A report in a Chinese-language newspaper a few days ago suggested that fans of Taiwan, hatai, are becoming as popular as South Korea fans, hahan, in the Asian market and even overtaking them.
Taiwan’s reputation has improved significantly in recent years as a result of the sheer quality of the technology and products it makes. This has given rise to the so-called hatai phenomenon, basically a liking of all things Taiwanese, which has given a boost to Taiwanese branded goods and services. The global reputation and status of “Made in Taiwan” (MIT) labeling is now roughly comparable to that of Japanese-made goods about 15 years ago.
The signing of the Economic Cooperation Framework Agreement (ECFA) in June is going to be a significant factor in this paradigm shift. It will magnify the hatai effect already evident in China and, through Chinese connections, have an impact in other advanced economies. This will ensure Taiwan has a bigger profile in the world market following President Ma Ying-jeou’s (馬英九) “Golden Decade,” which ends in 2020. The development of the former will be instrumental in facilitating the latter, and if this happens, Ma will have gone a long way to achieving his vision for the future of Taiwan.
Since the ECFA has now been signed, cross-strait production will be much more coordinated than before, at all levels of the value chain — from upstream suppliers and producers to downstream providers, together with all the peripheral products and services supporting them. This is true for both high-tech and low-tech products. In future, many of these products and services will be labeled “Made in China” (MIC) or MIT, depending on whether they are made for the domestic market or export. Such a consideration will, naturally, constitute an important economic policy decision.
There are already a lot of products on the market along the eastern seaboard in China that are Taiwanese on the inside and Chinese outside: high-tech products with Taiwan-designed innards and Chinese casing or packaging. These are then marketed under the MIC labeling, with its reputation for quality items at reasonable prices. This phenomenon is particularly noticeable with low-tech traditional products, which means they can now be sold at relatively higher prices.
It is important to be aware exactly which products this involves. For now they are mostly sold in China, but in future they will be marketed in other countries, especially markets that are sensitive to the cost of main components and where demand for high-priced Taiwanese goods is gradually declining.
The ECFA also means there will be more Chinese goods tagged with a Taiwanese label on the market. That they are being sold under the MIT brand means that it will become possible to charge more for cheaper Chinese-made goods in mature markets. This will enable Taiwan to significantly diversify its exports, broadening Taiwanese branded goods and services, while adding new channels and strengthening existing ones in which Taiwan can compete on the global market.
Both permutations will significantly reinforce the international impact of the hatai phenomenon. It will also enhance Taiwan’s ability to market its goods, giving producers more leverage to cross over into different market sectors.
The government is trying to attract foreign investment in an attempt to strengthen Taiwan’s position as an intermediary linking the West and Asia. This is a valuable opportunity, which could bring huge benefits and one Taiwan should do everything to optimize.
Bert Lim is president of the World Economics Society.
TRANSLATED BY PAUL COOPER
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