A few days ago during a talk show on Sanlih E-Television, Chinese Nationalist Party (KMT) Legislator Alex Tsai (蔡正元) attacked a recent article of mine. Tsai said I had been wrong in the past about the coming collapse of China and the theory of China in Seven Blocks, and that he therefore could not respect my opinion. Tsai’s remarks left me dumbfounded. I would like to remind Mr Tsai that I have never predicted that the Chinese economy would fail and that the “China in Seven Blocks” idea is not mine. It was in fact proposed by former president Lee Teng-hui (李登輝).
About a decade ago, Gordon Chang (章家敦), the author of The Coming Collapse of China visited Taiwan and I told him that he may have overlooked one very important factor: Back then, each year, Taiwan was making more than US$20 billion of productive investment in China, not to mention all the technology and skilled labor that goes along with that. With this “support” from Taiwan, China would not collapse in the foreseeable future. Furthermore, although I did not propose the idea of China in Seven Blocks, I always remind Chinese friends that an independent Taiwan outside of China can only be extremely good for China and can in no way harm it.
In 1979, China adopted what it called a socialist market economy, which started China’s economic takeoff. This was a copy of how Taiwan claimed to follow the “Three Principles of the People” as proposed by Sun Yat-sen (孫逸仙), while implementing Western-style capitalism. The new economic policies promoted by China in 1979 were inspired by Taiwan.
However, it would have been hard for China’s new economy to become effective without support in the form of foreign capital and technology. In 1990, Taiwan started to pump productive capital, technology and skilled labor into China, despite the economic sanctions the UN had placed on China. This injection of capital, technology and skilled labor spurred China’s economic growth and within a decade, China became known as the world’s factory for traditional industries such as consumer electronics and clothing.
In 2001, Taiwan’s active opening policy (積極開放) initiated a great outflow of Taiwanese high-tech companies to China. Within five or six years of this outflow of Taiwanese high-tech companies, China became known as the world’s factory for the IT industry. Each time China’s economic growth has reached a bottleneck, Taiwan has been there to offer timely capital and technological assistance, helping the Chinese economy through hard times.
China was never on the brink of collapse.
However, starting this year, I have adjusted my outlook somewhat. I mean that China’s economy, that may look all rosy now, will in fact go down a very hard road in the future. Taiwan’s economy has now had its life sucked out of it by China over the past dozen years. Taiwan has lost the ability to continue providing China with assistance.
It should also be noted that the help Taiwan can offer China in terms of financial resources is in fact very limited. Without Taiwan, China will have to start to rely on economies like the EU, the US and Japan. However, these places are not as generous as Taiwan technology transfer.
In other words, in the future, without Taiwan’s support, things will not go as smoothly for China and if the Chinese economy slows down as a result of this, then China will only have itself to blame for sucking Taiwan dry and essentially cutting off Taiwan’s support.