Wednesday, March 23, 2011

ECFA side effects

Side effects of Taiwan's growing integration with China are whipsawing Taiwanese in all sorts of ways. Plenty of articles on the real estate market have noted how China's real estate bubble is infecting Taiwan -- though certainly all that demand is buoying Taiwan's exports. Commonwealth, always a good source, points out that China's growing appetite is putting strains on local prices...or is it only China?:
....In January, the Directorate General of Budget, Accounting and Statistics (DGBAS) announced a 1.11-percent rise in the Consumer Price Index, but food prices as reflected in the Cost of Living Index (Category A) rose 1.97 percent on an annualized basis and had shown increases for three consecutive months. The Marine Products Price Index shot up to 144 in January, not only its highest level ever but a hefty 12.73 increase over last year. This shows the cost of eating one fish is, on average, 12 percent more expensive now compared with January of last year.
The cross-strait seafood market displays all the issues we've been seeing with ECFA. First, the increasing involvement of big foreign financial players in Taiwan markets:
With piles of Chinese and Hong Kong consumer cash flowing into Taiwan to buy grouper, keen entrepreneurs were quick to smell an opportunity. Over the past year, Baring Private Equity Partners, Asia’s largest private investment fund controlling US$4.5 billion, has begun sinking investment dollars into the top-grade grouper produced through Taiwanese fish farming operations rather than continued investment in high-tech silicon wafer plants.


Consequently, Baring’s Asia has begun investing in Taiwanese aquaculture operations and is preparing an integrated distribution chain stretching across Hong Kong and China in a bid to reap "grouper riches." Wang reveals that Baring’s is now actively hunting for "mutually complementary" agricultural and livestock products in Taiwan and China in which to increase its investments. Dairy products, fruit and even soy sauce are all among the items under consideration. This is of course due to steadily increasing Taiwanese agricultural exports to China, not merely grouper, but also Taiwanese baked goods and leather, for all of which China is the top export destination. China is the number two export destination for other agricultural exports as well, bringing a welcome opportunity for Taiwan’s agricultural, livestock and fisheries businesses.
An important driver of ECFA were large foreign financial houses who hoped that greater integration between Taiwan and China would drive greater profits for themselves. They heavily backed the Ma Administration in the 2008 election. Of course, we all know how the people on the bottom of the production chains are making out:
"Even with grouper, currently our hottest product, the pond-side price (sold to distributors at the site of production) for a jin last year was about NT$210. This year it’s about NT$250. Exporters (to China) do offer a little extra, but it’s still only about NT$270," Tsai notes. "Compare that with the current market price in Taipei, which has gone from just over NT$200 to over NT$300. But we also have to bear the risk of winter damages in addition to the 20-percent rise in feed costs since last year, so we actually don’t really earn that much," Tsai sighs. "We’re producers, not sellers. It’s the money people that come down and invest or distributors seizing the initiative in raising prices, but that money doesn’t go into our pockets."
In other words, rising prices are not merely the result of rising Chinese consumer incomes, which must inevitably drive up food prices, but also a deliberate marketing strategy of middlemen who raise prices for consumers in China but suppress prices paid to suppliers in Taiwan.

The article goes out that China will continue to put inflationary pressure on Taiwan's food markets. With the 2012 elections a year away, voters will be experiencing China as the giant maw across the Strait that steals their incomes with one hand and pushes up their food prices with the other. That can't be good for the incumbent Ma Administration.
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Anonymous said...

That Immigration info page looks like a Mormon Jamboree!!!

Okami said...

A few problems I have with the farming example. First, almost all agriculture is controlled by the govt at the wholesale level. Second, a lot of import and export industries are controlled by one company/family with a monopoly. Third farmers aren't exactly victims, are taken care of by the govt with cheap electricity and water and aren't stupid businessmen. Farming is a business. They have chosen to diversify their holdings to insure against any one market being ruined.

China doesn't produce enough food and is going to be a net food importer for a long time. Fortunately we haven't seen anything like when a South Korean company tried to rent half of Madagascar for agriculture. Their incomes are rising and Japan's population is shrinking and wages are stagnant. Taiwan has a lot to offer in agriculture with good products high on the value chain. Unfortunately it is looked down upon as a low class job.

Stefan said...

Regarding the scam colleges - I really like this from :

Now you graduate, we would like to hear from you, about life and how the study at TVU and the degree do to your career, not just your million dollor donation!

Yep, sounds legit.

On the other hand it wouldn't be fair to say they lack English skills. The following, is beautiful and poetic:

5. What is the accreditation status of TVU?

The entire institution has submitted accreditation Candidacy status application to a prestigious accreditation agency. The accreditation agency is recognized by both the United States Department of Education, and the Council for Higher Education Accreditation. Some individual academic programs also apply for specific accreditation, such as the J. D. program is seeking provisional accreditation status with American Bar Association (ABA).

I suppose I would have just said "No".

Anonymous said...

Sorry Michael I have to call political BS on this one

Michael Turton "The cross-strait seafood market displays all the issues we've been seeing with ECFA. "

What exactly has ECFA to do with the price increases of sea food? You do know there are bans on many species from China such as shrimp and tilapia.

You would be aware of price increase in wheat of around 40% and oil that effect the costs of a feed mill.

The rising wealth of Chinese and buying power that forces fish prices up. You might even have noted the cold weather that has effected yields.

Now, can you with a straight face tell me you didn't just correlate fish prices with ECFA because it met your political bias?


Michael Turton said...


Please read the sentence following "....all the issues we've been seeing with ECFA". That might clue you into the following:

1. Involvement of large parasitical foreign financial houses who produce nothing of value while making money (by arbitraging seafood prices in this case). One thing I've constantly noted is that ECFA will benefit only large firms, foreign financial houses, and organized crime.

2. Producers in Taiwan not getting very much for their products that sell at high prices in China.

3. China pushing up Taiwan prices.....

I'm not even going to get into fish smuggling, which goes on regardless of ECFA.

I think you called bullshit on your own bizarre idea of what I have been saying.


Robert Scott Kelly said...

Mick wrote:

"What exactly has ECFA to do with the price increases of sea food?"

Mick, the entire article from Commonwealth is an explanation of that relationship.

"Even accounting for reduced production resulting from last year’s damaging winter and rising feed costs, the extent of the decrease in supply was not to a degree that would result in an inability to satisfy domestic demand. So why are prices climbing so high?

The key inside factor that few people are aware of actually lies in the continually developing consumer market across the Taiwan Strait in China."

Which is related to ECFA as the article makes clear.

I think Michael is correct that ECFA is exaggerating the problems with Taiwan's economy that we have seen over the past 10 years: too much investment in China, and GDP growth that does not result in rising wages for ordinary people. At least before we benefited from cheaper (if inferior) goods, but if a post-ECFA world means stagnant wages and a significant rise in inflation, then there is a crisis brewing.

Anonymous said...

According to Susan Xiao-Ping Su's resume she's from China. She has quite the impressive scientific resume, actually.

Michael Turton said...

Unfortunately it is looked down upon as a low class job.

Yes, this is a problem. Those are good points, but I think the issue here is retaining the surplus value that the local farmers produce in Taiwan rather than shipping it off to big corporate financial houses.