Despite poll furor, Taiwan's cash is
still king By Mac William
Bishop
TAIPEI - When it comes to cross-Strait
economic prospects, business trumps politics and
ideology. Despite the upheaval over Taiwan's contested
presidential election and China's coldness toward
President Chen Shui-bian and his cross-Strait policies,
Taiwan's economic prospects look unusually bright this
year. Across the Taiwan Strait, extensive business ties
with the mainland are as powerful as ever, and they are
expanding. Taiwan, after all, is China's biggest source
of foreign investment.
Reuniting the Taiwan
compatriots with the sacred motherland may resonate with
the China's People's Liberation Army, but for the power
brokers in Beijing, Taiwanese cash is still king.
There were doom-and-gloom predictions that a
Chen victory on March 20 would be disastrous for
Taiwan's economy and businesses, but the prophesies were
simply hyperbolic rhetoric. Taiwan's economic realities
should triumph over what many here consider to be the
ideological fantasies of the "one China" policy. The
cold dialogue (or lack thereof) between Beijing and
Taipei won't facilitate trade between the two nations,
but it won't prevent it, either.
After all,
China relies on Taiwanese capital and experience as much
as Taiwan relies on the cheap labor and expanding market
across the Taiwan Strait. And foreign investment is
especially important for China, considering that it is
already short more than 20 million jobs, according to
the World Bank. This number is projected to increase
over the next decade, and some projections see
unemployment in China rising to as much as 17 percent by
2020. In short, Beijing still needs all the help it can
get to continue the economic reform package initiated by
Deng Xiaoping in 1978.
This is where Taiwan and
its businesspeople come in. Taiwan is the single largest
source of foreign investment in China, and the bulk of
China's high-tech exports originate in Taiwanese-run
factories in Guangdong province.
Taiwan's
exports to Hong Kong and China also reached a record
high last month, and trade between the three will only
increase as their economies expand this year. Hong Kong
and China accounted for 36 percent of Taiwan's exports,
according to data provided by the Taiwan Ministry of
Finance.
Growth forecasts top 6
percent Much attention has been focused on the
"roaring" Chinese economy, but gross domestic product
(GDP) growth forecasts for Taiwan are topping 6 percent
for 2004 - no mean feat, considering that Taiwan's per
capita GDP is already quadruple that of China. Goldman
Sachs has maintained its forecast of 6.3 percent GDP
growth in Taiwan for 2004, despite the current political
upheavals over the contested election.
Chen
narrowly won by about 30,000 votes, thousands of
opposition protesters took to the streets, a recount was
demanded - and agreed to. The dispute is now in the
courts, however, and it seems reports of the death of
Taiwan democracy were greatly
exaggerated.
Political commentators in Taiwan
have spilled a lot of ink in recent years agonizing over
the outflow of capital and jobs to China, blaming these
developments for a wide array of economic and social
ills. But Taiwan's recent economic malaise occurred
against the backdrop of a global economic downturn. Just
as there was no silver bullet to end the global
recession, no single factor was responsible for slowed
economic growth and job losses in Taiwan, although many
economic pundits placed the blame squarely on President
Chen's shoulders.
The downturn, coupled with the
relative health of China's official economic figures,
turned many businesspeople against Chen. They believed
they saw which way the economic wind was blowing and
adjusted their tack accordingly.
For example,
the chairman of the shipping and transportation
conglomerate Evergreen Group - who had supported Chen's
Democratic Progressive Party (DPP) in the 2000 election
- withdrew his support only days before last month's
election. The move was interpreted as a condemnation of
Chen's inability to successfully expand direct links
between China and Taiwan - important to businesspeople.
Although the "small three links" - ferry, postal and
cargo transportation between China and Taiwan, between
the outlying islands of Kinmen and Matsu to coastal
Xiamen and Fuzhou - are already in place, the business
community has been pressuring Chen to establish direct
air links and to expand and liberalize other
transportation links between Taiwan and China.
Beijing's unwillingness to
cooperate At present, Taiwanese law still forbids
direct flights between the two sides of the Taiwan
Strait, a holdover from the days of martial law.
Although the president had promised to establish the
transportation links by October last year, he was
hindered by Beijing's unwillingness to cooperate. Chen's
policies, which are interpreted by many as
pro-independence, have not garnered him any popularity
in Zhongnanhai (Beijing's seat of government), and the
leaders in Beijing have effectively suspended dialogue
with Taiwan since Chen came to power in 2000.
This has made it difficult to work out the
details regarding direct flights between China and
Taiwan.
In any event, the future of Taiwan's
economy is not simply tied to the state of cross-Strait
relations. Taiwan has traditionally relied on the cheap
manufacture of consumer electronics and electrical
components as its main source of exports. This trend
will continue regardless of who holds the reins of power
in Taipei. A number of products produced in Taiwan are
increasingly in global demand, the most notable being
semiconductors and flat-screen TVs.
Both of
these sectors - semiconductors and flat-screen TVs -
have boomed with the recovery of the global economy. For
example, spot prices for benchmark Dynamic Random Access
Memory (DRAM) chips have hovered between US$5 and $6,
nearly double the price during the same period last
year. This translates into increased profitability for
such heavyweight firms as Taiwan Semiconductor
Manufacturing Co, United Microelectronics Corp and
PowerChip Semiconductor Corp.
The booming
consumer electronics industry has been visible on the
Taiwan Weighted Stock Exchange, or Taiex, which has
almost fully recovered to its pre-election level as the
political battle in Taipei has calmed. Although the
Taiex closed down 52.50 points on Friday at 6620.36, it
finished the week up nearly 75 points.
For the
time being, traders are ignoring a possible
deterioration in political relations between Beijing and
Taipei, as are foreign firms that rely on Taiwan for
inexpensive electronics components. For example, Japan's
Sony Corp said on Wednesday it planned to double its
orders from Taiwanese suppliers this year. Such moves by
major multinational corporations are indicative of the
comparative health and competitiveness of the Taiwanese
economy, as well as the political stability of the
island.
President Chen has not embraced an
anti-business platform: indeed, some analysts argue that
the reform and privatization of such key sectors as the
banking industry under the Chen administration have left
Taiwan in an enviable economic position.
Where
Taiwan's economy leads, China will follow. Although
Beijing may not be happy with this state of affairs, it
can do little to change it so long as Taiwanese
businesspeople are bankrolling the Chinese economic
miracle.
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