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    Greater China
     Mar 9, 2006
The politics of cross-strait business
By Craig Meer

TAIPEI - Silence, apparently, is golden. At least that's what you might conclude from the reaction of Taiwanese business groups to last week's surprise announcement by President Chen Shui-bian to scrap the National Unification Council (NUC) and Unification Guidelines. There's hardly been a peep out of them.

The local business community has restricted any public comment to generic calls for peace and stability. Chen Cheng-yi, spokesman for Taiwan's General Chamber of Commerce, said in

an interview with the Central News Agency on February 27, "What the commercial and industrial sectors hope for most is peace outside and stability inside the country." No word at all from the chamber's conservative siblings, the Chinese National Association of Industry and Commerce and the Chinese National Federation of Industry.

In private, Taiwanese businessmen and women active in the People's Republic of China express concern about official reprisals: the fate of recently penalized chipmaker United Microelectronics Corporation (UMC) is fresh in everyone's minds. UMC was fined US$150,000 in mid-February for investing in Chinese chip foundry without the permission of the Taiwanese government.

But in truth, the UMC fine was laughably small, and the business sector's reticence to speak out on Chen's recent initiative appears unusual. These are large, rich corporations that have done remarkably well on the back of cross-strait economic integration. Surely they have an interest in debating a move that could easily threaten cross-strait stability and with it their livelihoods?

Now more than ever, the cross-strait economy is booming. Total indirect trade between the two sides - Taiwan retains a ban on direct exchanges and most trade is routed through Hong Kong - was $3.9 billion in 1989, the first year business contact was officially permitted.

In 2004, according to figures collated by Taiwan's Mainland Affairs Council (MAC), total trade was just under $62 billion - a 16-fold increase in just a decade and a half. Projections for 2005 suggest that last year's result (the collated figures from MAC lag four months) will come in at greater than $70 billion. Taiwan-China trade has increased at an average annual rate of 25% since the start of the decade.

The trade balance is overwhelmingly stacked in Taiwan's favor. In 2004, with exports of $44.9 billion and imports of just US$16.6 billion, Taiwan recorded an accumulated trade surplus with China of $28.3 billion. Surpluses of similar magnitude are expected for 2005 and 2006.

Debate over the extent of cross-strait financial links is intense, but the message of a strong business interest in stable relations remains the same. According to statistics from China's Ministry of Foreign Trade and Economic Cooperation, accumulated and realized Taiwanese investment (foreign direct investment - FDI) in China is in the order of $42 billion.

However, due to the sensitive nature of cross-strait investment, most observers agree that the official figures drastically understate the actual level of Taiwanese FDI. Channeled through shell companies in ports of convenience such as the Bahamas, Taiwan-origin FDI in China could be over $120 billion.

Remittances to Taiwan are also substantial. Statistics published by Taiwan's Central Bank of China put the amount of returned profit and capital from the PRC at over US$44 billion to date.

But despite the impressive figures, and the capitalist clout they would appear to afford Taiwan's silent business community, the truth is, cross-strait economic integration counts for little when it comes to politics. Contrary to the best hopes of interdependence advocates, business is, and has always been, subservient to a political calculus in both Taipei and Beijing. Taiwan's corporate sector doesn't speak out because no one in official circles is interested in listening.

For Chen and much of his ruling Democratic Progressive Party, cross-strait economic integration is an increasing burden on aspirations for local autonomy. For a time, Chen flirted with the idea of embracing the trend toward closer economic ties; he adopted a cross-strait policy of "active opening, effective management" in 2001 to replace the more insular approach of his predecessor, Lee Teng-hui.

However, the president discarded this policy on January 1 this year, and soon after did the same with his premier, Frank Hsieh.

While there were multiple factors bearing on the latter decision, a large part of the reason was Hsieh's push for the establishment of direct commercial links between Taiwan and China. In a press conference on January 20 after stepping down, Hsieh lamented, "We should formulate our China policy based on Taiwan's interests ... I believe direct cross-strait air links will benefit the country." Replacement premier Su Tzeng-chang is a novice in cross-strait relations and unlikely to buck the president's new harder line.

For the leaders in Beijing, cross-strait integration is primarily a means to hasten Taiwan's unification with the motherland - to achieve by economics what cannot, currently, be achieved by political means. On the surface, China is extremely welcoming of Taishang (Taiwanese businesspeople), and channels the administrative component of their mainland operations through dedicated and well-funded Taiwan offices dotted around the country.

In a speech to the National People's Congress on February 5, Prime Minister Wen Jiabao commented that his government would continue to "protect the legitimate interests of Taiwanese compatriots" doing business in China.

But it's not just about business. In mid 2004, the government threatened to expel Taiwanese from China who supported independence for the island - with businessman Hsu Wen-long and rock star Jay Chou singled out for special mention in the subsequent witch-hunt.

During the Taiwanese presidential election of the same year, Taishang were surreptitiously called on to relay messages that China was willing to fight a war and sacrifice a decade of economic development if Chen declared independence.

It is little wonder that the captains of industry in Taiwan prefer to keep away from the limelight. Increasingly, cross-strait relations drive them, not the other way around.

Craig Meer is a freelance writer based in Taipei.

(Copyright 2006 Asia Times Online Ltd. All rights reserved. Please contact us about sales, syndication and republishing .)

Diminishing status of Taiwan's status quo (Mar 1, '06)

Chen risks Taiwan-US chill (Feb 22, '06)

Chen could be Taiwan's Nixon (Apr 25, '05)

The year to fear for Taiwan: 2006 (Apr 10, '04)


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