The economy is in a rapid downward spiral, with many economic indicators telling a tale of coming doom and gloom. Last year, exports, which constitute a major proportion of our GDP, fell by 4.7 percent. Taiwan was the only nation among our Asian neighbors to see export volume fall. South Korea reported a year-on-year increase rate for the first half of the year of 0.7 percent. It is abundantly clear who is the most competitive here.
Academia Sinica adjusted its Taiwanese economic growth rate forecast for this year downward to 1.94 percent, making a mockery of the government’s promises to maintain the rate at 3 percent or above. President Ma Ying-jeou (馬英九) is struggling to come up with a viable antidote to the nation’s economic ills, and is quite powerless to breathe life back into the ailing patient. Who knows when the public’s trials will end?
If we are to find a way out of this predicament, we first need to understand the nature of what ails our economy, and prescribe the correct medicine accordingly. One of the symptoms is our overreliance on China, including the fact that more than 50 percent of the orders Taiwanese companies take are for goods that are actually produced overseas, and when we say “overseas,” we mean in China.
Also, the vast majority of Taiwanese investment “overseas” is actually in China, to the tune of more than US$10 billion a year. In fact, according to unofficial estimates, the total amount over the years has accrued to more than US$200 billion. Another factor is that more than 40 percent of our exports go to China.
Since Ma took office, he has come up with one sole antidote to our economic travails: Look to China for help. Ostensibly seeking to sign the Economic Cooperation Framework Agreement (ECFA) as a means to overcome Beijing’s resistance to our signing free-trade agreements with other countries, Ma has in practice embarked on a policy of diplomatic-truce-and-sovereignty emasculation in the hope that China will show us some mercy. This is how he thinks he is going to be able to reinvigorate the economy.
Putting virtually all our eggs in the China basket has not only worsened our economic malaise, but has got us addicted to the purported cure.
We are already seeing the negative impact of this addiction. Politically speaking, Beijing knows it has Taiwan by the short hairs. The reason behind the perpetual postponement of the eighth meeting between Association for Relations Across the Taiwan Straits (ARATS) Chairman Chen Yunlin (陳雲林) and Straits Exchange Foundation (SEF) Chairman Chiang Pin-kung (江丙坤) is that the dynamics between the two countries has changed. Beijing no longer needs anything from the Ma administration. The net has already been cast, and all Beijing has to do is wait to pull in the catch.
In economic terms, Taiwan is even worse off. Taiwanese industry has placed all its hopes in China, but China’s economic growth is already starting to slow, and its policy of transforming its formerly labor and energy-intensive, low-tech industry through technology transfer is starting to bear fruit. These two factors combined are having a serious impact on Taiwanese manufacturing, hitting Taiwanese exports and marginalizing Taiwanese companies.
Given that, as we have said, the main problem for Taiwan’s economy is our overreliance on China, it is this we have to change to put things right. We have to put a stop to the current model of goods ordered from Taiwanese companies being manufactured over in China. There are three parts to the prescription.