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.
Taiwanese must be alert to the fact that cross-strait economic integration is not a matter of mutual benefits, and it is not the win-win situation that the Chinese Nationalist Party (KMT) government keeps talking about. It is a process through which a big economy, China’s, is absorbing a small economy, Taiwan’s.
Over the past 15 years, Taiwan’s economy has experienced only two resurgent periods. The first appeared when Chen modified his active opening policy to an “effective management” policy between 2006 and 2007, during which time GDP growth increased to 5.44 and 5.98 percent respectively. The second period occurred last year, after the Sunflower movement blocked the approval of the cross-strait service trade agreement, bringing GDP growth for last year up to 3.74 percent. However, it seems the movement was unable to change Ma’s determination to push for the cross-strait agreement and economic Sinicization. As a result, last year’s economic resurgence quickly faded.
If Ma’s long-cherished hopes of economic Sinicization and eventual unification are not changed, Taiwan’s economy can be expected to continue to sink. If that happens, zero or even negative economic growth could become the new normal.
Huang Tien-lin is former president and chairman of First Commercial Bank and a former Presidential Office adviser.
Translated by Eddy Chang
Recently, China launched another diplomatic offensive against Taiwan, improperly linking its “one China principle” with UN General Assembly Resolution 2758 to constrain Taiwan’s diplomatic space. After Taiwan’s presidential election on Jan. 13, China persuaded Nauru to sever diplomatic ties with Taiwan. Nauru cited Resolution 2758 in its declaration of the diplomatic break. Subsequently, during the WHO Executive Board meeting that month, Beijing rallied countries including Venezuela, Zimbabwe, Belarus, Egypt, Nicaragua, Sri Lanka, Laos, Russia, Syria and Pakistan to reiterate the “one China principle” in their statements, and assert that “Resolution 2758 has settled the status of Taiwan” to hinder Taiwan’s
Singaporean Prime Minister Lee Hsien Loong’s (李顯龍) decision to step down after 19 years and hand power to his deputy, Lawrence Wong (黃循財), on May 15 was expected — though, perhaps, not so soon. Most political analysts had been eyeing an end-of-year handover, to ensure more time for Wong to study and shadow the role, ahead of general elections that must be called by November next year. Wong — who is currently both deputy prime minister and minister of finance — would need a combination of fresh ideas, wisdom and experience as he writes the nation’s next chapter. The world that
The past few months have seen tremendous strides in India’s journey to develop a vibrant semiconductor and electronics ecosystem. The nation’s established prowess in information technology (IT) has earned it much-needed revenue and prestige across the globe. Now, through the convergence of engineering talent, supportive government policies, an expanding market and technologically adaptive entrepreneurship, India is striving to become part of global electronics and semiconductor supply chains. Indian Prime Minister Narendra Modi’s Vision of “Make in India” and “Design in India” has been the guiding force behind the government’s incentive schemes that span skilling, design, fabrication, assembly, testing and packaging, and
Can US dialogue and cooperation with the communist dictatorship in Beijing help avert a Taiwan Strait crisis? Or is US President Joe Biden playing into Chinese President Xi Jinping’s (習近平) hands? With America preoccupied with the wars in Europe and the Middle East, Biden is seeking better relations with Xi’s regime. The goal is to responsibly manage US-China competition and prevent unintended conflict, thereby hoping to create greater space for the two countries to work together in areas where their interests align. The existing wars have already stretched US military resources thin, and the last thing Biden wants is yet another war.