Pundits yesterday were mixed as to whether the request from business leaders to relax China trade restrictions will lift the economy out of a slump.
Business leaders, including the chairmen of Chinatrust Commercial Bank (
"It's a good route to follow," said Jeremy Chang, who manages NT$840 million (US$24 million) in Taiwan stocks at Cathay Securities Investment Trust Co Ltd (國泰投信). "Taiwan's economy would get a leg-up with access to China's market."
The economy needs a boost. GDP may have shrunk from a year earlier last quarter, the economic planning agency said last week. The economy grew 1.06 percent in the first quarter, the slowest in 26 years, as falling exports forced manufacturers to cut production, fire workers and move production to China.
By contrast, China's economy grew 7.8 percent in the second quarter as government spending on roads, bridges and other public works and a domestic market of 1.3 billion consumers helped counter the effects of flagging exports.
In response to slumping growth and record 4.4 percent unemployment, the government approved NT$80 billion (US$2.3 billion) in extra government spending last month, and set up the economic council framework made up of politicians, academics and business leaders to recommend measures to revive the economy.
Executives on the committee include Robert Tsao (
The business community also asked the government to lift curbs on investment in China, allow tourists from China to visit Taiwan and scrap a 0.3 percent tax on stock transactions to boost a market that's near an eight-year low.
"These recommendations won't pull Taiwan out of its downturn, but if the US recovers quickly they would speed up the country's
recovery," Chang said.
While opening up business channels with China may be popular among the nation's companies, it could drain local investors' money from Taiwan, hurting growth and leaving the nation even more dependent on China's market.
"Both sides benefit from increased trade in the long term, but in the short term, local investment will be reduced, unemployment will rise and banks' non-performing loans will keep rising," said David Lee, an economist at Entrust Securities Co (永昌證券).
"From the political perspective, China is still more like the enemy," he added.
Still, the government of President Chen Shui-bian (
elections.
"If local businessmen are saying this is Chen's only way to win the election, he may listen to them," Lee said.
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