Fri, Jun 05, 2015 page8

• Holes in Taiwan’s silicon shield

  • By Huang Tien-lin 黃天麟
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  The people behind devising the economy’s trajectory, the architects of economic strategy, do not work for Taiwan. Everything suggests that they operate out of Beijing.

  There is nothing covert about Beijing’s plan to bring about unification through economic means: It has been quite explicit about its intentions in this regard. All of Taiwan’s leaders are complying with this strategy, such that the operation is virtually seamless. There are many examples to illustrate this.

  In 2008, in the middle of China’s 11th five-year plan and the year in which the Chinese Nationalist Party (KMT) regained political power, China was in need of an injection of capital. The administration of President Ma Ying-jeou (馬英九) wasted no time in abolishing the 40 percent ceiling on investments in China, and China’s economy soared.

  Beijing then wanted to sign an agreement with Taiwan along the lines of the mainland and Hong Kong’s Closer Economic Partnership Arrangement (CEPA) signed in 2003. This agreement was to be called the Economic Cooperation Framework Agreement (ECFA), and when Beijing asked Ma to jump, Ma asked: “How high?”

  The whole thing was wrapped up in 2010, the date and location of the signing arranged by Beijing. To emphasize the master-and-servant nature of the arrangement, Beijing chose the date the CEPA had been signed, June 29, in the city of Chongqing, China’s capital during the Second Sino-Japanese War.

  After the ECFA was completed, Beijing wanted to sign a cross-strait trade in services agreement. Nowhere in the world has anyone preceded the signing of a trade in services agreement before inking a trade in goods agreement, and yet the Ma administration was happy to oblige, signing the agreement on June 21, 2013.

  The government said that the signing of the ECFA would see GDP rise by between 1.65 percent and 1.7 percent. The following year, Taiwan’s economic growth rate had fallen to 3.8 percent, and it fell again in 2012 to 2.06 percent. Beijing’s goal has been to gut the economy. Had the ECFA been of significant benefit to the economy, it would run counter to the strategic objective of unifying Taiwan through economic means.

  In June last year, Beijing devised an initiative to develop China’s integrated circuit industry, setting up a 120 billion yuan (US$1.93 billion) industrial investment fund. The goal was to destroy Taiwan’s semiconductor industry, one of the pillars of the economy. At the same time it was planning to launch the Fujian Free Trade Zone, as an olive branch to United Microelectronics Corp (UMC), the nation’s No. 2 contract chip maker.

  In December, UMC announced its decision to invest US$1.35 billion in a three-way joint venture with the city government of Xiamen and Fujian Electronics & Information Group to make advanced chips in China.

  The Ma administration, unconcerned about leaking technology to China, approved the venture on Dec. 31, when people in the country were busy with new year plans.

  The government is well aware of China’s 120 billion-yuan plan to crack Taiwan’s “silicon shield,” and it is not ignorant of the fact that the free-trade zone lying across the Taiwan Strait is there to challenge the nation.

  Clearly, the Ma administration is in compliance with the master plan.

  Following this was Beijing’s announcement of the Asian Infrastructure Investment Bank (AIIB), which, while not being directed at Taiwan per se, is nevertheless part of the strategy to absorb Taiwan via Beijing’s policy of securing unification through the economy.

  The result was as Beijing wanted: Taiwan sidled up to China while nobody else was paying attention.

  Next, due to the emergence of a “red supply chain” in China, Taiwan needs a strategic fund for the development of its semiconductor sector. The Ma administration, however, would prefer to allocate these funds to investing in the AIIB, leaving the semiconductor sector to stand or fall on its own.

  There is not much economic benefit to be gained through participation in the AIIB. By doing so, Taiwan is establishing the foundations to help countries that join at a later date.

  Even if Taiwanese operators accept contracts, the engineering projects will be carried out overseas, and there will be little benefit to job creation or incomes here.

  So what happens when China succeeds in destroying the semiconductor sector. That will essentially leave Taiwan with nothing more than the tourism industry, which may well have been the objective of KMT and Chinese Communist Party cooperation all along.

  Is the tourism industry reliable? China’s Taiwan Affairs Office Minister Zhang Zhijun (張志軍) has said: “Don’t insist upon maintaining your sovereignty, because if you do you won’t have Chinese tourists coming over.”

  The solution would be to retract the application for membership of the AIIB, and establish a strategic fund for the development of the semiconductor sector.

  Huang Tien-lin is former president and chairman of First Commercial Bank and a former Presidential Office adviser.

  Translated by Paul Cooper
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