the substitution effect has started to overtake the complementarity and mutual benefit that is supposed to exist as a result of division of labor in trade conducted between Taiwan and China.
Taiwan’s trade with China so far has seen Taiwanese invest huge amounts in China, which has caused a decrease in investment in Taiwan and had a severe impact on our economy.
If President Ma Ying-jeou’s (馬英九) government ignores the trade issues I have mentioned and signs an economic cooperation framework agreement with China, Taiwan will become increasingly isolated as it is Sinicized, and we will face economic and financial crises that will be very hard to fix.
Wang To-far is a professor of economics at National Taipei University.
TRANSLATED BY DREW CAMERON
US President Donald Trump created some consternation in Taiwan last week when he told a news conference that a successful trade deal with China would help with “unification.” Although the People’s Republic of China has never ruled Taiwan, Trump’s language struck a raw nerve in Taiwan given his open siding with Russian President Vladimir Putin’s aggression seeking to “reunify” Ukraine and Russia. On earlier occasions, Trump has criticized Taiwan for “stealing” the US’ chip industry and for relying too much on the US for defense, ominously presaging a weakening of US support for Taiwan. However, further examination of Trump’s remarks in
It is being said every second day: The ongoing recall campaign in Taiwan — where citizens are trying to collect enough signatures to trigger re-elections for a number of Chinese Nationalist Party (KMT) legislators — is orchestrated by the Democratic Progressive Party (DPP), or even President William Lai (賴清德) himself. The KMT makes the claim, and foreign media and analysts repeat it. However, they never show any proof — because there is not any. It is alarming how easily academics, journalists and experts toss around claims that amount to accusing a democratic government of conspiracy — without a shred of evidence. These
China on May 23, 1951, imposed the so-called “17-Point Agreement” to formally annex Tibet. In March, China in its 18th White Paper misleadingly said it laid “firm foundations for the region’s human rights cause.” The agreement is invalid in international law, because it was signed under threat. Ngapo Ngawang Jigme, head of the Tibetan delegation sent to China for peace negotiations, was not authorized to sign the agreement on behalf of the Tibetan government and the delegation was made to sign it under duress. After seven decades, Tibet remains intact and there is global outpouring of sympathy for Tibetans. This realization
Taiwan is confronting escalating threats from its behemoth neighbor. Last month, the Chinese People’s Liberation Army conducted live-fire drills in the East China Sea, practicing blockades and precision strikes on simulated targets, while its escalating cyberattacks targeting government, financial and telecommunication systems threaten to disrupt Taiwan’s digital infrastructure. The mounting geopolitical pressure underscores Taiwan’s need to strengthen its defense capabilities to deter possible aggression and improve civilian preparedness. The consequences of inadequate preparation have been made all too clear by the tragic situation in Ukraine. Taiwan can build on its successful COVID-19 response, marked by effective planning and execution, to enhance
RSS