Formosa Plastics chief Wang Yung-ching (王永慶) returned from a trip to China on June 5. It seems that, in addition to going back to his old stomping grounds in Quanzhou, he took time to visit a power station in Zhangzhou. This was not the first trip that Wang has made there, and it must have caused a few pangs of regret.
Nine years ago, Wang saw considerable potential in the electric power industry in China, and signed an agreement with Chinese officials in an investment worth US$3 billion in the Houshi Thermal Power Station in Zhangzhou. Not long after, the Uni-President group announced plans to plow money into the Wuhan Hydroelectric Power
Station. Taiwanese businesses jumped on the bandwagon, getting involved in steel plants and other construction projects.
In reaction to this, in August 1995, then president Lee Teng-hui (李登輝) came up with his "no haste, be patient" policy to restrict investment. Plans for building large power stations and steel plants were put on the back burner, and investment in the Zhangzhou power station was reduced considerably, with only part of the plan implemented.
Now, nine years later, China is plagued with problems surrounding the output and cost of electricity and high-grade steel. This has in turn required Chinese Premier Wen Jiabao (溫家寶) to announce a slow-down of the economic growth rate, a serious blow to the Asian economy and the stock market. China's shortage of electric power is predicted to continue until at least 2006, and this will undoubtedly retard the flow of Taiwanese and other foreign investment into the country, restricting the strength of China's economic growth.
We have to admire Wang's perspicacity. Nine years ago, he was able to predict the energy requirements demanded by China's economic growth, and follow his convictions by putting up US$3 billion in investment money. The "no haste, be patient" drive thwarted this particular business opportunity (although there are business opportunities everywhere, and Formosa Plastics was sure to have used the money to good effect elsewhere). Despite the fact that Wang hit the nail on the head with this one, the profits involved would have been reduced by other Taiwanese investors constructing power stations and exceeding the demand for electricity.
If it had not been for Lee's no-haste policy, by 2000 China would have already had several power stations and steel plants, built with Taiwanese money, up and running. With these, China would have had sufficient supplies of cheap electric power to spur economic growth, and would have had no problem maintaining the required growth rate of 7 or
8 percent. If this had been the
case, China would be enjoying a double-digit growth rate, without power woes and steel shortages.
Wen would also have been able to avoid implementing his macro-economic control policy. China's GDP for last year would certainly have exceeded US$1.4 trillion, giving Beijing the opportunity to behave even more outrageously toward Taiwan. It would also have given China more leverage with Japan and the US. This would have put Taiwan in a worse position than it is today. Lee's no-haste policy was thus not only correct, it was necessary.
Lee may well have trod on the toes of Wang and other Taiwanese businessmen straining to get into China, but he was able to ensure the nation's security. Nine years on, the events surrounding the Zhangzhou plant have driven home the point that the interests of, and decisions made by, individual enterprises are not necessarily beneficial to the nation, and may even be damaging to them in many instances.
If this is the case for power plants, then surely it also applies to direct links.
Huang Tien-lin is a national policy advisor.
TRANSLATED BY PAUL COOPER
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