The Liberty Times Editorial: Beware China’s economic invasion

Thu, Oct 18, 2012 - Page 8

Ever since he started his second term, President Ma Ying-jeou (馬英九) has been even more conspicuously pro-China. During his Double Ten National Day address on Wednesday last week he spoke of relaxing obstacles to foreign investment, saying that in the future, deregulation would be the default, and restrictions the exception. When Ma speaks of foreign investment, what he actually means is investment from China. Given the parlous state of Taiwan’s economy at the moment, if Chinese investment is allowed to come flooding in, it will only increase China’s hold on Taiwan’s economy, and thereby increase Beijing’s influence on Taiwanese society. Essentially, this will turn Taiwan into another Hong Kong.

Despite the apparent improvement in relations between China and Taiwan in recent years, their essential nature has not changed, as China continues to view Taiwan as a renegade province. Since the end of World War II, it has not been possible for China to achieve its goal of annexing Taiwan through military action. However, the massive global economic tectonic shifts in the final two decades of the past century have given China the opportunity to control Taiwan through economic means. In that time, Taiwanese businesses have become less competitive, necessitating a mass exodus to China.

This not only helped China’s economic growth, it also had a hollowing-out effect on Taiwan’s domestic industrial base, making Taiwan increasingly dependent on China. In 2006, the Chinese economist Hu Angang (胡鞍鋼) proposed that China could bring Taiwan to its knees within seven days if it instigated a trade war, likening Taiwan to a person with diabetes, dependent on economic insulin that only China can provide. Clearly, China is already thinking in terms of trapping Taiwan through economic reliance.

The reason for the multitude of questions regarding Ma’s policies is that they are all contributing to the seriousness of this “economic diabetes,” and thereby hastening Taiwan’s downfall.

If one looks at what Ma has done since gaining office, he has consistently and unwaveringly followed a singular course in how he has run the country, and that is to increase reliance on China. During the global financial crisis, Ma touted China as Taiwan’s savior. He allowed Chinese tourists to come to Taiwan, which had no appreciable stimulus effect on the economy, but failed to make structural improvements to domestic industry or the investment environment, so that the economy idled. Taiwan is also the Asian country worst hit by the ongoing EU sovereign debt crisis.

However, Ma has clearly not looked into the mistakes and errors of his pro-China policies, and just keeps reiterating the need to attract Chinese investment. His answer is to allow Chinese investment in the manufacturing, service and construction industries. Of all of these, it is the deregulation of public construction that contains the greatest potential danger, but the Ma administration has allowed the deregulation of up to 51 percent of the industry.

It has recently been revealed that Chinese investors are interested in bidding for the A25 plot “Build, Operate, Transfer” project in Taipei’s Xinyi District (信義). There are concerns that allowing this public engineering project to fall into the hands of Chinese investors with a low bid of NT$20 billion (US$685 million) will mark the beginning of China’s control of Taiwan.

The first concern is that China has always had the ambition to annex Taiwan, so why allow Chinese investors to be involved in public construction projects? This is especially worrying since some of these projects are related to national security and Chinese investors may well get access to confidential information over the course of these projects, potentially leading to national security leaks.

Second, Taiwan’s current account surplus has stood at around the NT$1 trillion mark for the past five years, and there is a lot of privately owned money in the country. If there are good investment opportunities out there that would see the environment improved and a large growth in domestic private investment, what is the sense in allowing Chinese investors to bid?

Besides, restricting Chinese investment is by no means exclusive to Taiwan. China has attempted to make major acquisitions in Western countries over the past several years, almost all of which have met opposition in various countries on the grounds of national security, especially in the energy and high-tech industries. Chinese expansionism has always raised eyebrows in the outside world.

The recent US House of Representatives’ Permanent Select Committee Investigative Report on the US National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE cites concerns over the possibility of these companies facilitating cyberespionage on behalf of the Chinese intelligence services.

By contrast, some Taiwanese telecommunications providers have expressed an interest in purchasing Huawei equipment as it is relatively inexpensive. This total disregard for national security is worrying.

It must be said that Huawei and ZTE are hardly exceptions. The Chinese government has its hand in many Chinese companies. At this point, considerations of profit, loss and cost do not matter, because this is more about national policy objectives, and these objectives — and what Beijing hopes to achieve — cannot be measured in monetary terms.

Therefore, if Chinese investors are allowed to vie for construction projects in Taiwan, they can put in very low bids to win the tender and then contract out the work to Taiwanese companies, guaranteeing a certain profit margin. This would mean that investors and local contractors would have common interests, making it possible for investors to influence the contractor’s political behavior, for example by persuading them to support the pro-China candidate when national elections come around. Then, all of a sudden, China will have achieved its goal of exerting more influence over Taiwan.

China is not a democratic country, nor does it have a capitalist free market. Yet, it is very good at exploiting the weaknesses of democracy and the free market, and Taiwan is its primary target. It does not have to go all out, all it needs do is strengthen its influence on Taiwan, and money is no object. What’s more, Ma has opened the door by allowing Chinese investors in to bid on public construction projects.

How could China miss an opportunity as great as this? Once Chinese investors start pouring in and grabbing a piece of the action, they will have leverage over the Taiwanese companies involved in these projects. When this happens, it will not just be Taiwan’s economy that suffers: after that, its very democracy and sovereignty will be at risk.

Translated by Paul Cooper