It is clear that whoever hopes to win the presidential election next year will have to propose a sound strategy on how to deal with China: not just politically, but also economically.
The process of cross-strait economic liberalization launched in the 1980s and sustained even under the pro-independence Democratic Progressive Party from 2000 until 2008, accelerated dramatically after President Ma Ying-jeou (馬英九) of the Chinese Nationalist Party (KMT) stepped into office on May 20, 2008. With the signing of the Economic Cooperation Framework Agreement (ECFA) in June last year and various other economic pacts in recent years, the dependence of Taiwan’s economy on China has grown by leaps and bounds.
Putting the political implications of those agreements aside, we will leave it to the history books to judge whether the decision to open the gates to Chinese money was economically sound for Taiwan. A growing number of economists are claiming that China’s economic miracle is heading full speed for a brick wall. Although such predictions have been made for more than a decade, there is evidence that this time the alarmists could be right.
Should such pessimistic forecasts come to pass, the more dependent Taiwan is on China for its economic well-being, the more severe the repercussions of a downturn across the Taiwan Strait will be.
Earlier this month, renowned economist Nouriel Roubini was warning of potentially destabilizing contradictions between China’s short and medium-term economic performance. In his view, China was able to weather the global economic crisis and sustain double-digit economic growth by artificially propping up its economy with major infrastructure projects.
However, this stopgap measure cannot go on indefinitely and already the construction spree is catching up with China as evidenced by low usage of its high-speed rail systems, highways leading to nowhere and steel-and-glass ghost towns. Furthermore, a recent scandal about the safety of China’s new ultramodern high-speed rail system has highlighted the prohibitive cost of construction and operation. The rail system, which was part of Beijing’s stimulus plan for 2008, is already losing money and depends for its survival on bank loans. The Chinese Ministry of Finance last week confirmed that its debt currently stands at US$276 billion, which was almost entirely borrowed from Chinese banks.
A great share of the massive infrastructure projects that have sustained the illusion of a booming Chinese economy has been buttressed by bank loans and many of those are non-performing and will very likely never be reimbursed. Add rampant corruption, as was ostensibly the case with the underused high-speed rail, to this mix and there are the makings of an economic time bomb — the consequences of which for the Chinese economy (and the region) one can only guess at.
For Taiwan, these signs should awaken officials to the need to implement prophylactic measures in the event the Chinese economy implodes. The key to this is threefold: ensuring Chinese money in Taiwan comes from economically sound institutions; redoubling efforts to attract foreign investment from sources other than China; and diversifying export destinations (Taiwan’s exports to China plus Hong Kong last year accounted for about 42 percent of total exports. Inflation, or a major economic downturn in China, would have a serious negative impact on Taiwan’s exports).
While there is no way to avoid significant trade with the giant next door, the candidates in next year’s presidential election should clearly explain to the public how they intend to hedge against a possible rainy day in China. It’s not a question of whether Taiwan should deal with China or not, but how.
The Chinese Communist Party (CCP) continues to bully Taiwan by conducting military drills extremely close to Taiwan in late May 2024 and announcing a legal opinion in June on how they would treat “Taiwan Independence diehards” according to the PRC’s Criminal Code. This article will describe how China’s Anaconda Strategy of psychological and legal asphyxiation is employed. The CCP’s People’s Liberation Army (PLA) and Chinese Coast Guard (CCG) conducted a “punishment military exercise” against Taiwan called “Joint Sword 2024A” from 23-24 May 2024, just three days after President William Lai (賴清德) of the Democratic Progressive Party (DPP) was sworn in and
Former US president Donald Trump’s comments that Taiwan hollowed out the US semiconductor industry are incorrect. That misunderstanding could impact the future of one of the world’s most important relationships and end up aiding China at a time it is working hard to push its own tech sector to catch up. “Taiwan took our chip business from us,” the returnee US presidential contender told Bloomberg Businessweek in an interview published this week. The remarks came after the Republican nominee was asked whether he would defend Taiwan against China. It is not the first time he has said this about the nation’s
In a recent interview with the Malaysian Chinese-language newspaper Sin Chew Daily, former president Ma Ying-jeou (馬英九) called President William Lai (賴清德) “naive.” As always with Ma, one must first deconstruct what he is saying to fully understand the parallel universe he insists on defending. Who is being “naive,” Lai or Ma? The quickest way is to confront Ma with a series of pointed questions that force him to take clear stands on the complex issues involved and prevent him from his usual ramblings. Regarding China and Taiwan, the media should first begin with questions like these: “Did the Chinese Nationalist Party (KMT)
The Yomiuri Shimbun, the newspaper with the largest daily circulation in Japan, on Thursday last week published an article saying that an unidentified high-ranking Japanese official openly spoke of an analysis that the Chinese People’s Liberation Army (PLA) needs less than a week, not a month, to invade Taiwan with its amphibious forces. Reportedly, Japanese Prime Minister Fumio Kishida has already been advised of the analysis, which was based on the PLA’s military exercises last summer. A Yomiuri analysis of unclassified satellite photographs confirmed that the PLA has already begun necessary base repairs and maintenance, and is conducting amphibious operation exercises