Many Taiwanese businesspeople in China have been affected by the severe acute respiratory syndrome (SARS) outbreak. Some of them are even infected with the disease and are in critical condition. People can still avoid the contagion if they act cautiously. But the Chinese government is addicted to its bad habit of forging statistics and controlling the media to hide facts. This habit may cause greater damage to enterprises and investors in China than SARS does.
Statistics provided by China's central and local governments are often incorrect. For example, they usually overestimate production and underestimate taxes, making it very difficult for foreign enterprises to receive clear, dependable market information and economic indexes.
Influenced by such statistics and information, foreign enterprises are unable to make appropriate decisions and usually overestimate business opportunities. This eventually leads to the failure of their business operations.
Fake and boastful statistics can be seen everywhere and come as no surprise in today's China. Many US scholars repeatedly question China's economic growth rate, asking if it may be exaggerated. Misled by the highly overestimated growth rate, many foreign investors strive to invest in China, ultimately causing a deflation problem.
The Chinese government has long subsidized the money-losing state-run enterprises, causing a huge deficit. Since 1983, it has demanded that public banks loan to state-run enterprises to reduce this deficit. As a result, the bad loan ratios of the public banks are as high as 50 percent. They would have gone bankrupt long ago if this had happened in a democratic country. Bad loans at these banks represent an estimated US$500 billion, which accounts for 43 percent of China's GDP.
If we also take the losses in its social welfare and elderly subsidies into account, its internal and external debts are estimated to have exceeded its GDP.
Thanks to its people's relatively high savings ratio (over 40 percent) and the US$40 billion to US$50 billion in foreign capital that pours into its market every year, China enjoys sufficient flow of capital domestically, while the channels for investment are limited. The government has tightly controlled the media, so people are not aware of the real situation. They think that the government is capable of protecting their savings and continue to put their money into these banks.
Moreover, foreign exchange control is tight in an effort to reduce possible capital outflow. People have no choice but to hold yuan, since foreign currencies are not available. China has also strictly kept in check the local business operations of foreign banks in order to prohibit foreign investors' speculation in foreign exchange. All these factors and measures have kept the nation's financial market stable for the time being.
China is facing a potential financial crisis, which may be triggered at any time. The crisis may be ignited if people lose their confidence in the government when it becomes unable to hide the massive amount of bad loans and debts. It may also take place when the global economic downturn damages China's export or direct foreign investment figures. The significant impact of the 1997 Asian financial crisis is still fresh in our memory. If a financial crisis occurs in China, it will cause overall damage to the currency and stock markets. None of the Taiwanese businesspeople in China can escape from such a disaster.
In light of the SARS epidemic in China, are Taiwanese busi-nesspeople ready to reduce investments there in order to lower their risks?
Peter Lin is director of the Graduate Institute of Operation and Management at Kao Yuan Institute of Technology.
TRANSLATED BY EDDY CHANG
Chinese Nationalist Party (KMT) caucus whip Fu Kun-chi (傅?萁) has caused havoc with his attempts to overturn the democratic and constitutional order in the legislature. If we look at this devolution from the context of a transition to democracy from authoritarianism in a culturally Chinese sense — that of zhonghua (中華) — then we are playing witness to a servile spirit from a millennia-old form of totalitarianism that is intent on damaging the nation’s hard-won democracy. This servile spirit is ingrained in Chinese culture. About a century ago, Chinese satirist and author Lu Xun (魯迅) saw through the servile nature of
In their New York Times bestseller How Democracies Die, Harvard political scientists Steven Levitsky and Daniel Ziblatt said that democracies today “may die at the hands not of generals but of elected leaders. Many government efforts to subvert democracy are ‘legal,’ in the sense that they are approved by the legislature or accepted by the courts. They may even be portrayed as efforts to improve democracy — making the judiciary more efficient, combating corruption, or cleaning up the electoral process.” Moreover, the two authors observe that those who denounce such legal threats to democracy are often “dismissed as exaggerating or
Monday was the 37th anniversary of former president Chiang Ching-kuo’s (蔣經國) death. Chiang — a son of former president Chiang Kai-shek (蔣介石), who had implemented party-state rule and martial law in Taiwan — has a complicated legacy. Whether one looks at his time in power in a positive or negative light depends very much on who they are, and what their relationship with the Chinese Nationalist Party (KMT) is. Although toward the end of his life Chiang Ching-kuo lifted martial law and steered Taiwan onto the path of democratization, these changes were forced upon him by internal and external pressures,
The Chinese Nationalist Party (KMT) caucus in the Legislative Yuan has made an internal decision to freeze NT$1.8 billion (US$54.7 million) of the indigenous submarine project’s NT$2 billion budget. This means that up to 90 percent of the budget cannot be utilized. It would only be accessible if the legislature agrees to lift the freeze sometime in the future. However, for Taiwan to construct its own submarines, it must rely on foreign support for several key pieces of equipment and technology. These foreign supporters would also be forced to endure significant pressure, infiltration and influence from Beijing. In other words,
RSS