Monday, February 29, 2016

Monday Links

Rice is life.

Enjoy some links....
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Kingdom of Women

Reuters: China's women struggle for power
One fifth of Chinese NPC parliamentarians are female, higher than the 17 percent of the U.S. Congress who are women. But China's parliament comes under the firm thumb of the Communist Party, where real power lies.

All nine members of the Party's top ruling body, the Politburo Standing Committee, who marked the 100th anniversary of International Women's Day on Sunday, are men.
At Ketagalan media: Gwen Wang on Taiwan's legislature:
On gender balance, the percentage of women in the Legislature has increased to 38 per cent (43 seats), from 34 per cent (38 seats) in the previous Legislature. The outcome of the legislative race is described by Dr. Nathan Batto as “a victory for diversity”, with Taiwan now ranking 10th in the world in the proportion of women in its national legislature. The steady increase in Taiwanese women’s representation in the parliament shows that women are gradually gaining power in Taiwan’s political institutions.
Me, a couple of weeks ago...
The KMT Chairmanship struggle is still a two woman race between Hung Hsiu-chu, the reactionary mainlander former presidential candidate, and Huang Min-hui, a Taiwanese faction politician from a family with long service to the KMT. Remarkable to think that if Chen Chu succeeds Tsai Ing-wen to the Chairmanship of the DPP, the president and heads of both major political parties will be female come May. This demonstrates not merely female power but continuity of female power, since the previous party heads will have both been female.
From Emma Jinhua Teng, An Island of Women: The discourse of gender in Qing travel writing about Taiwan, 2010.
Seventeeth- and eighteenth-century Chinese travellers to the island colony of Taiwan almost invariably remarked that indigenous custom gave precedence to the female sex. 'The savages value woman and undervalue man' became a commonplace of Qing ethnographic writing about the indigenous peoples of the island, known as fan (savages) to the Chinese. As an inversion of the Confucian patriarchal maxim 'value man and undervalue woman', this pithy expression indexed the alterity of Taiwan to the Chinese who colonized the island in 1683. Encountering a land with female tribal heads, uxorilocal-residence marriage, and matrilineal inheritance, Chinese travellers perhaps thought that they had stumbled upon the mythical Kingdom of Women -- the Chinese equivalent of Amazon. As in the Kingdom of Women, it seemed, here women took the lead, and men followed. The anomalous gender roles of the indigenous peoples thus became one of the most popular topics in Qing travel writing about Taiwan...
But people say that the influence of Taiwan aborigines on the local Han is insignificant.

ADDED: And of course, pre-1945 Taiwan was 25% Hakka, with different attitudes toward the role and status of women then the Hoklo.
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Sunday, February 28, 2016

Doing Duona

Drew is ready to go

Great weather, so Drew and I grabbed the chance to drive down to Pingtung and do the gorgeous road from Gaoshu up to the aboriginal village of Duona, the Pingtung 132. Click on READ MORE to see more...

"Is NCCU under martial law?"

The "jiao guan" -- a military official on every campus responsible for discipline, and in the old days, were Political officers charged with the task of making sure the students were politically reliable. The students at NCCU are putting up fliers about 2-28, which they apparently did not need, they say, to put up, when the jiao guan (woman in pink) comes to challenge them [UPDATE: commenter below notes she's the head of their jiao guans]. She rips down their fliers. When she is asked who she is, she says "never mind that, who are you?" The young man answers who he is, and she says she knows his name. She refuses to say whether she was representing the university despite being repeatedly asked, although news reports said she was acting on her own authority. Finally a student asks "Is NCCU under martial law?"

I have often said that the university system is where the old authoritarian system remains most strongly. These people need to go. Now.

You can see how much the young people have changed.
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Friday, February 26, 2016

A Friday Threesome

Looking forward to summer and an end to this crappy weather...

MEDIA: Reuters writes of China' Taiwan Affairs Office head speaking in Washington DC....
Chinese Foreign Minister Wang Yi, a former head of China's Taiwan Affairs Office, said Tsai's election was a normal political process that did not come as too big a surprise."We do not care that much who is in power in the Taiwan region of China," Wang said at the Center for Strategic and International Studies in Washington on Thursday, without directly using Tsai's name. His comments were carried on the center's website.

"What we care about is, once someone has come into power, how he or she handles the cross-strait relationship, whether he or she will maintain the peaceful development of cross-strait relations, whether he or she will recommit to the political foundation of cross-strait relations, the one China principle," he said.

Wang said he hoped that, before Tsai assumes power in May, she would indicate that she wants to pursue the peaceful development of ties and accept the provision in Taiwan's own constitution that the mainland and Taiwan belong to one China.
Ha! We don't care who is in power in Taiwan -- now there's a slap at the KMT. But of course it's nonsense -- they are quite concerned about the DPP.

The laziness of international media "reporting" is on display here. Reuters simply acts as Wang's stenographer. None of his claims is nuanced, questioned, or even explored. Does the ROC Constitution (not "Taiwan constitution") clearly state that Taiwan is part of the ROC and China? Surely Reuters -- surely reporters, and not stenographers -- might have raised the issue (imagine, by contrast, if Wang had said something about the Spratlys -- Reuters might have included some reference to claims by other nations). But Reuters is too spineless to even do that.

Why O why can't we have a better media?

FocusTaiwan news quoted a DPP legislator who observed that if Wang thinks Taiwan has a Constitution, he is recognizing it is a country. LOL! Note also the desperate try of the KMT news organ to find a claim to Taiwan in the Constitution.

TOURISM: Some news went around in the outside world claiming that China had reduced tourists to Taiwan....
Since the opposition's victory, mainland Chinese authorities have placed quotas on outbound tourists. Before the new rules, an average of 8,000 Chinese tourists visited Taiwan daily, but that number is now down by 40 percent, to about 5,000, Taiwan media reported.

An estimated 80 percent of tour packages on offer in the mainland have been suspended, and popular tourist attractions have seen a significant reduction in visitors, posing a major setback for Taiwan's travel industry that has enjoyed a boom since free travel was permitted in 2012.
...has it? Depends who you ask. The article appeared to be based on reporting originally in the pro-KMT China Times which filtered through the pro-DPP Liberty Times, with the numbers as above. But a Chinese spokesman in Xinhua attributed the drop -- note that he admits there's a drop -- to "the market".

The KMT news organization said that the Tourism Bureau had indeed found a drop in Chinese tourists...
Chiu Lo-feng, chairwoman of the International Tourist Hotels Association of Taipei (臺北市觀光旅館商業同業公會), stated that the number of Mainland tourists staying in Taipei hotels would decline by 10% in March, and the total number of Mainland tourists would decline by 20% to 25%. Chiu pointed out that even the number of individual Mainland tourists visiting Taiwan would decline.

According to an investigation conducted by the Tourism Bureau, the Mainland would reduce the number of Mainland tour groups visiting Taiwan per day by one-third to two-thirds, namely, 1,600 to 3,300 tourists per day, impacting airlines, hotels, restaurants, shops, and tour buses.

Alex Lu (魯孝亞), chairman of the Taipei Tour Bus Association, stated that judging from the reservations for tour buses in February, it was expected that at least 600 tour buses would be left idle, and the situation in April and May was not likely to improve. Lu went on to say that there were 16,000 tour buses in Taiwan, 4,000 of which were used to transport Mainland tourists around the island.
Up to you, dear reader, to decide whether China is being coy about cutting tourists or whether it is the natural result of market forces (Chinese tourists booming elsewhere, I saw zillions in Dubai).

DOWN WITH SUN YAT-SEN PORTRAITS!: Portraits of Sun Yat-sen, the ROC's "founding father", brood over public buildings across the nation. DPP legislators want to put a stop to this. J Michael Cole describes....
The proposal, initiated by DPP Legislator Gao Jyh-peng (高志鵬), wants the requirement that Sun’s portraits be installed in every public building be dropped and for Sun to no longer be referred to as the nation’s “founding father.”


Despite the validity of Gao’s proposal (and similar ones were made before), the timing isn’t ideal. Much more pressing matters that will directly affect the wellbeing of the people in Taiwan ought to be addressed in the new legislature. Whether Sun continues to stare down at government officials or remains the object of Nazi-style salutes isn’t one of those. Moreover, by making it this so soon after the DPP victory in the January elections, the proposal smacks of triumphalism. Not only does this go against what president-elect Tsai Ing-wen (蔡英文) has sought to prioritize, it empowers the more radical elements within the KMT who will seize every opportunity to attack the DPP, while weakening the more moderate voices in the party.
Actually, the argument at the bottom was going around the net today, with many people noting publicly and privately that this was the goal of the move: to energize the Bitter Enders in the KMT so that they all go out to vote for reactionary Chair candidate Hung Hsiu-chu instead of her rival Huang Min-hui, a Taiwanese faction politician from Chiayi, in the KMT Chairmanship election next month. Aware of this, both Hung and Huang blasted the proposal. Whether or not that was the real goal of the factions pushing this move, it is likely to have that effect, which means that it is a very good thing.

Why? In a few months as presidential candidate, Hung had the Taiwanese wing of the KMT leaving in droves. Imagine the effect she could have as the Chairman until the end of next summer. Gao is making the right move, politically. Getting rid of the symbols of authoritarian power and personality cults is a good thing for democracy in Taiwan, but just as important is detaching the Taiwanese compradore politicians from the KMT.

Now if we could work on that eyesore memorial in central Taipei...
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Tuesday, February 23, 2016

Succession Crisis among the firms

An old mantou place in Chenggong on the east coast.

Not a secession crisis, as is usually the case in Taiwan, but a succession crisis as the founders of Taiwan's family owned firms age. The latest case is the Evergreen group (Taipei Times):
The dramatic shift came two months after Evergreen Group founder Chang Yung-fa (張榮發) died on Jan. 20 and left a December 2014 will that named his youngest son, Chang Kuo-wei, (張國煒), chairman of Eva Airways (長榮航空) and the only son of his second wife, as his successor and the sole inheritor of his estate worth billions of New Taiwan dollars.

Chang Yung-fa’s eldest son, Chang Kuo-hua (張國華), led his two brothers by his father’s first wife in moving to dissolve the group’s top management team during an extraordinary board meeting, effectively stripping Chang Kuo-wei of the chairmanship, local media said, without naming sources.
Economist chart from 2011

In an editorial, the Taipei Times observed more generally:
The court battle over the inheritance of late Formosa Plastics Group chairman Wang Yung-ching (王永慶) is still unresolved and the fight among four brothers over the division of Mayfull Group resulted in the shooting deaths of three of the brothers. The fight over Evergreen once again makes it clear that the operation of family businesses has become the biggest problem of domestic business groups and is turning into a nightmare in terms of the sustainable operation of publicly traded companies.

Three-quarters of publicly traded Taiwanese companies are controlled by families and 10 families control one-quarter of the value of the TAIEX. The death of a company’s founder can jeopardize the existence of that company: Only one-third of family businesses survive the second generation of family operations, and a mere one-10th survive the third generation. Businesses owned and run by ethnic Chinese families remain in the hands of the family even when they are publicly traded. Infighting among heirs is one of the main reasons for fluctuation in these companies’ market value.
BBC was among the many media reporting on this over the years, this one from 2014....
But some analysts estimate that just one-third of these family-run firms - which account for up to 90% of the island's businesses - have a succession plan.

Further still, Yeh Yin-hua, a professor at National Chiao Tung University's Institute of Finance, says that some 60% of Taiwan's publicly listed companies are still being managed by their original and ageing founders.

About 20% are being run by second or third-generation family members, Prof Yeh says, with a remaining 20% having hired leaders from outside their founding families.
The BBC article observes that many of these founders are workaholics, instancing Terry Gou, the head of Foxconn, who works 16 hours a day and micromanages every detail, from prices to expenditures in excess of $100,000. It is difficult to make such individuals give up.

Although big firms get the most publicity, this is a problem throughout Taiwanese industry at all levels, part of the still more fundamental problem of getting smaller and family run Taiwanese firms, where granddad still runs everything by the seat of the pants, to adopt modern methods of management and operation (one reason so many firms moved to China was to continue to do avoid such upgrades). Things just become more critical when the business is a global multinational rather than a tool and die maker in Taiping.
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Sun Moon Lake
Simon, who was also the Gauleiter of the neighbouring Gau Trier-Koblenz, later Moselland (Gauleiter being a title denoting the leader of a regional branch of the Nazi party), led a propaganda and later terror campaign, known as Heim ins Reich, to convince the population that they were ethnic Germans and a natural part of the Third Reich. His objective was "to win Luxembourg back over to the German nation as soon as possible."[2] He was convinced that Luxembourgers only needed a level of education and enlightenment in order to voluntarily declare their loyalty to Germany.[2] He deduced this from his belief that they were, in fact, German "by blood and by descent".[2] To the Gauleiter, Luxembourgish independence was an "absurd idea," which existed only because the monarchy and government had nurtured it: if the Luxembourgers were shown evidence of their belonging to the German nation, the will to be independent must disappear.

...In October 1941, the German occupiers took a survey of Luxembourgish civilians who were asked to state their nationality, their mother tongue and their racial group, but contrary to German expectations, 95% answered "Luxembourgish" to each question.[7] The refusal to declare themselves as German citizens led to mass arrests.[2]
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Sunday, February 21, 2016

PRC Rep in Houston hurts the feelings of 300 million Americans

The PRC rep office in Houston sent around these letters written in substandard English to a State Representative from Mississippi, Hank Zruber, who posted them to his Facebook site. Zruber wrote:
UMM! Chinese Govt asking me to stop supporting democratic Taiwan. Context: Annually, I make the time/go out of my way to coauthor supporting resolutions and meet the visiting Taiwanese Delegation! Why: I hold dear that every man has the God given right to live under the freedoms of religion/speech regardless of national origin, etc. Conflict is not intended nor desired. But, we should engage China to ensure these freedoms for the Taiwanese and one day for the Chinese people! I defer to our State Department but they have notice of our commitment to freedom in MS!
Apparently the second richest country in the world can't afford English editing services.
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Saturday, February 20, 2016

Meandering through the Party and Legislative Politicking

A friend near Baling. 

So much to catch up on! The KMT Chairmanship struggle is still a two woman race between Hung Hsiu-chu, the reactionary mainlander former presidential candidate, and Huang Min-hui, a Taiwanese faction politician from a family with long service to the KMT. Remarkable to think that if Chen Chu succeeds Tsai Ing-wen to the Chairmanship of the DPP, the president and heads of both major political parties will be female come May. This demonstrates not merely female power but continuity of female power, since the previous party heads will have both been female.

Interestingly, few of these powerful females are married. There are basically only two ways to become a powerful woman in Taiwan: as a wife delegated by a male when he is unable to carry out the duty (a favorite route of gangsters who run their wives for office while in prison) or as a public virgin. This situation was highlighted this week when TV personality Clara Chou criticized incoming NPP legislator Hung Tz-yung (my district!) for dating someone, saying she should be focusing on learning her job. Chou was probably just jealous, since Hung is 1000X more attractive than her, an authentic Taiwanese woman like so many I have known: beautiful, kind, warm, polite, well spoken, and made of steel.*

Hung's alleged sally into the world of romance also highlights another aspect of legislative power in Taiwan: she was said to be dating a reporter (who is now head of the Taichung City media organ, Donovan tells me). Many politicians have married reporters and TV anchors.

Meanwhile back in the KMT Hung Hsiu-chu and Huang Min-hui both courted the Huang Fuhsing, the Old Soldiers, this week. These Deep Blue seniors are crucial to winning the election, and they love Hung Hsiu-chu. Smart politician Jason Hu, the former Taichung mayor and briefly a potential candidate for party chair, said he was supporting Hung, an important indication that he thinks she will win. Hu no doubt has his eye on the long term and is courting the Old Guard, since next August there will be another KMT Chairmanship election at which point whoever wins in March will likely step down.

The courting of the Old Soldiers is a reminder, as a longtime observer put it on Twitter, that the KMT "cannot, will not, must not learn from their mistakes". They will likely ensure that no real change will occur. Note that neither Hung nor Huang is a "reform" candidate by any means. The KMT's downward spiral will continue, to the benefit of Taiwan and its democracy.

Speaking of not getting it, the legislature swung into action, with a flurry of draft bills being put forward and the KMT blocking the party assets law...
More than 100 draft acts sailed through their first readings and were referred to legislative committees for review and deliberation during the morning meeting, including draft bills on governing political parties; amendments to the Referendum Act (公民投票法) and the Disaster Prevention and Protection Act (災害防救法); setting up reciprocal offices with China; and the much-discussed legislation on the presidential transition of power.

What did not get through were four bills aiming to deal with ill-gotten party assets proposed by DPP lawmakers, which the KMT caucus opposed and were sent back to the Procedure Committee.

KMT caucus whip Lin Te-fu (林德福) said the regulation of political parties’ assets could be included in the proposed political party act, adding that the KMT opposed the DPP’s bills because they are “apparently targeting [the KMT].”

DPP Legislator Su Chih-fen (蘇治芬) blasted the KMT’s move on Facebook, saying the KMT “still does not understand why it has been spurned by the public even after its 2014 and 2016 electoral routs.”
Recall that the Referendum Act is set up deliberately to make it impossible for public referendums to pass. Hopefully that will change. The Parade and Assembly Laws, deployed against protesters repeatedly over the years, are a holdover from the authoritarian days. Su Chih-fen, readers will recall, was one of the DPP politicians who was prosecuted in the opening days of the Ma Administration in 2008 when it went after the DPP (see this old post). She was of course found innocent. The KMT held a public meeting on the asset issue, with Huang adopting a cautiously conservative position (Hung was not present).

Gwen Wang, always excellent, set forth the great changes in this new legislature. Among the many changes she identified was the rise of the New Power Party (NPP)...
To continue their momentum, its five legislators will have to show the voters that they are not merely junior partners to the DPP, but a real “third force” in the political spectrum different from the KMT and the DPP. During the 2016 elections campaign, DPP presidential candidate Tsai Ing-wen lent her support to the NPP with herself and several DPP heavyweights, including the Tainan and Kaohsiung Mayors, attending many rallies held for NPP candidates. The close collaboration between the NPP and the DPP will be the “baggage” that the legislators will have to get rid of first, should they want to be a real alternative to the traditional blue and green camp rivals. As Dr. Hsu Szu-chien (徐斯儉) of Academia Sinica commented, the NPP has to walk its own path because society is looking expectantly towards the NPP, to see whether they can be a real watchdog in the parliament.
...I should add that the Taichung mayor backed our NPP candidates and attended their rallies as well. The NPP came out this week with proposals for a parliamentary system. At present, with the KMT not yet eliminated, this is probably a bad idea -- indeed, it is something the KMT has called for as a tactic to weaken and cage a DPP presidency.

But to the extent that the NPP plays watchdog, it will set itself against the DPP. More importantly, the NPP has to differentiate itself because we need a viable alternative to replace the KMT as the second largest party.

The danger here, as I see it, is that the Legislature is inherently in opposition to the Presidency in Taiwan, and that dynamic could well continue under the Tsai Administration. Wisely, the Speaker is Su Chia-chuan, who is close to Tsai and was her running mate in 2012.

*Yes, I am crushing hard
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Thursday, February 18, 2016

Social media moments as news: "Taiwan Mothers Alliance" protests Sunflower history in history textbooks

The transcript is given on Youtube:
The start of the new academic semester has led to the latest textbook controversy. Parents are upset that new freshman high school civics textbooks include passages about the student-led Sunflower Movement of 2014. Parents argue that illegal activities shouldn’t become part of the curriculum, though civics teachers say the movement is now part of history, and shouldn’t be regarded as controversial. Opening Hanlin Book Publisher’s high school freshman civic textbook, one can read a passage about the student Sunflower Movement. This text has angered the Taiwan Mothers’ Alliance who took to Facebook to protest. The group questions how an act of civil disobedience could become teaching material. However, some civics teachers simply don’t agree. Huang Yi-chung Civics Teacher I think these mothers are making too much of a fuss. The student Sunflower Movement took place in 2014 and was a major protest movement which took place in Taiwan. It’s only natural to discuss major social movements in civics classes. Huang says that civics textbooks need to include current events and the more recent the better. However, students are divided over the issue.High School StudentI think this is actually good subject material because it''s a current event. If the Wild Lily Movement and 228 became part of our curriculum, then why can’t this subject?High School StudentI don’t think it’s suitable because this subject is quite controversial.Of six domestic publishers of civics textbooks, so far only Hanlin and Lungteng have included the student Sunflower Movement in such textbooks.
It's cool that two publishers included the Sunflower movement, crucial to understanding the victories of Tsai Ing-wen and the DPP in 2014 and 2016.

The complaint is on Facebook here. It calls the Sunflowers an "illegal violent protest" although the violence was all police inflicted (oh, and some was offered by gangsters as well, but I guess mothers don't mind gangsters). The group posted again on it here, defending its position against the overwhelming abuse of netizens and complaining that their private information had been made public on the net (which sucks). Apple Daily report.

Many changes occurring as a result of the DPP victories as everyone bends with the new wind. We can expect to see more things like this in textbooks -- they were a huge influence under the Chen Administration as well. Under the Ma Administration, the rise of social media and the intensive use of the traditional PTTs helped expand Taiwan consciousness among the young and counteract Ma's pro-China propaganda offensives, as well as coordinate social movements. Mark Harrison, longtime scholar, has a great piece on the effect of social media, both on the election, and the international media.
From the early 2010s in Taiwan, student activists began deploying these communications tools to create new political practices. They undertook a series of protest movements against the Ma government over media ownership, urban development and cross-Straits relations that culminated in the Sunflower Movement of 2014, when several hundred university students occupied the legislative assembly over democratic oversight of the Cross-Straits Trade in Services Agreement. From inside the legislative chamber, they used social media with such sophistication that they were able to circumvent Taiwan’s traditional news media and create an alternative public sphere across Taiwan and globally.
People who deride Taiwanese for putting food pictures on Facebook are forgetting that Facebook is not where the young go to engage in political talk: that's the function of PTTs.
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I took this massive panorama (original) during my favorite moment in Dubai: a trip to the Pakistani cricket pitch. On one side are skyscrapers of Dubai, on the other, working class homes.

A few months ago, my friend Michael Cannon gets in touch with me. "I'm going to Dubai in February, want to come and join me for some workshops at Gulf Photo?" "I'd love to," I replied, "but I got two kids in college." "No problem," my generous friend assured, "I'll cover it." And so he did, and so I went. I ended up visiting three of the emirates that make up the United Arab Emirates, Dubai, Abu Dhabi, and Sharjah, and spending three days in a street photography workshop with the famous photographer Steve Simon. I can never thank Michael enough for his generosity and kindness, it was a wonderful learning experience.

Click on read more for zillions of photos and commentary...

Wednesday, February 03, 2016

Paper on Parade: Political Economy of Cross-Strait Relations: is Beijing’s patronage policy on Taiwanese business sustainable?

A farm above Namaxia.

Bloomberg ran a story this week on Taiwanese businessmen who had been speculating in Yuan derivatives and got burned when the Chinese economy slumped. So many years of articles explaining that derivatives are a bad idea, and people are still buying them. But the loss was like a metaphor for dealing with China: initial gains, followed by steep costs...

Time again for this blog's regularly irregular feature, Paper on Parade. A friend flipped me this article on Taiwanese businessmen in China: Yi-Wen Yu, Ko-Chia Yu and Tse-Chun Lin (2016): Political Economy of Cross Strait Relations: is Beijing’s patronage policy on Taiwanese business sustainable?, Journal of Contemporary China, Feb 2016. It discusses the failure of Beijing's policies for Taiwanese business and to use business as a pathway to annexing Taiwan, a failure thrown into stark relief by the refusal of Taiwanese businessmen in China to come home to vote for the pro-China party. The authors write:
Via quantitative analysis and interviews, this article has found that things have been moving in a different direction: the rise of economic nationalism and local protectionism is undermining and constraining the credibility and sustainability of Beijing’s patronage policy. The new story is that with the growth of Chinese state-owned enterprises (SOE) and local private firms, Taiwanese businesses are being crowded out of China’s market. As a result, cross-Strait economic integration seems to have entered a period of stasis with regard to both direct investment and trade. Meanwhile, with the growth of nationalism, opposition to the patronage policy from China’s hawks and society has been emerging. Lastly, Taiwanese business, as a strategic linkage community targeted by Beijing, is losing its clout on both sides of the Strait, as well as its role as leverage in cross-Strait relations.
The article reviews two basic models of the Cross-Strait dynamic, and shows that both assume that Beijing has absolute control over its own domestic actions. They then point out three assumptions that many of us have attempted to refute over the years, especially the inevitability thesis:
In summary, most of the existing literature is based on three assumptions: firstly, domestic constraint on Beijing’s Taiwan policy is limited or meaningless; secondly, the growing economic integration is inevitable; and thirdly, Taiwanese business groups could be a leverage in cross-Strait relations.
What are the domestic constraints?
since the rise of economic nationalism and local protectionism in mainland China, local governments and economic departments have selectively ignored Beijing’s political patronage policy towards Taiwanese business and turned to favor SOEs and local firms. As a result, Taiwanese business has been crowded out of the Chinese market.
The article points out that economic nationalism in China has made it difficult to sell the idea of economic privileges for Taiwanese to Chinese actors. The authors also observe that the same process is happening in Taiwan -- the cooperation between Taiwanese big business and the CCP has been met with economic nationalist resistance in Taiwan, and Big Businessmen were unable to create a victory for the KMT in 2014 (and as we have seen, in 2016). Parallel domestic constraints affect both Chinese expansionist parties in their respective domains.

This same protectionism is occurring at the local level in China. In the 1990s Taiwanese businessmen were courted and could get tax breaks, land, and favors from local governments. But that "golden age" is long gone. Local governments now favor local state owned enterprises and local businesses over Taiwanese.

This development is important, because it swamped the effects of Ma Ying-jeou's alliance with the CCP after 2008. The authors note:
Yet, an interesting finding is that prior to the enforcement of the New Corporate Income Tax Law to all companies in 2008, Taiwan businesses’ tax payments had already been going up since 2005.14

This finding coincides with the story that the authors learned from respondents: the golden age of Taiwanese businesses in mainland China began to fade at the very beginning of this century because of China’s industry policy (腾笼换鸟政策) and local protectionist sentiment.
The authors compare Chinese firms, SOEs, and Taiwanese firms by subsidies, taxes, and performance, and the same trends are evident across all data sets: until 2002, Taiwan firms outperformed local firms and SOEs. By 2007, Taiwan firms were only outperforming SOEs. The article collects data from several sources, and summarizes:
Due to limits of the database, this article only can do panel data analysis until 2009. To trace TDI’s performance in the following years, this article employs China Credit Information Service, Ltd’s ‘Annual Report of Taiwan Business 2012, 2013 and 2014’.18 The reports indicate that the performance of Taiwanese businesses in mainland China has been going down, consistent with the trend presented in the panel data analysis above. They reveal that 649 Taiwanese listed companies (their investment in China) saw their profits plunge by 22.72% in 2012 compared to 2011. Moreover, 40.5% of non-listed companies were running a deficit on their investment in the mainland. In the 2013 report, the editor uses ‘The collapse of Taiwanese business in China’ to describe the tough situation: 55% of Taiwanese listed companies in mainland China had a deficit; over 70% of small–medium size Taiwanese companies in the mainland had losses. In 2014, over 60% of listed companies had losses in the Chinese market. Such lasting deficits in the Chinese market have led many Taiwanese businesses to shut down, shrink or relocate their investment to other countries. According to a report by the Chung-Hua Institution for Economic Research,19 over 60% of Taiwanese businesses had no plans to inject new investment into mainland China during 2011–2015 (the duration of China’s 12th Five-Year Plan).
The rise of Chinese business has meant that the old pattern of Taiwanese firms importing intermediate goods into China for final assembly is dead: the business model has shifted from vertical integration of Chinese firms in Taiwanese supply chains to direct competition, because China has introduced policies to cause this shift, and its SOEs have been reformed. The authors write:
Meanwhile, the growth of cross-Strait trade also has been slowing down. Figure 6 shows that the contribution rate (to Taiwan’s GDP) of exports to China has seen a dramatic drop during 2011–2013 compared to 2003–2007.
Yes, that's right -- after ECFA, exports to China had dramatically less effect on Taiwan's GDP even as cross-strait trade allegedly increased. And if your businesses are contributing less to GDP, you have less political clout. It's no wonder most Taiwanese businessmen in China stayed there this election.

In China the Taiwan Affairs Office (TAO) coordinates the policies under which Taiwanese businessmen are supposed to get patronage, but in reality its power is weak and it can do little against regional and local government preferences for new investors, local businesses, and local SOEs. Taiwanese businessmen can do little to compete with these alliances. The authors review local discussion forums and collect remarks on the patronage policy towards Taiwan businesses. They are critical and negative for the most part, and the policies are not popular.

The paper then turns to discussing what many of us have observed over the years: big businesses invested in China helped the KMT in the 2008-2012 election cycle, but since then the public has turned against these economic arrangements, seeing the KMT's China policy as a sellout of the island that helps only big business. As a result, "Beijing is now reviewing its patronage policy and alliance with Taiwanese business, as one respondent, a Chinese expert in Taiwan affairs, said."

In addition to competition and favoritism, Taiwanese businesses are finding it difficult to operate for other reasons:
‘The Observation of Taiwanese Business’s Human Rights in China’ indicates that in most cases of conflicts between Taiwan businesses and local firms, Chinese local governments and judiciary favor local firms significantly. Even worse, local governments have begun infringing on Taiwanese business’s property. As Taiwan businesses entered the mainland at a very early stage, with this advantage they were able to locate their factories in prime real estate areas within cities at that time. With rising land prices, in order to gain profit from reselling the land, local governments frequently force the relocation of Taiwanese businesses occupying these prime locations without reasonable compensation.
The TAO can do little, of course.

The authors conclude with a series of questions that boil down to: what will the future bring? As the 2016 elections show, Taiwanese reject annexation to China and reject economic integration, which is not, in any case, under favorable terms. The Taiwanese have always seen economic engagement with China as a straightforward exchange to receive economic benefits, to be terminated when benefits no longer flowed. Now they are finished flowing.

How will Beijing respond?

The CCP is not the only Chinese political party that this changing economic situation has impacted. This article confirms that the KMT's policy of selling Taiwan to China via economic integration has no political future. Without this economic foundation, the KMT's entire China policy has become, like the ROC itself, a zombie waiting for a bullet to the head.

What will the KMT do?
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1985 Diane Sawyer on the Henry Liu killing

This segment discusses the killing of a writer and critic of the Nationalist regime on Taiwan in California in 1984. The incident affected US relations with the KMT, and helped inspire the recent movie Formosa Betrayed. h/t to KL.
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!

Tuesday, February 02, 2016

Trippin' to Namaxia

Used the two days of good weather to steal a ride in the south to Namaxia. Gorgeous weather, grand scenery, and great conversation made for a perfect two-day ride in the mountains of Tainan, Kaohsiung, and Chiayi. It was my first ride in a long time, with my hip finally feeling better. So happy... Props to Drew, who planned this wonderful ride, his description with lovely pics is here. Click on READ MORE to join us on this great ride.