Dependency and risk in cross-strait trade ties
　

By Shen Chieh 沈潔
Saturday, Nov 29, 2008, Page 8

Vice President Vincent Siew (蕭萬長) and Straits Exchange Foundation Chairman Chiang Pin-kung (江丙坤), both technocrats with a background in foreign trade, should be able to remember the advice the older generation of Chinese Nationalist Party (KMT) cadres gave when Taiwan’s economy took off: Trade must not be too dependent on the US and Japan and should develop a wider market to distribute risk.

In the second half of the 20th century the US and Japan had no ambitions to annex Taiwan, but the governments of dictator Chiang Kai-shek (蔣介石) and his son Chiang Ching-kuo (蔣經國) still distributed risk.

Now that Taiwan is faced with the threat of China’s attempt to annex Taiwan — using both carrot and stick — Siew and Chiang are following the lead of President Ma Ying-jeou (馬英九) in accelerating the move westward and economic reliance on China. They are also prioritizing the economy over political issues in their march toward eventual unification.

Anyone alert and willing enough to take a detached look at reality will see that economic dependence on China is an unforgivable mistake. The “Chinese rise” that Ma, Siew, Chiang and former KMT chairman Lien Chan (連戰) see does not include the Chinese economy’s weaknesses and dependence on foreign markets in its narrative.

Domestic purchasing power in China, an economy with 1.3 billion people and around 70 percent dependence on foreign markets, is limited. In the past, when Taiwan relied on the US and Japanese markets, we used to catch a cold when the US sneezed. Now Taiwanese industry has moved westward, and China is so dependent on the US market that when the US sneezes these days, China gets pneumonia and Taiwan has to be taken to intensive care.

A responsible government should safeguard the national interest, protect the public and warn of dangers, but the Ma government is behaving in exactly the opposite way. Its trust in China is disproportionate to the reality that is being reported by the international media and even Chinese officials.

Here are two examples.

On Nov. 14, the New York Times reported that factories in China’s Pearl River Delta were closing, and that one Taiwanese businessman who could not pay his employees’ salaries had fled in the middle of the night. The article said that 67,000 factories had gone into bankruptcy in the first half of the year, and that according to official Guangdong Province statistics, 7,000 of those plants were located in Guangdong alone. This is leading not only to unemployment but also protests and social unrest.

Long Yongtu (龍永圖), secretary-general of the Boao Forum, has admitted that China has been affected by the global financial crisis, and says that the period between this February or March and the end of next year will be critical. He also says that “industry cannot be allowed to collapse or industrialists flee.”

This is evidence of the weakness of China’s economy as a result of its dependence on export markets and the seriousness of the problem involving businesspeople who take the money and run.

The population of Taiwan has just passed 23 million. The government will not be able to solve the unemployment crisis by means of the service industry, but it can rely on manufacturing and exports to maintain growth and boost employment.

Taiwan must rely both on foreign markets and greater attention to risk distribution, but the Ma administration, drunk on its own ideology, is falling into the black hole of Chinese politics and economics.

Shen Chieh is a freelance writer.