Sun, Aug 09, 2015 - Page 8 News List

Sinicization damaging the economy

By Huang Tien-lin 黃天麟

Taiwan’s second-quarter GDP growth slumped to only 0.64 percent year-on-year, and GDP growth for the first half of the year was a mere 1.97 percent. Meanwhile, the TAIEX dropped sharply last month, shedding 657 points, its largest monthly decline in the past 46 months. The loss of capital was four times higher than the entire capital of Taiwan High Speed Rail Corp.

Is this just a temporary phenomenon in the business cycle? Of course not. It is the result of President Ma Ying-jeou’s (馬英九) policy of “economic Sinicization” (經濟中國化) that he has been promoting over the past seven years. It is one link in Taiwan’s long-term economic decline as the economy is marginalized by China’s.

Let us review the process of Taiwan’s economic marginalization that has been brought on by the cross-strait business integration over the past 15 years.

First, Taiwan’s economy grew by an average 6.4 percent in the 1990s, allowing the nation to maintain the top spot among the four Asian Tigers. Taiwan also rode out the 1997 Asian financial crisis better than anywhere else. After then-president Chen Shui-bian (陳水扁) adopted his “active opening” policy on investment in China in 2000, Taiwan lost its domestic investment momentum. As the Chinese economy grew, the Taiwanese economy slowed down, and during Chen’s eight-year rule, the average economic growth rate dropped by 2 percent to 4.4 percent. During the first six years after Ma came to power in 2008, average growth was 2.9 percent due to the Ma administration’s policy of “complete opening” and integration with China. This also shows that the closer the integration with China, the weaker Taiwan’s economic momentum.

Second, in terms of domestic investment, the average investment rate was 27 percent in the 1990s, but it dropped to 23.32 percent due to Chen’s active opening policy, and then to 22 percent due to Ma’s complete opening policy. In particular, the average capital outflow over the first six years of Ma’s administration was US$40.4 billion, and that increased to US$52.3 in 2012, after Taiwan and China signed the Economic Cooperation Framework Agreement (ECFA) in 2010, and most of that flowed to China.

Third, the percentage of export orders received in Taiwan, but manufactured in China remained within a reasonable range in 2000 at 13.28 percent. This number quickly surged after Chen abandoned former president Lee Teng-hui’s (李登輝) “no haste, be patient” policy following the 2002 Economic Development Advisory Conference (經發會), and it reached 45.5 percent in 2007. Ma’s ECFA then further boosted that figure to 53.1 percent.

Fourth, in terms of workers’ income as a percentage of GDP, about half of GDP was distributed to workers’ pay during Lee’s time in office. That dropped to 45.81 percent in 2005 on Chen’s watch. By 2013, on Ma’s watch, it had dropped further still to 44.65 percent of GDP. The increasingly uneven income distribution has created groups of “busy poor” (窮忙族) and “young poor” (青貧族).Today, the income from work for 52 percent of all Taiwanese is less than NT$450,000 per year, while average real salaries have dropped back to the level they were at 15 years ago. The increasingly uneven income distribution has also curbed the consumption levels of ordinary people.

Fifth, in terms of the capital market momentum — the stock market — the stock turnover rate, which indicates the activity on the stock market, was 288.6 percent in 1999. That slipped to 153.3 percent in 2007 and 84.6 percent last year. Under Lee’s “no haste, be patient” policy, the TAIEX reached 10,393 points on Feb. 18, 2000, and it was at 9,295 points when Chen handed power to Ma in 2008. Seven years later, it stood at a mere 8,524 points, on Aug. 3 this year. The marginalization of Taiwan’s economy is becoming increasingly clear.

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