Sat, Feb 14, 2009 - Page 3 News List

INTERVIEW: Be wary of China and diversify, Therese Shaheen says

In the face of the economic tsunami sweeping the planet, a growing number of countries, including the US, are looking to Beijing as a strategic partner. In an interview with ‘Taipei Times’ reporter Jenny W. Hsu yesterday, former American Institute in Taiwan chairwoman Therese Shaheen warned that an overreliance on China could be dangerous and that Taiwan had to rely on its inherent advantages and diversify its investments if it is to weather the crisis

By Jenny W. Hsu  /  STAFF REPORTER

Former American Institute in Taiwan chairwoman Therese Shaheen is pictured in Taipei yesterday after she refused to respond to reporters’ questions about whether she would visit former president Chen Shui-bian. Shaheen spoke at a forum organized by Taiwan Thinktank entitled “The New US Administration and its Asia Policy.”


Taipei Times: Can you tell us about US President Barack Obama’s policy on Taiwan?

Shaheen: Generally speaking, Obama’s policy toward Taiwan will not change. It will be based on the “one China” policy, the Three Communiques and the Taiwan Relations Act. But I think there is something broader that forms US policy toward Asia, and that is the US’ priorities at [any given] time.

In the last administration, the US’ priority was 9/11, which came eight months into [US president George W.] Bush’s first term. Even though US policy didn’t change, that [event] shaped the US’ attitude and perspective for the rest of his term.

Now, with the Obama administration, I presume it would be the same. Now we have what a lot of people have called the “economic 9/11,” so that would be the top priority of the Obama administration unless something supersedes that. So the US will look at Asia through the eye of the economic crisis. The conventional wisdom [in Washington] is that China is the driving force behind potential Asian growth. I believe the current perception of the US government [is] ... that China is perhaps an equal partner to the US in solving this crisis. My argument today is that it is not.

The Chinese economy is structurally unsound. I believe the leaders know this and they are trying to correct the problem. But because of years of driving growth up at the expense of rising living standards and, ultimately because it is hollow growth and because everyone looked to China’s growth, growth became the goal, not further developing the economy and the health of the entire economy. So what happened is that the Chinese government became more and more reliant on foreign direct investment and exports at the expense of domestic consumption, exports into China, or rising income and a better standard of living.

If we use the analogy of boats, Taiwan is a motorboat and the US is a large cruiser, and China is a huge freighter, so it can only move slowly. It’s large ... and it’s not modernized to the extent that Taiwan and the US are, so it would be very difficult to [raise the living standards of the rural poor in China]. China, regardless of the amount of stimulus that it throws at the problems, will not be able to turn as fast, and therefore will not be able to outrun the time it will take the US to get through the recovery.

TT: How do you think the economic crisis will affect the relationship between Taiwan, the US and China? Should Taiwan be worried that the US will lessen its support in an effort to make Beijing an economic partner?

Shaheen: I think it’s a legitimate worry, which is why I’m spreading the word that China is in worse condition than any of the developed economies in Asia. The Chinese leaders know this. Two years ago, [Chinese] Premier Wen Jiabao [溫家寶] said the Chinese economy was unstable, unstructured, uncoordinated and unsustainable.

Many people in the US believe that the PRC [People’s Republic of China] is the US’ banker. This is absolutely untrue. Any country that has a trade surplus with the US or any countries that have goods that are dollar-dominated must have US dollars. They are prisoners of the US dollar ... so their keeping dollars is largely involuntary ... and [China] has to continue to buy US treasury [notes] in order for its dollars to continue to earn what they are earning [now].

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