President Chen Shui-bian's (
The TAIEX fell by a whopping 5.78 percent on Monday, the first business day after Chen's speech. The bourse's value shrank by NT$500 billion, putting enormous pressure on government officials and the financial authorities. Beijing, the KMT and the PFP all accused Chen of recklessness. Fortunately, the market quickly stabilized -- an indication that Monday's fall was just an emotional response and would not affect long-term investment prospects.
A side effect of Chen's statement was that the two sides have found a convergence in economics. To seek parity with China in terms of sovereignty, Taiwan must first maintain economic independence and continued stable development. However, Taiwan's growing dependence on China is a cause for concern. In recent years, China has become Taiwan's main export destination and source of trade surplus. Taiwan now enjoys an annual trade surplus of US$20 billion with China. As much as 25 percent of Taiwan's exports go to China. In terms of investment, more than 70,000 Taiwanese firms are now operating in China, having channeled US$100 billion there. Taiwanese businesses have contributed more than 70 percent of China's information-technology industry production -- which has made the country the world's third-biggest IT manufacturer. Economics has become a decisive bargaining chip in cross-strait relations, but it is also a sword that cuts both ways.
With Taiwan's economy and domestic investment still in the doldrums, the country is quickly losing capital, technology and talent to China. Beijing is using businesses as a weapon to pressure the government to open direct links. With the economic tilt toward China, Taiwanese investments in China are more of a liability than an asset. To reverse this, Taiwan must first revive its economy. Chen has stressed many times that the economy is his priority.
As a trade-oriented nation, Taiwan is deeply affected by fluctuations in the global economic situation. The US and European economies are not recovering as quickly as expected.
To improve its economy, Taiwan will first need to improve its domestic investment environment, increase incentives for private-sector investments, and continue to help strengthen local businesses. The government should also divert the excessive concentration of investment in China. The "go south" policy could be a feasible alternative, but the government needs to offer incentives and help create a beneficial environment for businesses to make such a move. The government should speed up talks on free-trade agreements with Southeast Asian nations and strengthen the competitiveness of Taiwanese firms in the region in order to prevent Taiwan being marginalized after the "ASEAN plus three" alliance becomes reality.
As the uproar over "one country on each side" subsides, the government must understand that there is no end to the cross-strait sovereignty dispute. The only choice for Taiwan is to increase its economic advantages. Only then will it have the means to wrestle with China in the international arena. The government should work to maintain stable cross-strait relations and quickly return to the key task of improving the economy, turning the power of business into Taiwan's assets in the cross-strait tussle.
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