Since President Tsai Ing-wen (蔡英文) took office two years ago, her government has worked hard to attract investment, with impressive results, such as factories being set up or expanded by Taiwan Semiconductor Manufacturing Co in the Southern Taiwan Science Park, Largan Precision Co in Taichung and Winbond Electronics Corp in Kaohsiung.
The World Economic Forum’s 2018 Global Competitiveness Report lists Taiwan as an “innovation hub” and its economy has outperformed those of South Korea and China. Why, then, are ordinary people not perceiving and applauding these achievements?
Tsai’s predecessor, former president Ma Ying-jeou (馬英九), adopted a central policy of a “single Chinese market.” This policy strengthened China’s magnetic attraction of Taiwanese businesses and jobseekers, thus accelerating Taiwan’s marginalization and slowing its economy, which even dipped into negative growth.
Tsai’s government has shifted to a policy of investing in Taiwan, especially the “five plus two” innovative industries, namely intelligent machinery, an “Asian Silicon Valley,” green energy, biomedicine, the national defense and aerospace industries, agricultural reform and the circular economy.
However, the cross-strait exchanges that the Ma administration threw wide open present a major problem. The cross-strait Economic Cooperation Framework Agreement and related agreements are still in effect and the semi-official Straits Exchange Foundation still has the mission of “promoting cross-strait exchanges.”
This facilitates China’s magnetism toward Taiwan’s medium, small and microenterprises. While fueling the higher levels of the economy, the government’s contradictory approach is allowing the nation’s economic base to leak away.
Despite having closed official channels of communication with Taiwan since Tsai took office, Beijing has been cultivating unofficial contacts, adjusting its policy to focus on younger generations and the social grassroots. This locally focused policy is helping China get closer to Taiwan’s basic industries and ordinary people.
On Feb. 28, China announced 31 preferential measures designed to attract Taiwanese microenterprises and young people to set up business in China.
China’s Taiwan Affairs Office said that between January and August, China approved 3,265 applications by Taiwanese investors — up 29.6 percent from the same period last year. Evidently, China’s magnetism is still strong.
There are 1.45 million small and medium-sized enterprises in Taiwan, accounting for 98 percent of the total number of companies. This does not even include microenterprises.
These enterprises are the foundation of Taiwan’s economy. If their personnel, capital, skills and technology are allowed to flow to China under a policy of promoting cross-strait exchanges, the leakage would outweigh the spillover effect that the economic base receives from investments by bigger corporations. The overall economy would not reap the benefits of such a recovery.
The case of National Taiwan University president-elect Kuan Chung-ming (管中閔) proves that excessive “exchanges” have become a question of national security. As important as it is to boost the “higher” economy, it is equally important to prevent the resources of the economic base from leaking away.
Restricting cross-strait exchanges is the only way to invigorate the economy in a way that ordinary people could perceive.
Huang Tien-lin is a national policy advisor.
Translated by Julian Clegg
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