Following China's WTO accession, the Chinese currency's appreciation may pose a threat to the profitability of Taiwanese businesses across the strait, said Shea Jia-dong (許嘉棟), chairman of the China External Trade Development Council (CETRA,
China has consistently said that it won't allow any currency fluctuation to happen, but Shea -- former deputy governor of Taiwan's central bank and former finance minister -- yesterday said that he expected to see the Chinese yuan becoming stronger.
"Foreign capital flow into China will increase the surplus of the country's balance of payments. This will place a burden on China if it does not allow its currency to appreciate," Shea said.
To offset the surplus, Shea added that he believes China has to either allow capital to flow out of the country or allow its currency to appreciate.
"Since its financial system is not mature yet, China dares not open up any capital outflow. So, it's very likely that China will choose to allow the renminbi's appreciation," Shea said.
Shea therefore warned Tai-wanese businessmen with assets in China of possible business risks there. He added that a raise in the average salary of mainland laborers may also increase corporate costs.
Taiwanese firms tend to take advantage of China's cheap labor, but Shea said that if too many businesses flood in and boost the demand, Chinese labor may also ask for pay rises, further burdening the corporations' profitability.
Shea also urged Taiwanese businessmen who plan to invest in China to pay close attention to China's industry policies, warning that China is inconsistent with its policies.
He said that, although China has decided to develop capital-intensive high-tech industries on its coastal and northeastern districts, an about-turn in this policy is likely to occur because the nation -- including the latter districts -- suffer from a lack of advanced skills and a high unemployment rate.
"Only [labor-intensive] traditional industries can help create enough job opportunities to ameliorate the country's high unemployment," Shea said.
While criticizing China's poor investment environment, Shea said that CETRA is also planning to explore commercial opportunities in China this year.
"Four Chinese industries of vital importance that CETRA will explore this year are electronics, machinery, construction material and agriculture," said Lin Ker-hsin (
Shea also expressed his confidence in Taiwan's industrial competitiveness, adding that the semi-official business association has established an unofficial office in Beijing to help Taiwanese firms develop inside the Chinese market. He hoped that CETRA's branch offices in China can be duplicated in Shanghai and other major cities.
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