Wed, Jan 01, 2014 - Page 8 News List

The Liberty Times Editorial: Reliance on China hampers growth

In other words, Country A, by outsourcing its manufacturing to a developing country to cut production costs, is essentially sowing the seeds for a future economic competitor. Given China’s unfaltering commitment to annexing Taiwan, outsourcing the manufacturing industry that was originally responsible for the nation’s economic miracle is tantamount to national suicide. Allowing the nation’s technology, talent and capital to move across the Taiwan Strait is akin to rearing a wolf: When fully grown, it will not be so tame.

China’s size gives it the inherent advantage of huge economies of scale. Industrial development will come along in leaps and bounds not just because its industry stands on the shoulders of Taiwanese businesses, but also because local companies enjoy generous government tax breaks and subsidies. The local manufacturing and high-tech industries are loathe to play second fiddle to anyone and so they are cultivating their own brands. In addition, the system is stacked in their favor, allowing them some control over technical specifications. Just as the student often supersedes the teacher, China will overtake Taiwan on the international stage. Soon it will be Taiwan playing second fiddle and only to tunes that China chooses.

In all fairness, the rapid increase in the percentage of Taiwanese goods manufactured in China did not start with President Ma Ying-jeou’s (馬英九) time in office. However, to continue following such pro-China policies now that the dangerous 50 percent threshold has been crossed is like the proverbial turkeys looking forward to Christmas. And yet, the Ma administration is even now trying to push through the cross-strait service trade pact, an agreement that will certainly do much damage to Taiwan’s economic foundations.

Even Hon Hai Group chairman Terry Gou (郭台銘) — Taiwan’s biggest industrialist in China — thinks that allowing the Bank of China to issue offshore Baodao bonds in Chinese yuan is a mistake, which is just one of the pro-China policies. Gou has suggested that the Chinese government is aware that there is a surplus of production capacity for LCD panels, but, after auditing local government finances, has chosen to issue the Baodao bonds in Taiwan. Then it takes the money it makes from selling the bonds to invest in Chinese panel makers, thereby using Taiwanese money against Taiwanese companies in China.

Gou’s criticisms perfectly sum up the fallacy of Ma’s pro-China policy. In attempting to ride on the coattails of China’s burgeoning economic growth, Ma is actually helping it to use Taiwanese capital against Taiwanese companies in China.

The IMF said last year that if China’s economic growth rate slowed by 1 percent, Taiwan’s would fall by 0.9 percent. Of all China’s trading partners, Taiwan is the most affected by changes in its economic fortunes.

Consequently, unless the nation is able to lessen its dependence on China, no matter how good the economic figures are — setting a new record for export orders for example — the economy will not benefit.

There really is only one way to stimulate the economy at the moment and that is to reduce the reliance on China.

Translated by Paul Cooper

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