20050814

Chen urges unity to deal with China

VIDEO MESSAGE: The president used his `Four Stages' theory to bolster his appeal to overseas Taiwanese to help support the nation's right to self-determination

BY SHIH HSIU-CHUAN

STAFF REPORTER

President Chen Shui-bian urged the Taiwanese to unite against Chinese "united front" tactics and insist on self-determination yesterday, saying China's opposition to Taiwan's independent status was the biggest challenge facing the nation.

Chen made the call in his opening speech to the 32th annual meeting of the World Federation of Taiwanese Associations (WFTA), which began yesterday in Brisbane, Australia. Chen delivered his address via a live video link from the Presidential Office.

WFTA, which unites overseas Taiwanese communities, has been dedicated to the promotion of Taiwanese national identity and the advancement of international support for the right of the Taiwanese people to establish an independent country since the organization was established in 1974.

In order to achieve its objective of Taiwan Independence, WFTA and other pro-independence organizations have lobbied the the Democratic Progressive Party (DPP) government to change the country's official name from the "Republic of China" (ROC) to "Taiwan."

Chen, however, told the WFTA members that, "The biggest challenge Taiwan faces today is not which name is used but that China has been doing whatever it can to deny the fact that Taiwan is an independent country and to deprive Taiwan of the rights an independent country is supposed to have."

The tactics used by China were highlighted in the Pentagon's recent report, 2005 The Military Power of the People's Republic of China, Chen said, including its military threats, efforts to interfere in Taiwanese politics and efforts to prevent his re-election.

"Simply speaking, except for its traditional military threat, China has reinforced its `united front' tactics against Taiwan, attempting to divide the Taiwanese and then annex Taiwan," he said.

What Taiwan needs to do is to consolidate its people's psychological defenses, he said.

"We need to build a consensus about the country's future development. We also need to achieve a common position on cross-strait policies," Chen said.

"As long as we can unite and keep the same pace, we won't be afraid of the Chinese `united front' tactics and we can protect the sovereignty of Taiwan," he said.

Chen reiterated his two theories of the ROC's history and called on WFTA members to embrace them.

The first theory is "Four States' theory that says the nation's first stage was the establishment of the ROC in China in 1912. The second stage was when the ROC moved to Taiwan in 1949. Lee Teng-hui's presidency marked the third state of "the ROC in Taiwan," he said.

The nation entered the fourth stage,"the ROC is Taiwan," after the 2000 presidential election and the first transfer of power.

Chen outlined his second theory, the "Three Stages" theory, that states that the ROC is an independent country, its sovereignty belongs to the 23 million Taiwanese and that any change of Taiwan's future can only be decided by its people.

The president said that the "Four Stages" theory represents the history of the country and the "Three Stages" theory stresses the country's future.

He said the two theories should not be treated separately but as a whole.

"In order to unite Taiwan and to build the common consciousness of being a new country, I hope the `Four Stages' theory can be understood and accepted," Chen said.

China's military a threat to region, president says

AP , CANBERRA

China's rapid military build up is a direct threat not only to Taiwan but to the US, Japan and Australia, President Chen Shui-bian warned in an interview published in the The Weekend Australian yesterday.

"Some of their missiles can reach 10,000 kilometers," Chen told newspaper in Taipei. "Therefore, their targets include the US, Japan, Australia -- all the countries in the Asia-Pacific region."

Beijing is also strengthening its worldwide espionage operations, Chen said.

An estimated 600 to 700 ballistic missiles along the Chinese coast face Taiwan.

Chen's comments echoed a Pentagon report published last month that said Chinese military planners want to expand beyond their immediate goal of dominating Taiwan. The report said that an increasingly modern Chinese military could pose a threat to US and other forces.

China's military spending already is the world's third-highest at US$50 billion to US$70 billion a year, behind only the US and Russia, the Pentagon report said.

In his interview with The Weekend Australian, Chen forthrightly rejected Chinese sovereignty over Taiwan.

Over the past five years of his presidency, Chen said, he had offered more than 30 times to negotiate directly with the Chinese leadership on relations between the two countries but had been rebuffed.

EFFORT NO. 13: While Taiwan launched its 13th bid to join the UN on Friday, China's foreign ministry spokesman said the government should stop its `separatist activities'

China yesterday slammed Taiwan's 13th bid to join the UN as "doomed to fail" and urged the government to stop seeking independence from China.

"The bid violates the principle of the UN Charter, is unlikely to find any support, and is doomed to fail," foreign ministry spokesman Kong Quan said in a statement.

Taiwan, recognized by just 26 allies, launched its new bid to join the UN on Friday and asked UN Secretary-General Kofi Annan to help keep the peace across the Taiwan Strait.

The question of UN membership has raged since 1949, when Chiang Kai-shek's Nationalist government lost the Chinese civil war to the communists in China and fled to Taiwan, taking with him the Republic of China (ROC) government.

Chiang held on to China's UN seat until 1971, when the General Assembly expelled Taiwan and gave the seat to Beijing.

China, which says the island must be reunified with the mainland, by force if necessary, sits on the Security Council, has veto power and many more friends in the UN than Taiwan.

In his statement, Kong urged Taiwan to accept the "one China" principle, which states there is only one China, and both Taiwan and the mainland belong to it.

Kong called on the government of Taiwan to stop what he referred to as separatist activities and give up its attempts to push the island towards independence.

"Only in that way, peace and stability across the Taiwan Straits could be safeguarded," he said

Taiwan Foreign Minister Mark Chen said on Friday that Taiwan had no intention of challenging China's UN seat.

"The authorities in Beijing must understand their repeated efforts to suppress efforts by Taiwan's 23 million people to participate in the international community will only provoke the people of Taiwan and hurt peace in the Taiwan Strait," he said.

Taiwan on Friday protested to the UN for naming the People's Republic of China (PRC) as one of the world body's founding members in a 60th anniversary exhibit.

Taipei's representative in New York, Andrew Hsia, wrote to Shashi Tharoor, the undersecretary-general for public information, accusing the UN of "blatantly deviating from history and misinforming the world."

The Republic of China (ROC) -- later known as Taiwan -- was the government in power in China at the end of World War II and one of five powers that began the process of creating the UN, which was founded in 1945.

Mao Zedong's communist forces forced the government to flee to the island of Taiwan in 1949, and communist China was awarded the Chinese seat at the UN in 1971.

Hsia protested because an exhibition at UN headquarters on its 60th anniversary includes a poster with names of the 51 countries that signed the UN Charter on June 26, 1945. The People's Republic of China was named one of them.

"I hope that this mistake has been unintentional and ask for your prompt attention and action to have it corrected," Hsia said.

China is no longer just a magnet for foreign investment; today, she is a foreign investor herself. And her ambitions are not small. Go to Wal-mart, the US mega-store, and you'll find the cheapest electronics emblazoned with a smiling Chinese boy -- the logo of Haier, an international Chinese brand. Even the gas stations are under siege.

If CNOOC, a Chinese company, had been successful in its bid for Unocal, a major share of the gasoline supply to the US would have been transferred to Chinese ownership. When a country is threatened with punitive tariffs from the US Congress and is pressured to revalue its currency, it must be a formidable country that's on the rise. In the 1980s, that country was Japan. Today, it is China.

Just as Japanese multinational corporations like Sony and Toyota flooded the US market with cheaper and better goods, and even flirted with buying the Empire State Building, today, Chinese firms are staging an entry that is no less dramatic. However, a key distinction lies between the two, and that is, the Chinese newcomers, like Haier and CNOOC, are state-owned enterprises. Arguably, Japanese companies also had strong links with the government. But having links does not amount to being explicitly owned and controlled by the state.

The brash appearance of the Chinese behemoths on the US market, though alarming to some, raises the question of their business rationale. Why did Haier build a sprawling factory of 10,684m2 in South Carolina, hiring thousands of US workers at perhaps 10 or 20 times the price in China? Besides, Haier is not a manufacturer of high-end products that might benefit from US technological prowess. Rather, it makes refrigerators, TVs, dishwashers, small appliances -- things that US companies would without hesitation make in China for its cheap labor costs.

But sitting in the US market no doubt makes Haier's presence as an international brand felt. The company has acquired a landmark building in downtown New York City, where a regal banner announcing "The Haier Building" drapes proudly over classic Greek architecture. As with all other multinational firms, face matters -- and a lot, too. But is good image worth relocating away from the well to reach a faraway pond? If Haier is truly sophisticated enough to bank on the comparative advantages of global locations, why spend its resources on a labor-intensive assembly factory, instead of an R&D or service center in a developed country?

Regardless of what it means for its bottom line, "Haier America" (as it calls its US unit) has become a fierce symbol of pride for the Chinese and its leadership. Former president Jiang Zemin personally visited the company and praised CEO Zhang Ruimin for placing China on the international corporate map. Building the Haier plant in job-starved South Carolina has also buffered complaints from the US Congress on Chinese dumping. In other words, Haier America, while making moves that seem irrational by business criteria, makes a lot of sense from the perspective of politics.

Or consider the case of CNOOC. In a David versus Goliath standoff, the spunky Chinese firm raised the stakes against a US competitor that is 20 times its size. Though the company finally withdrew its offer under political pressure in the US, CNOOC put up a US$19 billion dollar bid for Unocal, a price tag that was equivalent to about 85 percent of CNOOC's total market value. In a free market, the loan of US$7 billion that it seeks would be offered at 8 percent a year and would drag the company's credit rating to the floor. Back home, however, CNOOC's parent company, the China National Offshore Oil Company, committed to a low interest loan for its spin-off, amounting to a subsidy of about US$2.6 billion. Even with this merger, CNOOC's credit rating in China would suffer a mere one-rung downgrading from AAA to AA.

Chevron ranted against what appeared like corporate suicide on CNOOC's part. In effect, Chevron was competing not against a Chinese start-up but against the Chinese state. Here, the bottom-line also seems suspect; it is not profits that count, but rather national pride and the political control of strategic overseas assets.

State-owned enterprises are commonly said to be the bane of the Chinese economy, draining away critical resources and credit from the more competent enterprises. The losses that state-owned enterprises incur have much to do with the socialist burden they carry. Their primary function is oftentimes less to do business than to gainfully employ hordes of workers and achieve state-mandated goals. Internationally, the largest and most successful state-ownded enterprises -- like Haier and CNOOC -- may have the luxury of state support, but the strings attached to that support may tie their hands in making rational business decisions.

The emergence of Chinese multinationals, as we now witness, is the mark of a rising economy and the arrival of a strong new competitor in global markets. But upon closer examination, these firms are not emblems of a growing corporate China, but rather that of an ambitious and effective central government.

That is not to say that state-owned companies cannot compete internationally; they can, and their owners will see that they do. What is more worrying is that the real victim of state-backed corporations are not uncompetitive foreign firms, but rather China's own private companies, which simply cannot stand up against their privileged cousins. Until we see privately-owned Chinese companies bidding against US corporations and hiring skilled US staff, corporatism in China remains a spark but not a conflagration of change.

Yuen Yuen Tang is a doctoral student in political science at Stanford University, specializing in China and East Asian politics.

Taiwan is now beginning to suffer the consequences of its "go west" policy and its economic tilt towards China. According to Ministry of Finance figures, the trade surplus this year for the months January through July was only US$750 million, a fall of 84.3 percent from the same period last year. It is likely that Taiwan's surplus for this year will be the lowest since 1981.

In the past, the nation's trade surplus has regularly exceeded US$10 billion, and in 2001 it achieved an amazing US$18 billion. But three years later this figure has plummeted, and is in danger of becoming a deficit.

Clearly this is not unrelated to the rise of crude oil and materials prices. But the blow to Taiwan's economic performance has been the massive shift in the proportion of companies that take orders in Taiwan but manufacture in China. This is the result of the "go west" policy, and this is what is responsible for the gradual deterioration of the nation's economy.

Despite a steady decrease in the importance of manufacturing, it still accounts for one-quarter of the country's economy. The strength or weakness of the manufacturing sector is therefore crucial to whether the economy can continue to grow. But beginning in the 1980s, traditional manufacturing industries began to shift their operations to China, followed by the high-technology sector in the 1990s. This shift to China undermined one of the twin pillars of the economy.

Before traditional manufacturing moved to China, Taiwan's light industry, with its production of bicycles, umbrellas, shoes and clothes, led the world. But after the move to China, export processing and industrial districts saw an increasing number of closures. China has successfully learned from and adopted our experience in export manufacturing, which -- when combined with cheap labor costs and plentiful land -- has made it highly competitive on the international market.

Taiwan was fortunate in that the growth of its high technology sector offset the shift of traditional manufacturing to China, helping to maintain economic prosperity. Unfortunately, the strength of the high-technology industry was in contract manufacturing, rather than in R&D and own-brand marketing, so ultimately it followed traditional industries to China starting in the 1990s.

As a result, Taiwan's leading position in the manufacture of many technology products has been taken over by China. Exports of Taiwan's tech products have shrunk and now China claims to lead the world in hardware production. According to reports released by Lehman Brothers, of the top 100 Chinese firms, over half are foreign-invested, and of these, 21 operate with Taiwanese capital. The biggest exporter is Hong Fu Jin Precision (Shenzhen) Co, owned by Taiwan's Hon Hai Group, with exports worth US$8.35 billion last year. In second place is Quanta (Shanghai), owned by Quanta Computer, with exports worth US$8.30 billion last year.

Other major players in Taiwan's technology market such as Compal, Acer, Inventec and AU Optronics are also in the top 50 exporters. According to figures released by the Ministry of Economic Affairs, the proportion of companies taking orders in Taiwan and exporting from China has risen from 23.85 percent in July 2003 to 40.5 percent in June this year. The proportion is even more skewed in the high technology industry, shifting from 45 percent to 74.76 percent over the same period.

To put it another way, three-quarters of the production value from our high technology sector, which is the very heart of our manufacturing industry, has moved to China. It is no wonder that our economic performance has lagged behind other Southeast Asian countries, which also face pressure from rising oil prices and materials costs.

South Korea's economic performance has been the envy of many other nations, and many in Taiwan like to compare our performance with theirs. Even our research organizations have praised South Korea's success. South Korea is no longer just a fad -- its leading companies have established themselves as internationally recognized brand names.

South Korea's investment in China is a form of industrial expansion that follows the consolidation of its core businesses. Taiwan's investments, on the other hand, are more akin to a transplant -- including roots and all -- and therefore quite different from South Korea's example.

This difference is the reason why South Korea's economy has grown, while ours has shrunk. We fear that the drop in our trade surplus is only the tip of the iceberg. The government should take this situation very seriously, for if a remedy is not proposed, who knows when the decline of the economy will end.