Asia Times: China and Taiwan: Interesting times, indeed


	August 16, 2001	atimes.com

China

China and Taiwan: Interesting times, indeed

SYDNEY - Taiwan's unprecedented economic slowdown comes at a time when China is moving into its most exciting decade. Intense international focus will be on China when it becomes a new member of the World Trade Organization (WTO) in coming months, and as it prepares to host the 2008 Summer Olympics. For the first time in over five years, how Taiwan manages its affairs and relations with Beijing will have a crucial bearing on its future.

Equally, it will be a crucial decade for China, said Vincent Siew, Taiwan's former premier for the KMT government and now chairman of the non-government Cross-Straits Common Market Foundation. When the term of current leader President Jiang Zemin ends in 2002, China will have to contend with a change in leadership, and joining the WTO and preparing for the Olympics will accelerate reforms as China comes under the glare of foreign scrutiny, he said.

Siew earlier said that "when Jiang Zemin became leader, the situation was uncertain, but it has turned out to be a good transfer of power. It is hard to know whether his successor will have the ability to handle all the issues that confront China." Much will depend on how well Beijing is able to re-distribute and balance growth and development under its current five-year economic plan. A lot will also depend on its "Go-West" strategy to spread economic growth and prosperity to the poor interior of the country. "If new leaders fail, then potentially there could be big problems," said Siew.

The Olympics will force China to open up more speedily to the outside world and the trouble with rapid opening is that there will be a strong and hard impact on domestic stability. But if things move in the right direction, he said, China will modernize and be connected and integrated to the world system. If it goes in the wrong direction, it could create social disorder and that will affect political stability.

Siew said that if China is successful in making the transition, it will overshadow Taiwan. But if Taipei can develop good relationships with the mainland, it will complement China's success in opening up. "Then Taiwan will benefit. But if Taiwan's relationship with the mainland deteriorates, then certainly, it will be overshadowed by China." If that happens, it will place Taiwan in a very difficult position, said Siew.

Some commentators say that Beijing will tone down its belligerence towards Taiwan in the lead-up to the 2008 Olympics. While he concedes this is possible, Siew adds that China will not abandon its established policy on Taiwan, that it is a domestic issue. "Taiwan will have to be careful not to provoke China, otherwise China will say that it is a domestic issue and that it [China] will not be influenced by outside [parties]."

Although Taiwan President Chen Shui-bian has continued to reach out to China, with, for example, implementation of the three-small-links policy late last year (allowing some direct contact with the mainland), Beijing has kept its distance from the new leader. Siew said the policy is not working as well as it should because the Chinese response has not been "positive". Beijing has, so far, refused to acknowledge Chen's presidency, while continuing to invite and meet with officials and ministers from his government. Beijing's refusal to deal with Chen has meant continuing stalemate with no prospect of renewed cross-Strait dialogue. Siew believes Beijing has adopted a "wait and see" attitude, pending the results of Taiwan's general election in December. The results will manifest Taiwanese support for Chen or otherwise, and he expects Beijing will decide accordingly on how to deal with the Taiwanese president.

Chen's administration is under tremendous pressure, with rapidly sagging economic growth. Taiwan will reach an unprecedented level of slow growth this year, partly aggravated by a collapse of confidence in Taiwan, but mainly because of the troubled world economy, especially the uncertain US economy, and in particular, the hard-it information technology sector. Chen has formed a bipartisan Economic Advisory Committee to deal with Taiwan's economic problems and is hoping to restore public confidence. He is reaching out to opposition parties and independents for solutions to pull Taiwan out of its present economic malaise. Siew has been invited to be deputy chairman of the committee, chaired by the president himself. The Economic Advisory Committee will look at five main issues: Taiwan's international competitiveness; unemployment and labor issues; the reform of Taiwan's financial services sector; the investment climate; and cross-Strait trade and relations.

It is natural to assume that post-WTO entry, Taiwan will eventually have to allow direct trade with China, said Siew, who believes passionately in closer economic integration with the mainland, leading to the formation of a Cross-Strait Common Market in the European Union model.

Local maunfacturers, however, remain cautious. A survey released on Tuesday shows that following Taiwan's entry into the WTO, 73.85 percent of those polled will not change their domestic investment plans, 16.56 percent will reduce the amount of their investments, and 9.59 percent will increase them. Domestic investment willingness has been low since Taiwan's economy began taking a downturn during the fourth quarter. The Statistics Department of the Ministry of Economic Affairs survey shows that only 25.01 percent of local manufacturers polled plan to increase their investments from the levels of the previous year, while 31.91 percent plan to make less investments this year.

The survey revealed that 61.41 percent of the respondents said that the government's decision on cross-Strait direct links will have no effect on their domestic investment plans in terms of investment value, 15.35 percent said they will reduce the amount of their domestic investments, and 23.24 percent said they will boost the amount of their domestic investments.

There have been reports that the Executive Yuan will move to ease the current mainland China investment policy, although Council of Economic Planning and Development (CEPD) chairman Chen Po-chih has dismissed the reports by clarifying that the government will "rationally" relax relevant rules on future mainland-bound investment by Taiwan firms. while seeking to prevent a side effect of "capital hollow-out".

(Asia Times Online/Asia Pulse)

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