Thursday, June 21, 2007

Two Views of Taiwan's Interactions with China

There are many who wonder why both Lee Teng-hui and Chen Shui-bian have put the brakes on economic links with China, despite the business community's faith that they will lead to greater economic growth for Taiwan. People forget that for every constituency in business that wants more openness, there's another that's in opposition. Lin Cho-shui, who left the DPP during the Chen indictment fiasco and has since published a number of insightful pieces in the Taipei Times, had a good one yesterday on why so many support Chen. Lin looks at in terms of the economic changes that have overtaken Taiwan's working class since the beginning of the 1990s. After arguing that the independence issue is not the main reason for such widespread support of Chen, Lin observes:

But an even more important reason is the political effect of the "M-shaped society" brought about by globalization.

In 1992, after Lee raised the idea of making China the hinterland for Taiwan's economic development, cross-strait trade became a link in the globalized post-Cold War economy and economic growth took off. Although attempts were made to step on the brakes through the "no haste, be patient" policy in 1996, this did not have any effect. Exports to China as a proportion of total exports kept rising, and by 2004 the figure had increased to 38 percent.

The rapid expansion of cross-strait trade enabled companies such as Foxconn and Asus, which invested in China and utilized its labor market, to become global companies. Some people profited greatly from this, but as with the US and Europe, globalization also caused many people to lose out, some even losing their jobs.

With domestic demand declining and wages stagnating, real incomes declined. These trends started to emerge in 1996, but because this coincided with a decade-long boom in the US technology industry, the problems as Taiwan felt them weren't very grave at first.

But between 1992 and 2003, a number of social problems accumulated and the situation became serious.

When the government changed in 2000, the unemployment rate was already 2.99 percent, and in 2004 it had reached 4.44 percent. In the early 1990s, wages had increased by an average of around 2 percent a year, but after 1995 this dropped to 1 percent, and in 2000 pay raises stopped altogether. Taking inflation into account, the real value of wages was now decreasing.

Faced with these difficulties, the KMT has been working toward increasing cross-strait trade and opening direct links with China.

But this is not in accordance with public opinion, which has complained that, even with limits on trade with China, bosses run off to do business there, leaving behind jobless workers. Many are also afraid that the situation will become worse if direct links are established and restrictions lifted, and feel that KMT politicians do not care about the circumstances of ordinary people.

That's how Taiwanese in the lower wage brackets turned to a sort of economic nationalism, opposing trade with China.

They regarded the KMT as their enemy, and Chen, who was criticized for isolating the country, as their ally. The more hard up people were, the more Chen would be supported by the majority of those who had lost out.

It is quite strange to look upon Chen as a kind of savior who would deliver Taiwanese people from trade with China, because until 2005 he was in favor of it.

As soon as he took office, he proclaimed the "four nos and one without," opened the "three small links," amended the Act Governing Relations Between the Peoples of the Taiwan Area and the Mainland Area (兩岸人民關係條例) and, at the end of 2004, he introduced the "actively opening up" policy.

But his plans were blocked by China and were indiscriminately criticized by the KMT as isolationist, thus giving people the firm impression that Chen was against the three small links.

The most important reason Chen won the election in 2000 was that the KMT was divided, but he won in 2004 because globalization had made this society M-shaped.

Note the last three paragraphs. Since 2004 there has been a steady barrage of "Chen the provocative" and "Chen the radical" in the local and foreign media. Reality is more complex than that. How long after Hsieh takes office will the "moderate" Hsieh become the "radical" Hsieh? I'm counting the minutes......

Mean J. Michael Cole, a Taipei-based writer whom I have never run across before, had a piece on Taiwan businessmen in China that echoed themes I've heard elsewhere:

Little has been said, however, about the impact that Taiwanese companies venturing into China has had on Taiwanese security and identity. Only when one turns to personal histories — the testimonies of Taiwanese businesspeople who operate in China — can a full understanding of the ramifications be reached.

This knowledge, furthermore, can help shed some light on what further economic engagement would entail for the survival of Taiwan as a nation.

The story begins with a Taiwanese businessman who, for his protection and that of his family, shall remain unnamed. This man has been operating a manufacturing operation in China for a number of years, where he spends the majority of his time, away from his family here in Taiwan. This author had a chance recently to hear first-hand of his experiences in China, revelations that cast the China-Taiwan relationship into a whole new light.

One of this businessman's first experiences — that of the Chinese media — offers interesting insights into Beijing's relentless propagandistic attacks on Taiwan. Systematically, retired officers of the Republic of China military who, for one reason or another, have chosen to relocate to China, are upon their arrival requested to make an official "surrender" and oftentimes asked, during interviews, to list the ills of the country they left behind and state how "backward" it is, testimonies that are then broadcast across China. (It is no small irony that Taiwan nevertheless continues to pay pensions to these individuals.) Some Chinese even say, perhaps tongue in cheek, that former Chinese Nationalist Party (KMT) chairman Lien Chan (連戰), who visited China on two occasions in recent years, has "surrendered twice."

Beyond the propaganda, however, lies China's intelligence collection efforts, to which retired military officials as well as businesspeople are subjected. In fact, the unidentified source has, on a number of occasions, been asked by Chinese authorities to confirm his address in Taiwan, as well as the name of his spouse and children, among other pieces of information. It is not inconceivable that under more belligerent circumstances, this information could be used to threaten him and his family or perhaps even to compel him to act against the interests of his country.

Put differently, the above shows that Beijing's aggressive stance on Taiwan goes well beyond the modernization of its military or the deployment of nearly 1,000 missiles aimed at Taiwan. It extends into the business sector, whereby Taiwanese entrepreneurs are tapped as a means of collecting intelligence on Taiwan.

A couple of weeks ago I spoke with an investment analyst who pointed out that if the ban on links and investment is lifted, we can expect a great deal of Chinese investment in the local economy -- people tend to focus on China's role as a manufacturer, and have not paid enough attention to its growing clout as an investor. For any other country, his point would have been a good one, but China does not see Taiwan as another country, but as an asset to seized.

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