It is clear that whoever hopes to win the presidential election next year will have to propose a sound strategy on how to deal with China: not just politically, but also economically.
The process of cross-strait economic liberalization launched in the 1980s and sustained even under the pro-independence Democratic Progressive Party from 2000 until 2008, accelerated dramatically after President Ma Ying-jeou (馬英九) of the Chinese Nationalist Party (KMT) stepped into office on May 20, 2008. With the signing of the Economic Cooperation Framework Agreement (ECFA) in June last year and various other economic pacts in recent years, the dependence of Taiwan’s economy on China has grown by leaps and bounds.
Putting the political implications of those agreements aside, we will leave it to the history books to judge whether the decision to open the gates to Chinese money was economically sound for Taiwan. A growing number of economists are claiming that China’s economic miracle is heading full speed for a brick wall. Although such predictions have been made for more than a decade, there is evidence that this time the alarmists could be right.
Should such pessimistic forecasts come to pass, the more dependent Taiwan is on China for its economic well-being, the more severe the repercussions of a downturn across the Taiwan Strait will be.
Earlier this month, renowned economist Nouriel Roubini was warning of potentially destabilizing contradictions between China’s short and medium-term economic performance. In his view, China was able to weather the global economic crisis and sustain double-digit economic growth by artificially propping up its economy with major infrastructure projects.
However, this stopgap measure cannot go on indefinitely and already the construction spree is catching up with China as evidenced by low usage of its high-speed rail systems, highways leading to nowhere and steel-and-glass ghost towns. Furthermore, a recent scandal about the safety of China’s new ultramodern high-speed rail system has highlighted the prohibitive cost of construction and operation. The rail system, which was part of Beijing’s stimulus plan for 2008, is already losing money and depends for its survival on bank loans. The Chinese Ministry of Finance last week confirmed that its debt currently stands at US$276 billion, which was almost entirely borrowed from Chinese banks.
A great share of the massive infrastructure projects that have sustained the illusion of a booming Chinese economy has been buttressed by bank loans and many of those are non-performing and will very likely never be reimbursed. Add rampant corruption, as was ostensibly the case with the underused high-speed rail, to this mix and there are the makings of an economic time bomb — the consequences of which for the Chinese economy (and the region) one can only guess at.
For Taiwan, these signs should awaken officials to the need to implement prophylactic measures in the event the Chinese economy implodes. The key to this is threefold: ensuring Chinese money in Taiwan comes from economically sound institutions; redoubling efforts to attract foreign investment from sources other than China; and diversifying export destinations (Taiwan’s exports to China plus Hong Kong last year accounted for about 42 percent of total exports. Inflation, or a major economic downturn in China, would have a serious negative impact on Taiwan’s exports).
While there is no way to avoid significant trade with the giant next door, the candidates in next year’s presidential election should clearly explain to the public how they intend to hedge against a possible rainy day in China. It’s not a question of whether Taiwan should deal with China or not, but how.
On May 7, 1971, Henry Kissinger planned his first, ultra-secret mission to China and pondered whether it would be better to meet his Chinese interlocutors “in Pakistan where the Pakistanis would tape the meeting — or in China where the Chinese would do the taping.” After a flicker of thought, he decided to have the Chinese do all the tape recording, translating and transcribing. Fortuitously, historians have several thousand pages of verbatim texts of Dr. Kissinger’s negotiations with his Chinese counterparts. Paradoxically, behind the scenes, Chinese stenographers prepared verbatim English language typescripts faster than they could translate and type them
More than 30 years ago when I immigrated to the US, applied for citizenship and took the 100-question civics test, the one part of the naturalization process that left the deepest impression on me was one question on the N-400 form, which asked: “Have you ever been a member of, involved in or in any way associated with any communist or totalitarian party anywhere in the world?” Answering “yes” could lead to the rejection of your application. Some people might try their luck and lie, but if exposed, the consequences could be much worse — a person could be fined,
Xiaomi Corp founder Lei Jun (雷軍) on May 22 made a high-profile announcement, giving online viewers a sneak peek at the company’s first 3-nanometer mobile processor — the Xring O1 chip — and saying it is a breakthrough in China’s chip design history. Although Xiaomi might be capable of designing chips, it lacks the ability to manufacture them. No matter how beautifully planned the blueprints are, if they cannot be mass-produced, they are nothing more than drawings on paper. The truth is that China’s chipmaking efforts are still heavily reliant on the free world — particularly on Taiwan Semiconductor Manufacturing
Keelung Mayor George Hsieh (謝國樑) of the Chinese Nationalist Party (KMT) on Tuesday last week apologized over allegations that the former director of the city’s Civil Affairs Department had illegally accessed citizens’ data to assist the KMT in its campaign to recall Democratic Progressive Party (DPP) councilors. Given the public discontent with opposition lawmakers’ disruptive behavior in the legislature, passage of unconstitutional legislation and slashing of the central government’s budget, civic groups have launched a massive campaign to recall KMT lawmakers. The KMT has tried to fight back by initiating campaigns to recall DPP lawmakers, but the petition documents they
RSS