China Cargo Cult Blues

When the capitulationist raccoons annexation lardbombs pandas arrived at the Taipei Zoo back in December, I wrote:

Based on these previous crazes, there will undoubtedly be another craze for the pandas, simple creatures, the public will queue up in long lines for a short glimpse of the rotund bamboo chewing machines, leading commentators to write about how successful the Capitulationist Raccoons are.

But the fact is that such crazes, normal in Taiwanese life, have short half-lives, and this one will fade as it dawns even on the easily-led primate herds of Taipei that observing pandas is as unique and fun and interesting as watching granite erode. Fads are common in Taiwan, as the Taiwan Journal noted of the koala craze.....

Perhaps it is only a temporary bump in the road, but it seems China's "goodwill pandas" aren't a big hit, reports Reuters:

Zoo official Eric Tsao said Taipei zoo's panda traffic averages 1,000 people on weekdays and 5,000 to 8,000 on weekends, down from daily maximums of 14,400 to 19,200.

Initial predictions had put traffic at 30,000 to 90,000 visitors a day.

"Visitors are used to seeing flagship species from different countries," said Tsao, an associate research fellow at the zoo. "Some people don't even want to see the panda conservation center, which breaks our hearts."

May your heart always be thus broken, Mr. Tsao. The pandas are emblematic of the way the Ma Administration's China policy consists of using Taiwan's resources to help China.

Of course, the pandas also reflect the way the the cargo cult promises of the Go China crowd have faded. The LA Times, which has had some good stuff on Taiwan lately, has another good piece on the fading dream of China in Taiwan.

China's economy has slowed sharply, affecting hundreds of thousands of Taiwanese working and living on the mainland. With their factories tottering, investments shrinking and competition from locals rising, many Taiwanese are wondering whether hitching their fortunes to China is the right way to go.

Taiwan's economy shrank a record 8.4% in the fourth quarter. By some measures, the current quarter looks worse. Exports to China, Taiwan's largest trading partner, plunged by about half in January and February compared with a year earlier, far more than the overall drop of 37%. Taiwan sends many of its staple products, including computer parts and electronic devices, to the mainland for reprocessing before they're shipped to the United States and elsewhere.

As opportunities in China have dried up, a growing number of Taiwanese have come home, some of them abandoning factories and mobs of unhappy Chinese laborers and suppliers. Taiwan's unemployment rate has jumped to 5.3%, prompting the government to extend jobless benefits and issue consumer vouchers to stimulate spending.

"It's never been like this before," says Don Shapiro, a 39-year resident of Taiwan and director of publications for the American Chamber of Commerce in Taipei.

For some Taiwanese, the economic troubles have been a rallying cry in support of Taiwanese President Ma Ying-jeou's bid for a free-trade agreement with Beijing. Proponents say it would boost Taiwanese competitiveness, lower tariffs and help Taiwan forge similar agreements with Singapore and other nations.

But Ma's plan is strongly opposed by those who see the increased links as a threat to Taiwan's sovereignty. Taiwan and China split in 1949 after a long civil war. Although politically separate, Beijing considers the island part of its territory. Politics aside, Taiwanese worry that normalizing economic relations with China would bring in more goods from the mainland, threatening jobs and hurting domestic sectors such as agriculture.

Besides direct flights, Ma already has signed deals liberalizing shipping and postal links and tourism. But those moves haven't produced a windfall.

There's been no boomlet of mainland visitors, disappointing Taiwanese who had invested in hotels and other tourist businesses. Meanwhile, the number of Taiwanese traveling to China has fallen sharply since last spring. Taiwanese investment on the mainland totaled 446 projects last year through November, less than half the amount during the same period in 2007, although the dollar volume was up slightly.

The article ends with a discussion of how Taiwan businessmen are coping with the problems in China:

For some Taiwanese manufacturers, China isn't an option anymore, not since the mainland began tightening the screws on labor, environmental and safety regulations in recent years. Some producers have moved to Vietnam. Others have quietly returned home.

"In Southern China, we had control over nothing," says one manufacturer of lighting fixtures, explaining that angry Chinese vendors occupied his factory in Guangdong province and beat up his lawyer after he posted a notice that the plant was closing down. The 43-year-old businessman, who declined to be identified for fear of retribution, says he is trying to rebuild his business on the outskirts of Taipei.

"We can do it without China," he insists. "Before China, there was Taiwan."

Taiwan still has a solid base of metal-processing shops. Unlike Japan and South Korea, Taiwan isn't as dependent on lumbering conglomerates. At the heart of its economy are small businesses, which are inherently more nimble and flexible.

Some Taiwanese see a future in designing and making niche products in smaller quantities, be they high-end bicycles or cultural goods such as fine tea sets.

Charlie Hsu's company, Taoyuan-based Chenfull International Co., started out in the mid-1970s selling shoe-making equipment. He has since diversified into precision machining, engineering services and water-treatment systems. The 59-year-old expects sales to grow 10% this year from $70 million in 2008.

"They need this know-how and technology, and we need their market," he says of China.

Other Taiwanese manufacturers in China, disillusioned by what's happened, find themselves looking for Plan B.

"The golden period is over now," says J.C. Chiu, who went to the mainland in 1990 because he had trouble finding enough workers to expand his lamp business in Taipei.

At its peak a few years ago, Chiu employed more than 2,000 people at two factories in Dongguan, producing building materials and lamps for Wal-Mart Stores Inc., Home Depot Inc. and Lowe's Cos. His annual sales ballooned to $30 million.

But he lost $2 million last year, Chiu says. This year he shut down one of the two plants. His orders for 2009 are down more than 50% from a year earlier.

"If the situation keeps deteriorating," he says, "I will definitely close up [in Dongguan] and go back to Taipei."

According to government spokesmen, the number of tourists arriving from China has jumped from a few hundred to over 2,000 a day, and Taiwan's ailing airlines may be getting the welcome boost of additional routes in China.

As we saw over the Presidential campaign in 2007-8, the KMT insisted that the economy sucked (it grew 5.7% in 2007 and 6.06% through the first six months of 2008). The KMT then proposed that the only way to "save" Taiwan's "bad" economy was to move closer to China. The recent downturn has blown that claim up. The KMT has attempted to salvage its strategy of moving closer to China by arguing first for CECA (the FTA with China) and then for ECFA (the loose framework that doesn't enhance Taiwan's sovereignty), and using the downturn as a "shock" to get the public to accept --once again -- that moving toward China is the only way to save the economy. Unfortunately for the KMT heavyweights making strategy outside of public oversight, the downturn is undermining this claim: moving closer to China clearly isn't helping. Even worse, discerning individuals might notice that Ma has recently said that talks on ECFA won't get going until much later this year, meaning that any positive effect from ECFA won't get rolling for another 12 months.....

UPDATE: WSJ reports:

Taiwan's jobless rate rose to a record 5.75% in February from 5.31% in January on the economic slowdown and a drop in temporary jobs after the Lunar New Year holiday, the government said Monday.

Taiwan, which is already in recession, recorded its 10th consecutive increase in the monthly jobless rate after more businesses retrenched staff or shut down operations, and the government warned an improvement ...

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