The latest TAIEX semiannual report is out and it highlights a particular problem in Taiwan’s economy: Accumulated investment in China by Taiwanese listed and over-the-counter (OTC) traded companies has reached NT$2.17 trillion (US$71.88 million).
Although the figure continues to rise, the amount is only NT$50 billion more than the NT$2.12 trillion figure for the same period last year, making it the lowest such increase in the past 11 years.
The peak occurred during the eight years under former president Ma Ying-jeou (馬英九), when it increased by more than NT$1.4 trillion, 64 percent of the total to date, compared with only NT$673.1 billion during former president Chen Shui-bian’s (陳水扁) two terms in office.
Ma’s “boldly go west” policy failed to usher in a “golden decade” as promised, but instead sent the economy into a period of negative growth. Under President Tsai Ing-wen (蔡英文), cross-strait relations have cooled due to her refusal to accept the “one China” principle.
With the slowing of investment in China by listed companies, the TAIEX rose from 7,726 points on Jan. 15 to 10,580 points on Sept. 15. The economy is regaining momentum, showing growth of 2.56 percent and 2.14 percent for the first and second quarters of this year, compared with minus-0.23 percent and 1.13 percent in 2016.
This 11-year low of investment in China by listed and OTC-traded companies tells us that these companies are shifting their focus back to Taiwan and that more capital is being retained in this nation. It shows that the economy has shifted from red to black during the last two years and that the pace, though slow, is gaining steam.
There are more than 1,600 listed and OTC-traded Taiwanese companies in China. These companies, which form the core of Taiwan’s economy, include Taiwan Semiconductor Manufacturing Co, Hon Hai Precision Industry (Foxconn) and Largan Precision.
However, they have been attracted to invest in China because of Beijing’s targeted policy over the past decade of offering incentives to companies to relocate, which has created a major imbalance between the business environments of China and Taiwan.
To encourage Taiwanese companies to relocate, China has offered tax exemptions and land and labor costs, as well as exchange rate and patent dividends, allowing these companies, operating at lower costs, to wrest the local and overseas markets away from companies remaining in Taiwan.
To survive, those that remain have had little choice but to follow suit. More than 1,400 listed companies — that is, more than 80 percent of listed companies — have either set up subsidiaries in China or have moved their production lines there.
Eighty percent is a startling amount.
The migration is the combined result of Taiwan’s economic “miracle” and the accumulation of more than a decade of unjust, unfair economic imbalance across the Strait.
This set of circumstances would be difficult to find elsewhere. They are also the main reason for the stagnation in Taiwan’s economy, with salary levels returning to those of 16 years ago.
Conquering this problem is something that subsequent administrations will have to work assiduously to achieve.
Taiwan needs economic transitional justice — economic conditions that would allow companies to take root in Taiwan, to survive and prosper and to remain here.
Listed and OTC-traded companies would be a critical part of this effort.
The government should use its newly reshuffled Cabinet and the cooling in cross-strait relations as an opportunity to offer preferential terms and incentives to companies that keep their manufacturing in Taiwan.
This might correct the economic framework of the past decade, which has only benefited Taiwanese businesses that have relocated to China and has actively harmed those that stayed.
Taiwan’s economy needs a jab in the arm to get the blood pumping again.
Huang Tien-lin is a national policy adviser and the former managing director and chairman of First Commercial Bank.
Translated by Paul Cooper
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
As former president Ma Ying-jeou (馬英九) wrapped up his visit to the People’s Republic of China, he received his share of attention. Certainly, the trip must be seen within the full context of Ma’s life, that is, his eight-year presidency, the Sunflower movement and his failed Economic Cooperation Framework Agreement, as well as his eight years as Taipei mayor with its posturing, accusations of money laundering, and ups and downs. Through all that, basic questions stand out: “What drives Ma? What is his end game?” Having observed and commented on Ma for decades, it is all ironically reminiscent of former US president Harry