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.
Japanese Prime Minister Fumio Kishida on Thursday last week met with Chinese President Xi Jinping (習近平) at an APEC summit in Thailand. The meeting made front-page news in Japan the following day. Three years ago, when then-Japanese prime minister Shinzo Abe visited Beijing to meet with Xi, no one questioned Abe’s attitude toward China, as the conservative parties in Japan had been spearheaded by Abe. However, Kishida could easily be labeled as pro-China, as he hails from Hiroshima — a place known for its anti-war, anti-nuclear movements — and was once the director of the Japan-China Friendship Association of Hiroshima.
It is quite the irony when former British prime minister Boris Johnson — a buffoon who for far too long was taken seriously — is branded a buffoon for saying something deadly serious. Following Johnson’s withering criticism of China at a business forum in Singapore on Wednesday last week, the event’s organizer, Michael Bloomberg, apologized to attendees, saying that Johnson was “trying to be amusing rather than informative and serious.” However, Johnson’s characterization of China as a “coercive autocracy” that had showed “a candid disregard for the rule of international law” was spot-on. His comments evoked the wisdom of the Austrian-British philosopher
Although internal Chinese politics are largely defined by meticulously concocted mysteries, it is an open secret that the battle for who will ascend to the highest echelons of Zhongnanhai is decided at the Beidaihe resort. It is where factions within the Chinese Communist Party (CCP) engage in horse-trading over leadership selection and delegate appointments long before the party’s national congress. What unfolded at last month’s 20th National Congress was predetermined at the Beidaihe gathering in August. In this context, the CCP, and particularly Chinese President and CCP General Secretary Xi Jinping (習近平), used the event to project power and party unity.
There has been a surge of global interest in Taiwan’s security in recent years. Amidst the noise, it can be easy to lose sight of broader trends that are shaping the environment within which Taiwan operates. Taking a broader view can bring into focus what tasks are most important for Taiwan to protect its democratic way of life. At the global level, several trends are unfolding in parallel. First, great power competition is intensifying. Russia is employing violence to seek to redraw boundaries. China is advancing its ambitions by operating below the threshold of conflict. China-Russia relations are unnaturally close by
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