The pact, which took two years to negotiate, offers investors from the two sides formal channels for dispute arbitration, while falling short of a Taiwanese demand that arbitration take place under international oversight. It is the 17th economic agreement between the sides since China-friendly President Ma Ying-jeou took office in Taipei in May 2008.No kidding.... not just the 2012 growth rate, but the economy hasn't gotten much help at all from China, certainly not like the golden days of CSB's latter years. With his usual mediocre luck, Ma seems to have both missed the best years of the China boom while getting hit by the Euro-American slump. Thus Taiwan's trade with China, Europe, and the US is all falling year on year, while with ASEAN Taiwan runs a trade surplus and trade volume is rising. Remember when Ma claimed we had to have ECFA in order to save our economy? We have ECFA, and growth is running 3-5% below what it was in the latter years of the CSB administration. This investment pact is years too late.
....But with this year's growth rate predicted to come in at less than 2 percent, broader tariff cutting and other trade promotion measures appear to have fallen short of Ma's promise that closer China ties would energize the Taiwan economy. The trade-reliant island is suffering from sagging demand for its trademark high-tech exports.
Chinese investment in Taiwan amounts to only about $300 million, far short of the more than $120 billion Taiwanese have invested in the mainland over the past 30 years. While the new pact could spur more Chinese investment in Taiwan, some restrictions aimed at preventing China's economic domination of the island remain in place.
Taiwan's opposition claims the new pact, like many of its predecessors, is helping to clear the way for increased Chinese economic influence on Taiwan, and setting the stage for an eventual Chinese political takeover of the island. That has been the ultimate goal of Beijing's Taiwan policy since the two sides split amid civil war in 1949.
But opponents point to Taiwan's continuing poor economic performance — its predicted 2012 GDP growth rate would make it one of Asia's most conspicuous economic laggards — as proof that Ma's highly vaunted China connection has failed to deliver the goods, and say the island needs greater balance in its trade ties.
Another issue the paper raises is investment from China to Taiwan. It's easy to look at that only in the context of China-Taiwan relations and blame, as the AP report does, investment restrictions. But I pointed out a couple of years ago when ECFA was still being "debated" that restricting FDI in its trade partners is a longterm policy of Beijing's:
The trade and foreign direct investment (FDI) figures are not encouraging either. Since 2004, tariffs between the two sides have been coming down, and Asean's trade deficit with China has widened. From 2000 to 2008, China-Asean trade grew sixfold to US$198 billion (S$280 billion). But Asean's trade deficit also widened five times to US$21.6 billion. Asean's cumulative FDI in China was US$52 billion in 2008. By comparison, China's FDI in Asean was just US$2.8 billion.Total Chinese FDI in ASEAN is now over $10 billion. The FDI situation is complex because "Chinese" FDI can be many things:
China’s share may be higher than official home and host country data show as the example of Vietnam illustrates. As large amounts of Vietnamese FDI inflows originate from Hong Kong and the British Virgin Islands, Frost (2005) suspects significant further amounts of Chinese capital to be routed to Vietnam via these and other offshore financial centres. On the other hand, there are also reasons to assume that China’s share is overestimated in some host countries. During the field research in Cambodia and Vietnam we found that a number of companies that were identified and registered as mainland Chinese were in fact owned by a parent company from Hong Kong, Macao, or Taiwan. In some cases, these parent companies were established in mainland China and later moved to Hong Kong for reasons like taxes, logistics, or proximity to clients. In other cases, however, companies originated from Hong Kong or Taiwan and were incorrectly registered as mainland Chinese.Recall also that in the glory days of the early 2000s when massive foreign investment in China was being touted, much of that "foreign" investment was Chinese money recycled through global offshore financial centers and reinvested as "foreign" investment in order take advantage of FDI investment benefits.
What about Korea? Well...(Asiaone):
South Korean statistics showed China's investment in its neighbor was US$3 billion last year, and was mainly in the tourism and entertainment industries. South Korean investment in China reached US$36 billion (S$45 billion) in 2011.China has invested a lot more in South Korea, yet the same lopsided investment pattern shows up -- S Korea invests twelve times more in China than China does in South Korea. (Actually, if anything could motivate Taiwan to sell itself to China via FDI, it's the knowledge that China sends more FDI to Korea....ZOIKS! The Koreans are kicking our ass!)
So, looking at the overall Chinese investment situation in Taiwan and China's investments in other nearby small economies, it is hardly surprising investment in Taiwan is so low. After all, it's not like we have a booming economy here, with growth probably going to come in under 1% this year and inflation on the march, and it's not like China sends large allotments of funds overseas to nearby economies.
Two other points need to made. First, FDI in Taiwan must satisfy Beijing's political goals. This places an additional constraint on such FDI. Second, FDI in Taiwan, which ostensibly helps Taiwan's economy, actually conflicts with Beijing's longterm goal of hollowing out the island's economy and stealing its technology. Given the current economic growth in China and the cross-strait political situation, why should China want to invest in Taiwan unless furthers its political and technological goals?
This discussion of Chinese investment also hits on another issue: the housing boom here. Everyone talks about China's ghost cities and massive real estate boom. We're having an under-the-radar boom here in Taiwan -- it doesn't get any play in the global media, but here in Taichung building after building, estate after estate, new hotels, all going up in the best cargo cult style. Yet something like 40% of residences in Taichung are unoccupied and will probably never find buyers/renters. Think Chinese money will step in to prop up this bubble? LOL.
Finally, ETRC points out the obvious: Eighteen agreements in four years, what's next? What's next is obvious: the (open) political talks.
- Chinese "activists" land on Senkakus, provoke Japan. China says it will send warships to protect future expansionist "activists." What's the next step in this minuet? Washington sending a quiet warning to Beijing that it still recognizes and will act on the US-Japan security treaty?
- Tsai cleared up Yu Chang allegations. Remember that smear, just in time for the election?
- Excellent observations on the Hong Kongization of Taiwan
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