Talks on an economic cooperation framework agreement (ECFA) are ongoing, but Taiwan has already made a series of major compromises to facilitate the inflow of Chinese capital, in what could be characterized as a down payment on the ECFA.
These compromises include a total of 192 approved items for Chinese investment announced on June 30 last year. Of these, 64 were in the manufacturing industry, 117 in the service sector and 11 in public construction. On March 16, the Financial Supervisory Commission (FSC) also announced regulations governing cross-strait financial business movements and approved investment licenses for Chinese investment in Taiwanese banking, securities and insurance. Note that all of these were announced unilaterally by Taiwan, as part of a framework for future investments from China.
It’s not as if Taiwan lacks capital. If we look at the 192 examples of non-financial investment or the banking, finance and insurance regulations just announced, there is nothing unique about Chinese capital that Taiwan can learn from. It seems clear that this is simply about getting Chinese capital into Taiwan and reinforcing the influence of Chinese investors on Taiwanese society, economy and politics.
Is this a problem? What is there to fear from Chinese capital? The FSC’s regulations governing investment stipulate various restrictions on the establishment of branches, subsidiaries and joint stockholding by “specific” Chinese investment banks in Taiwan. This suggests the FSC is well aware of the danger inherent in Chinese investment banks establishing themselves in Taiwan, sucking up Taiwanese finance and getting out of control, and is therefore making at least a show of being vigilant.
Based on the conditions laid down by the FSC, the press reported that five Chinese banks would qualify to invest in Taiwan: the Bank of China, the Industrial & Commercial Bank of China, the China Construction Bank, the Bank of Communications and China Merchants Bank. The question is, who controls these institutions? In a one-party dictatorship where the Chinese Communist Party (CCP) keeps a tight rein on everything, these banks are in effect all subsidiaries of CCP Financial Holdings. Worryingly, the FSC’s investment regulations give the impression that the rules were hammered out in conjunction with companies affiliated with the Formosa Plastics Group, such as Formosa Plastics (台塑), Nan Ya Plastics (南亞), Formosa Chemicals and Fiber (台化), and Formosa Petrochemical (台塑化), seemingly feigning ignorance that these are all controlled by the Wang family, descended from the group’s recently deceased founder, Wang Yung-ching (王永慶).
The CCP controls, or at the very least exerts considerable influence over, all large enterprises in China either directly or indirectly. Even billionaire Li Ka-shing (李嘉誠) in Hong Kong fell in line with Beijing’s stance on Google, instructing his firms to stop using the company’s search engine on its Web sites when Google withdrew from the China market. The CCP is the de facto head of holding companies in China.
China does not have a free economy, it is controlled by the CCP: One cannot apply liberal, international economic theory in China. An ECFA will result in even more CCP controlled companies operating in Taiwan and this will lead to the decline of economic and political freedom, which will in the long term undermine economic and political innovation. The result will be a proliferation of Taiwanese Li Ka-shings, of all shapes and sizes.
If Taiwan is to avoid this, we have to mobilize, insist on a referendum and say no to an ECFA.
Lin Kien-tsu is a member of the Taiwan Association of University Professors.
TRANSLATED BY PAUL COOPER
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