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China exchanges bad for economy

By Huang Tien-lin

Economists who embrace the idea of moving westward to China view the arguments that "bad cross-strait relations will boost Taiwan's economy" and "good cross-strait relations will hurt the economy" as nonsense. However, Taiwan's more than 400 years of history has proven the continuity and truthfulness of these arguments.

During the period of Dutch occupation of Taiwan, China adopted an isolationist policy, thereby turning the island into a regional hub of commerce for Dutch and Portuguese traders to make connections with Korea, Japan, China and South Asia (which proved that the economy would also do well in the absence of cross-strait relations). But once China adopted an open-door policy and retook Taiwan, Taiwan's position as a regional hub vanished (which proved that Taiwan would change for the worse if cross-strait relations improved).

Taiwan was ceded to Japan after the first Sino-Japanese War. As Taiwan departed from China's orbit, the island's economy was changed inside out. But after Taiwan was returned to China following World War II, it encountered a major economic calamity that lasted four years, undergoing unprecedented inflation with 40,000 old Taiwan dollars worth NT$1. Cash assets disappeared (another example of good cross-strait relations leading to a poor economy for the island).

Later Taiwan adopted the KMT government's "three no's policy" and severed relations with China for 50 years. During this period of separation, Taiwan created its own economic miracle that was admired by the world (which proved for the second time that bad cross-strait relations would improve the economy).

Taiwan resumed relations with China in 1987 when people were allowed to visit their relatives there. Next, a series of "opening-up" policies -- such as tourism -- compelled the government to open up indirect investment in China in late the 1990s. China fever then started to burn off Taiwan's economic power.

Around the time of the so-called 1992 consensus ("one China, with each side having its own interpretation"), our traditional industries started to move to China in great numbers. It was also a period in which the stock market had its darkest phase, with index falling to 3,098 in January 1993. People suffered great losses (which proved for the third time that good cross-strait relations would ruin the economy).

In 1995, when the Constitution was amended to allow for direct presidential elections, cross-strait tensions escalated. Then president Lee Teng-hui's "no haste, be patient" approach in 1996 worsened cross-strait relations, but Taiwan's economy took a favorable turn. In August 1997, the stock market soared to 10,256 points, its highest in 10 years (which proved for the third time that bad cross-strait relations would make Taiwan well). As the "no haste, be patient" policy began to ease in 1998, the Investment Commission of the Ministry of Economic Affairs rarely rejected any applications for investment in China. The nation's high-tech industries then moved quickly to China and Taiwan's stock market plunged (which proved for the fourth time that good relations would hurt Taiwan).

Tension resurfaced when Lee came up with his "state-to-state" model of cross-strait relations in July 1999, but Taiwan's stock market soared to 10,393 points seven months later (which proved for the fourth time that bad cross-strait relations would improve the economy).

Cross-strait relations remained relatively stable after the presidential election in 2000, but the economy showed no sign of improvement. The sneaky transfer of Semiconductor Manufacturing International Corp and Grace Semiconductor Manufacturing Corp to China only accelerated Taiwan's economic hemorrhage. Since then the bear market has continued for three years, largely due to global economic recession and the Sept. 11 attacks on the US (which proved for the fifth time that good relations would hurt Taiwan).

The SARS epidemic broke out in March because of China's cover-up. As people went into a panic, the Chen government announced epidemic-prevention measures. Cross-strait exchanges almost broke off completely. The Council for Economic Planning and Development and various think tanks all expressed concern about the future of the economy and lowered their growth forecasts. However, I believe that SARS, if we can handle it properly, can be a godsend for us to improve our economy and reduce domestic unemployment.

The basis for this is that bad cross-strait relations -- due to reduced personnel exchanges caused by the epidemic and the resultant quarantine measures -- will boost Taiwan's economy. Why? It is simple. The number of Taiwanese touring China last year reached 3.8 million (over 10,000 a day). If SARS can reduce this number by half, Taiwan will save approximately NT$55 billion in travel expenditures.

If the annual Taiwanese investment of US$12 billion in China can also be reduced by half, the nation will save NT$200 billion in production capital and use this amount for domestic investment. If this amount is invested in the stock market, it will raise the index by several hundred points, thereby increasing trillions of dollars of wealth and increasing domestic consumption and investment.

The strong stock trend last month proved this argument. On June 18, the value of TAIEX stocks broke the NT$10 trillion mark, NT$2.5 trillion more than the NT$7.48 trillion at the end of May. The increase of people's wealth will be followed by the recovery of consumption and investment.

Of course, those who embrace the idea of moving to China will not agree with my argument. They say that the current stock trend is a sign of global economic recovery and a result of extensive foreign investment. However, they seem to have forgotten the reconciliation period following the 1992 consensus, during which the European and US stock markets were doing well but Taiwan's stock market was flat and purchases by foreign investors did not have much effect.

The "one country on each side of the strait" theory proposed last August and the SARS storm this February provided Taiwan with the "capital conditions" to move forward with the world. The surprise brought by SARS has a positive effect on our economic development in the long term. This was the fifth example to demonstrate that "bad cross-strait relations will boost Taiwan's economy."

How strong is this power pushing the stock market up and how long will it last? The key is how soon cross-strait exchanges return to normal. If personnel exchanges return to normal as soon as is advocated by the pro-tourism lobby, the China-investment fever will resume. The gift from SARS will start to shrink and the stock market will lose steam. In the end, the stock market boom will have been short-term.

If the government and the Mainland Affairs Council (MAC) can place the lives of the 23 million people of this nation above the interests of a million or so Taiwanese businesspeople in China and insist on the continuation of existing SARS prevention and quarantine measures, then the stock market should do quite well. And if the policy of investing in Taiwan can go hand in hand with SARS prevention, the return to a vibrant economy can be expected soon.

Experience tells us that information from Beijing about epidemics in China is neither transparent nor trustworthy. Although China's name has been removed from World Health Organization's list of SARS-affected areas on the back of its sheer political power, we should not lower our guard. We should still continue quarantine measures for at least six months to make sure that China is epidemic-free, which is the only way for Taiwan to ensure it is a safe distance from the Chinese epidemic.

If the MAC hurriedly lifts the quarantine measures to make it convenient for Taiwanese businesspeople, a second outbreak of SARS will follow and Taiwan may become the only SARS-affected area in the world. The stock market will crash, and any reconstruction work done by the government in the post-SARS period will be in vain.

China's policy toward this country is definitely more brilliant than ours toward them. The first thing China did to us when they started to fight SARS was to stop approving applications for travel to Taiwan. Perhaps we should do the same by taking a firm stand to temporarily suspend non-business travel to China. Should we do so, we will not have problems with home quarantines.

The people of this nation should not to be confused by the incantation that "bad cross-strait relations will hurt the economy," because history tells us the opposite.

Huang Tien-lin is a national policy adviser to the president.

Massive protest grips Hong Kong

FREEDOMS: In the largest demonstration since the 1989 Tiananmen Square massacre, hundreds of thousands gathered to protest against planned anti-subversion laws

REUTERS , HONG KONG

Hundreds of thousands of protesters took to Hong Kong's streets yesterday to denounce the government's planned anti-subversion law, in the city's biggest street demonstration since the 1989 Tiananmen Square massacre.

"Return rule to the people," they chanted as the rally began to denounce a bill critics say will impose Beijing-style control over free speech and the media.

Brandishing banners, umbrellas and fans, many wore black on a sweltering day to mourn what they said was the demise of rights and freedoms in one of the world's key financial centers.

Critics say the law, which Beijing has been pressing Hong Kong to enact, poses the biggest threat to basic rights in the former British colony since it reverted to Chinese rule in 1997.

Hours before the rally began, protesters burned the Communist Party flag as Chinese Premier Wen Jiabao repeatedly tried to reassure the nervous territory that its freedoms would be protected.

By late afternoon rally organizers said around 400,000 people had turned out with more still pouring in. It was the largest organized protest in Hong Kong since 1989, when a million turned out after troops killed hundreds of pro-democracy demonstrators in the Chinese capital.

Hundreds of thousands of people pack Hong Kong's Victoria Park before marching to Hong Kong government headquarters yesterday to protest against plans to enact an anti-subversion bill that critics fear will curtail civil liberties.

Many more protesters were stranded miles away as the crush of people heading to the rally overwhelmed subway and bus systems.

The government has said it would not back down on the legislation regardless of yesterday's turnout. The bill is bound to be passed by the territory's legislature, which is packed with pro-Beijing and pro-government supporters.

Marchers came from all walks of life with businessmen, retirees and young couples pushing baby strollers marching alongside veteran pro-democracy supporters.

The DPP yesterday warned the public to be wary of the "one country, two systems" formula Beijing has suggested for Taiwan's unification with China, criticizing the communist authorities for trampling on the autonomy of Hong Kong since it imposed the formula on the territory six years ago.

The DPP's Central Standing Committee said Beijing had betrayed its promise to give Hong Kong a high degree of autonomy for 50 years, making the world suspicious about how it could fulfill its promises regarding unification.

"We hope the Taiwanese public can be clear-headed about China's so-called `one country, two systems' myth and its `one China' claim," the party said in a statement.

DPP Deputy Secretary-General Lee Ying-yuan said the Hong Kong authority's plans to enact a security law would be used to create a blacklist restricting the freedom of its people.

"I was on a blacklist and forbidden to return to Taiwan a decade ago," Lee said. "As a democracy activist, I can totally understand why tens of thousands of Hong Kong people need to take to the streets to protest against Beijing's limiting their freedom."

"The state security law is reminiscent of Taiwan's authoritarian past when the ruling KMT regime blacklisted and persecuted political activists," he said.

Under an anti-subversion law, certain social activities that originated in China could be banned in Hong Kong, Lee said.

"It is such a stark contrast between Hong Kong and Taiwan as here we are talking about a referendum law while in Hong Kong, its people are facing the curtailment of their freedom," Lee said.

Chen Ming-tong, Vice Chairman of Mainland Affairs Council, said yesterday that Hong Kong should gradually enhance its interaction with Taiwan.

"At the every moment, Hong Kong should actively express its respect for the interaction between the civil societies of Taiwan and Hong Kong, and further develop its ties based on existing bases and customary practices,"Chen said.

According to Hong Kong correspondents with a New York-based online news agency, Dajiyuan.com, the demonstration was joined by more than one million people.

"The legislation will provide a legal basis, and referendums will become a system under which the issues to be subject to a vote can be regulated to stave off controversy or any possible fallout."－Yu Shyi-kun, premier

Premier Yu Shyi-kun said yesterday the right to hold referendums should not be stigmatized since it is a basic human right protected by the nation's Constitution.

Yu made the remarks while attending a ceremony marking the seventh anniversary of the delinking of the Central News Agency (CNA) from government oversight to becoming a largely independent organization.

Yu said he was delighted to see the opposition camp belatedly support legislation for a referendum bill to let domestic voters exercise their legitimate right to express their opinions on major policy issues.

The people of Taiwan have so far been unable to exercise their right to participate in referendums because the previous KMT administrations didn't bother to legislate how such a poll would be structured, Yu said.

Noting that the long delay in referendum legislation might result from misgivings that Taiwan holding referendums could lead to a change to its status quo or destabilize relations across the Taiwan Strait, Yu said such worries can be clarified through the legislation of a referendum bill.

Now that major opposition parties have finally come to acknowledge the need to hold a referendum to clear up certain controversial policy issues, Yu said he hoped the opposition-controlled Legislative Yuan can legislate a referendum law.

Yu recalled that Taiwan experienced a short period of social chaos following the lifting of its decades-old martial law and ban on the establishment of new newspapers in the late 1980s.

"But we have not been daunted by those disturbances. We have instead learned to exercise self-restraint and self-discipline.

"And our nation has since grown into a mature democracy with full press freedoms," Yu said.

He said the nation now needs a referendum law to enable its people to express opinions on major public issues to serve as a reference for policy formulation. Without a referendum law, he went on, Taiwan cannot live up to its goal of governance by the people and by the law.

What Hong Kong needs is to establish its inner strengths to speed up the development of its economy.

Chinese Premier Wen Jia-bao recently visited Hong Kong for the first time after becoming premier. He brought a special gift -- a package of special policies for Hong Kong now that the SARS epidemic has been brought under control. Hong Kong's government looks like an intensive-care patient who's receiving a lot of leeches. Of course Wen's package will promote economic development for Hong Kong in some areas. But how to develop the economy and build up core competition based on the territory's inner forces is the big question.

Hong Kong has lots of advantages compared to China and other Asian countries. However the government of Hong Kong has yet to find the right ideas and methods to improve the economy. So many companies from Taiwan have developed their businesses in China and made huge amounts of money there, even though they have not received any special favors or policies from Beijing. Why Hong Kong's government remains focused on getting special policies from China is a mystery.

We can expect that the special policy delivered by Wen will promote the development of trade and business in some areas. But it cannot radically change the weak environment of the territory's economy. It cannot improve the structure of its economy.

Hong Kong's government should learn something from the governments of Japan, Singapore and Taiwan. Hong Kong should establish its own core competitive forces. Hong Kong has strong support from China, but there is no reason it cannot find its own strong engineers to boost its economic recovery. There are many ideas and methods. It depends on whether the Hong Kong government can accept such suggestions and realize the ideas and plans.

On Friday, a four-member delegation invited to attend the UN-affiliated Global Summit of Women was denied entry at Marrakech airport in Morocco, even though they held valid visas issued by the Moroccan consulate in Hong Kong. After an investigation by Taiwan's diplomatic corps, it turned out that the Chinese embassy in Morocco was behind the incident. While we deplore the Moroccan government's buckling under Chinese pressure, we are also puzzled by Beijing's hysterical diplomatic attacks. Such behavior can only raise Taiwan's profile in the international community, attracting more attention to Taiwan's plight as well as to the vast differences between Taiwan and China.

After they were forced to return to Amsterdam, a member of the delegation, Rosa Yang, went back to Morocco and successfully cleared customs using her US passport. She made it to the global summit, where she revealed China's obnoxious behavior to delegates from around the world. Yang found out that China was not even represented at the summit. Yet the Chinese embassy still blocked Taiwan's delegation from attending the event. The reservations Taiwan's delegation had made at a hotel in Morocco were also canceled by an impersonator.

Beijing's obstructionism has repeatedly created diplomatic trouble for the host country at international conferences. This has highlighted the differences between China and Taiwan, while at the same time has generated friction between China and other countries. Taiwan's representatives at international events should not give up opportunities such as this to present their position, despite harassment from China.

What's even more ludicrous, according to Center for Disease Control Director Su Ih-jen, who attended the WHO's global SARS conference in Kuala Lumpur last month, was that Beijing pressured WHO officials to keep Taiwan on the health body's SARS travel advisory list until Beijing had been removed. Beijing did not hesitate to conceal and distort facts just to pretend that it's stronger, faster and better than Taiwan. It's ludicrous and infantile. Fortunately, the WHO officials did not buckle under Beijing's pressure to twist scientific facts.

In a way, Beijing's habit of making enemies wherever it goes is a blessing for Taiwan. As long as the Chinese authorities cling to the idea that they are a "dynasty anointed by the heavens" and therefore must be obeyed by everyone under the sun, they will only generate repulsion in the international community, while also helping Taiwan to win over more friends and international support. This will only increase the guarantees for Taiwan's security. Sooner or later, the myths fabricated by Beijing will be viewed as a joke in the international community.

China once promised that Hong Kong would remain unchanged for 50 years. Now, six years after Hong Kong's handover to Chinese rule, Beijing is pushing for an anti-subversion law in Hong Kong that will take away people's freedoms. Beijing's purpose is simply to build an authoritarian system in Hong Kong that tramples on human rights -- a system just like the one in China. No wonder tens of thousands of Hong Kong people protested against the law yesterday. Beijing has not only lost credibility in the eyes of Hong Kong's citizens by destroying the spirit of "one country, two systems," but has also thuggishly and unreasonably suppressed Taiwan in the international community. Looking at this mad, arrogant, authoritarian regime, how could any Taiwanese -- unless they are also mad -- want to live under the same roof as China?