Were I to say that nothing in the cross-strait service trade pact will benefit Taiwan, I would be accused of letting ideology color my judgement. And yet, an objective look at what has been deregulated and the impact this is to have on Taiwan shows that such an assertion holds water. When the Economic Cooperation Framework Agreement (ECFA) was first signed, the government proclaimed a coming “golden decade.” Back then, I said the term ECFA would more aptly refer to an “eventual colonization framework agreement” that would do nothing to Taiwan’s benefit and everything to its detriment. Three years on, the facts bear this out. Millions of new graduates are at their wits’ end, facing starting salaries of only NT$22,000 (US$737) per month.
President Ma Ying-jeou (馬英九) would have us believe this service trade pact is an “opportunity long due,” and that deregulation of the financial services industry will bring business into Taiwan’s financial services sector. Indeed, I am sure the government is particularly proud of the “financial services” part of the pact. What people need to understand is that, when it comes to the financial services sector, it may be true that initially the financial sector will have business coming out of its ears, but this is the beginning of a disaster for Taiwan, and even the Taiwanese financial services industry itself.
Why do I say this is the beginning of a disaster? You need only look at how enthusiastically the financial services industry has flocked to China. Confucius said: “Going too far is as bad as not going far enough” (過猶不及). This is a sentiment deemed fundamental to economists and yet, even now, there are many financial holding companies preparing to increase their investments in China and plough billions into local banks, mergers and acquisitions, and stocks and securities, and opening overseas branches in Fujian Province.
Initial estimates suggest that Taiwanese banks have either already transferred, or are preparing to transfer, not less than NT$160 billion in core capital to China. This is another example of integration with China that will surely see the further marginalization of Taiwan, just as the exodus of Taiwanese manufacturing to China did in the past.
Closely related to this is the deregulation of Chinese yuan deposits in February that, in the short four-month period to the end of June, has seen the accumulation of more than NT$360 billion worth of Chinese yuan in domestic and offshore accounts. This figure is increasing at the rate of NT$50 billion per month, giving a projected annual increase of NT$600 billion, a rate and amount equivalent to half Taiwan’s average annual increase in national M2 deposits — NT$1.2 trillion — in the decade from 2001 to 2011.
What is the purpose of accumulating all these yuan deposits? Naturally, they are to be used for providing financial services in China. This increase in credit financing in China means squeezing the amount of credit available to be extended in Taiwan.
To put it another way: In the past we experienced a manufacturing exodus to China and Taiwanese manufacturers did not take out loans in Taiwan. However, now that the banks are making the move across the Taiwan Strait, there will be little credit to be had for companies who do want to take out loans in Taiwan. It simply makes no sense to suggest that this situation will actually help Taiwan’s economy pull itself out of its current malaise. This yuan-deposit financial service trade deregulation issue goes some way to explaining why the response to the moratorium on the capital gains tax on securities transactions was weaker than expected.
Even more alarming is the impact on the political level. China has, after all, made it known that it would be prepared to use military force against Taiwan. Excessive exposure for Taiwanese banks in China — as of March our exposure has already reached US$30.4 billion, or NT$913 billion, threatening to rival even the US in terms of exposure in China — will undoubtedly place Taiwan’s financial security, and the fate of our banks and financial holding companies, firmly in Beijing’s hands. Is it still possible to suggest that these arrangements in any way represent concessions to Taiwan? It is crucial not to be deluded as to the impact this deregulation of the financial services industry is going to have on Taiwan.
It would be far better to first look to free-trade agreements with ASEAN, the US or Japan. This will be the best way to engage with the international community, for the benefit of our citizens, our businesses and the very survival of our nation.
Huang Tien-lin is former president and chairman of First Commercial Bank.
Translated by Paul Cooper
Taiwan is a small, humble place. There is no Eiffel Tower, no pyramids — no singular attraction that draws the world’s attention. If it makes headlines, it is because China wants to invade. Yet, those who find their way here by some twist of fate often fall in love. If you ask them why, some cite numbers showing it is one of the freest and safest countries in the world. Others talk about something harder to name: The quiet order of queues, the shared umbrellas for anyone caught in the rain, the way people stand so elderly riders can sit, the
Taiwan’s fall would be “a disaster for American interests,” US President Donald Trump’s nominee for undersecretary of defense for policy Elbridge Colby said at his Senate confirmation hearing on Tuesday last week, as he warned of the “dramatic deterioration of military balance” in the western Pacific. The Republic of China (Taiwan) is indeed facing a unique and acute threat from the Chinese Communist Party’s rising military adventurism, which is why Taiwan has been bolstering its defenses. As US Senator Tom Cotton rightly pointed out in the same hearing, “[although] Taiwan’s defense spending is still inadequate ... [it] has been trending upwards
Small and medium enterprises make up the backbone of Taiwan’s economy, yet large corporations such as Taiwan Semiconductor Manufacturing Co (TSMC) play a crucial role in shaping its industrial structure, economic development and global standing. The company reported a record net profit of NT$374.68 billion (US$11.41 billion) for the fourth quarter last year, a 57 percent year-on-year increase, with revenue reaching NT$868.46 billion, a 39 percent increase. Taiwan’s GDP last year was about NT$24.62 trillion, according to the Directorate-General of Budget, Accounting and Statistics, meaning TSMC’s quarterly revenue alone accounted for about 3.5 percent of Taiwan’s GDP last year, with the company’s
There is nothing the Chinese Nationalist Party (KMT) could do to stop the tsunami-like mass recall campaign. KMT Chairman Eric Chu (朱立倫) reportedly said the party does not exclude the option of conditionally proposing a no-confidence vote against the premier, which the party later denied. Did an “actuary” like Chu finally come around to thinking it should get tough with the ruling party? The KMT says the Democratic Progressive Party (DPP) is leading a minority government with only a 40 percent share of the vote. It has said that the DPP is out of touch with the electorate, has proposed a bloated
RSS