Tue, May 23, 2006 - Page 3 News List

Economist backs investment limits

CURBS The government should not promote cross-strait investment and should provide clearer information on China so that businesspeople can accurately assess risks

By Ko Shu-ling  /  STAFF REPORTER

As China is not a normal country, and does not embrace democracy and human rights, it is necessary to restrict China-bound investment rather than promote it, an economist said yesterday.

"In a market economy, I don't think the administration can do much about China's booming economy," said Chang Ching-hsi (張清溪), an economics professor at National Taiwan University. "However, there is at least one thing it can do: Don't promote any further cross-strait economic activities."

Chang made the remarks yesterday in a speech delivered at the monthly Sun Yat-sen memorial meeting at the Presidential Office, which high-ranking officials from the five branches of the government must attend.

Chang was invited to talk about the impact of China's economic rise and the administration's cross-strait economic policy on Taiwan's job environment.

Since most of the economic problems Taiwan faces today derive from the fact that China is not a normal country, Chang said the administration was duty bound to help facilitate China's democratization.

In addition, the administration must provide local industries with correct and detailed information on the risks involved in investing in China, he said.

"A correct decision is based on correct information," he said. "If the US Congress has such information, Taiwan should have more channels by which to obtain information. The more we know about China, the less we will put our businessmen at risk and the less afraid we will be of China."

Such information, Chang said, includes the exact amount of China-bound investment, the success and failure rate of such investments, estimated losses should China's financial system fail as well as its impact on Taiwan's economy.

Statistics released by the Investment Commission show that approved China-bound investment in 2004 reached about US$6 billion (NT$19.2 billion).

The US Congress, however, said China had attracted more than US$562.1 billion in foreign direct investment by the end of 2004 and that about US$281 billion of that, or about 50 percent, came from Taiwan.

Taiwanese investment in China accounted for more than 71 percent of Taiwan's foreign investment last year and about 67 percent in 2004, Chang said, adding that the figure for South Korea was 38 percent in 2004 and 12 percent for Japan, with the US reporting only 1.8 percent of its foreign investment going to China.

Compounding the problem of capital outflow, products made cheaply in China deliver a significant blow to Taiwan's export market, Chang said.

"It's not hard to imagine what will happen if we further open the local market to Chinese goods," Chang said.

While the world may be overwhelmed by the economic rise of China, Chang said this would not last long.

"China's economic development is like walking on a tight rope," he said. "I suspect its domestic and international problems will become so severe that its economy will someday collapse."

Although it remains to be seen whether China's economy will continue to rise, it is certain that Taiwan will bear the brunt if things go wrong with China, he said.

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