Sat, Apr 14, 2018 - Page 8 News List

Chinese mistakes present opportunity

By Lin Shiou-jeng 林修正

By abolishing the constitutional limit on presidential terms, Chinese President Xi Jinping (習近平) has further concentrated power in his hands.

This is a reflection of how Xi wants to decide the direction of all Chinese policy. From a political perspective, it is not very good for Taiwan, although the same thing is not necessarily true if looked at from an economic perspective.

As politics is allowed to take a forceful lead of the economy, the economy will change as it is being forced to bend to political concerns.

For example, Chinese top semiconductor operator Zhao Weiguo (趙偉國), former chairman of Tsinghua Unigroup Ltd, made a hurried departure from the company this week. The news was followed by reports that Zhao was not part of the core around Xi, that his stepping down came as a shock to high-tech circles on both sides of the Taiwan Strait and that this would put an end to mergers in China’s semiconductor industry.

Zhao might not be the best semiconductor leader around, but as the reason for his replacement is political, the process of finding a replacement will also not be conducted from an economic perspective; rather, it will be an attempt to find someone who is acceptable to Xi.

Finding a replacement under such restrictions often does not result in the choice of someone adept at running a business, nor will such a person’s decisions be made with the company’s best interests in mind. Instead, any decision will be made because it meets the goals set by Xi, and these decisions will be limited by a plethora of restrictions.

The longer this continues, the more the final decision will deviate from an ideal solution and the greater the risk that the allocation of resources will be inferior. In this kind of situation, anyone who places economic concerns first will stand a good chance of reaping greater benefits.

One good example of this is the looming trade war between the US and China. In response to the administration of US President Donald Trump’s raising of import tariffs on aluminum imports from China, Xi’s government — in an attempt to keep Beijing from losing face — is fighting back and has promised to respond in kind, which can only lead to mutual destruction.

Taiwan, Japan and South Korea are instead trying to convince the US to exempt them from heavy tariffs, while at the same time trying to take advantage of the vacuum left by the disappearance of Chinese products in the US. The same thing will happen with other products affected by the trade war.

In the short term, it will be very difficult for China to change the way everything is decided based on political concerns. What Taiwanese businesses need to do now is to stop complaining and stop wishing for an end to the confrontation between the US and China. Instead they should focus on taking advantage of China’s political and economic mistakes. Surely this is a great opportunity.

Lin Shiou-jeng is an associate professor at Chung Chou University of Science and Technology.

Translated by Perry Svensson

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