President Chen Shui-bian (陳水扁) recently announced at his monthly press conference that his top priority at the moment is to stabilize and further develop Taiwan's economy. In Chen's words, "We will lose everything if we don't further develop Taiwan's economy ... the scheduled social welfare programs might have to be postponed."
When both economic development and social welfare cannot be accomplished at the same time, we seem to have no choice but to give up one of them. Why can't Taiwan, with such a strong economy, consider both economic development and social welfare? The answer is easy and obvious: Taiwan's external investment in China has been far too high over the past 10 years. These investments, including business, private, and security investment as well as Taiwanese tourists' spending in China, have rapidly transferred Taiwan's capital in to China's market.
Over 51,000 Taiwanese companies have invested in China, with an estimated capital of US$40 billion. Many areas in China, such as Shenzhen (深圳), located in Canton Province (廣東省), have mushroomed into overseas industrial complexes.
On the other hand, Taiwan is now facing critical challenges such as the worsening of its real estate and stock markets, a decreased savings rate, rising unemployment and non-performing loans at banks. Our foreign exchange reserves -- not including short-term foreign capital -- have not increased during the last 10 years. Instead, Taiwanese companies put their money into the China market and seldom remit profits back to Taiwan.
Consequently, as a result of other Taiwanese companies' investments in China, companies staying in Taiwan are now struggling to survive. These companies have paid great contributions to Taiwan's economic development. Unfortunately, they not only can't enjoy the fruits of their hard work, they also need to face a worsening business environment caused by Taiwanese companies' enormous China investments.
I agree with Chen's advocacy of "economy first" (經濟第一). Still, the priority in solving Taiwan's economic problems is to immediately examine our China investment policies. Taiwan should build a "national economic security council" in order to deal with the recently discussed investment plans such as the "investment quota policy" (投資配額制), requiring Taiwanese companies to also expand their businesses in Taiwan while making investments in China. Without such a formal mechanism to take charge of Taiwan's long-term investment policies, trying to save the economy by promoting the Taiwan economic development scheme (台灣經濟發展計劃 ) or the stock market stimulation plan (股市振興方案) will be like climbing trees to catch fish. Taiwan's economy will keep growing only if it can prevent itself from being pushed to the fringe of the market by China.
As for our economic and trading relations with China, what we need is normal business relations with appropriate amounts of investment in China, which is the best direction for Taiwan's economic development and will benefit Taiwanese people most.
Taiwan can compete with other countries even if we don't invest in China. According to past experience, Taiwanese companies seem to lose the motivation for upgrading their technologies once they have moved to China. On the contrary, those staying in Taiwan usually devote themselves to technological development and industrial upgrading.
If we don't stop China fever soon, Taiwan's economic plans, such as the "knowledge-based economy" (
Huang Tien-lin is a national policy advisor to the president and former chairman of First Commercial Bank.
Translated by Eddy Chang.
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