KMT Administration set to ease restrictions on hi-tech investment in PRC

AFP has the call on this one:

The long-standing controls on investment in China are now under government review and could be relaxed before the end of 2009, Shih Yen-hsiang told parliament.

"The discussions will not take a long time. We expect there will be a conclusion before year's end," he said in response to a question from a lawmaker.

The lifting of restrictions referred to by Shih would apply to high-tech industries in particular, said Huang Hsien-lin, an economics ministry official.

The Commercial Times earlier on Tuesday reported plans by the ministry to allow Chinese investors to buy stakes in Taiwanese flat panel and microchip makers.

....

Local businesses are among the biggest foreign players on the mainland, with at least 80 billion dollars invested, but Taipei has imposed limits on high-tech firms fearing it could give China a technological advantage.

President Ma said in June his administration had been considering allowing Taiwan's semiconductor companies to set up plants on the mainland, introducing state-of-the-art technology.

The proposal was welcomed by local microchip makers, who have been pushing for a relaxation of controls under which they are permitted to invest only in mainland plants producing low-end, eight-inch microchips.

The article I've linked to below gives more information on one of the major hidden issues: State ownership of industry in China, and more importantly, a State strategy to retain and expand state control of industry and industrialization. Before readers wonder how successful this can be, the article points out that State-controlled firms are competitive with private enterprises. O brave new world....

We have already seen this state-business nexus in other forms, in Korean chaebol and Japanese kereitsu, and of course, the numerous Party-State businesses in Taiwan. I would argue that these are not positions on a spectrum but evolutionary variants that appear(ed) in different political-economic contexts. The CCP will not permit the Development State to be outcompeted by the private sector, when it can simply swallow any competition, or swamp it. State control of key industry is a hallmark of Confucian thinking on how the economy works (anyone remember that classic, Discourses on Salt and Iron?). Moreover, as the article below points out, this Development State functions to keep foreign firms in subordinate positions. And as everyone knows, China covets foreign technology.

The Ma Administration's position is that this state-run juggernaut really ought to be permitted to invest in Taiwan's technology firms, both in its telecom sector, and in its crown jewels. Perhaps such investment might be welcomed, if it could be shown that the there would be significant transfer of technology, capital, and management expertise from China to Taiwan, as has been the case in the past with US and Japanese investment in Taiwan. But quite obviously the flow is going to be in the other direction. And quite obviously, China wants to hollow out our industrial base, since it is the foundation of Taiwanese freedom.

The AFP report mentions Korea and Japan. It is not difficult to see what has happened to Korea even with its more limited investment, as this report from 2006 is already saying:

"A recent KOTRA survey of South Korean firms operating in China showed that half
believe they have lost their comparative advantage in technology."

One constantly hears from "centrist" KMT apologists that "other nations are investing in China" and "the KMT has a plan." I'm curious to understand how, if China is negatively impacting Korea's large and powerful technology sector, how sending even more of our hi-tech industry to China will enable Taiwan to raise incomes and productivity so living standards can rise further. If sending our industry to China will make us wealthier, let's send all our industry to China -- then we'll grow 15% a year! That's the KMT "plan" that I am always hearing about -- if Taiwan permits its hi-tech firms to move to China, the island's economy will expand.

Sure.

I'm going outside to build my runway now, waiting for those Chinese planes to land and discharge plenty of cargo.
_________
Daily Links
As mentioned above, Mucha Man over at Forumosa.com pointed me to this excellent paper that argues that:

Contrary to many other analysts, we do not view the dominant role of the state in China's industry (and, more generally, in China's economy) as a possibly necessary - albeit wasteful - evil, which will be superseded once the transition from a centrally-planned to a fully capitalist modern economy will be completed. We rather see it as a primitive, embryonic, ever-evolving but permanent form of strategic planning aimed at fostering industrial development, and as a key distinctive, structural, and pioneering characteristic of market socialism.

Will economic growth bring democracy in China? When the State owns all important industrial concerns one way or another? People have grown so used to Taiwan's freewheeling freemarket ways that they have forgotten that the KMT attempted to do much the same thing in Taiwan. In many ways, with the intimate connections between the Party-State and business, it did. Remember when cable TV was illegal and the bus companies were state-owned and private bus firms illegal? The Establishment Carnegie Endowment for Int'l Peace points out that Chinese savings are part of this strategy (also a feature of Taiwan's Miracle days). Kadeer plans to sue Taiwan's gov't. High court continues Chen's detention. BBC rings up another one: telling how Taiwan feels about 60th anniversary of PRC entirely from KMT POV. No mention that some people here might not have any connection to that.
_______________________
[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!