Last Wednesday, after Chinese Premier Wen Jiabao (溫家寶) proposed to cool China's breakneck economic growth, Taiwan's stock market plunged 10 percent in three days. The NT dollar also continued to lose ground. But his announcement came as no surprise.
The possibility of China losing control of its overheated economy has posed a long-standing problem for officials. Economists around the globe have their eyes glued on China. The pegging of the Chinese yuan to the US dollar has kept the yuan quite strong, other governments are pressing China to revalue its own currencies. The strength of the yuan has also increased the flow of hot money into the Chinese market and has invited creeping inflation. Although a appreciated yuan had been expected, Wen's announcement that China's feverish economy would be calmed to some degree still managed to trouble stock markets across Asia.
Taiwan must pay close attention to China's economic situation. With the nation's exports to China exceeding 36 percent of total exports, China has overtaken the US as the nation's biggest trading partner. Therefore, the maintenance of a smooth trade relationship across the Taiwan Strait is becoming yet more critical in safeguarding national economic development.
Unlike the "trade over investment" approach to the Chinese market adopted by many other countries, Taiwan has been dumping valuable investment resources rather than engaging in trade with China. "China fever" has accelerated not only Taiwan's capital hemorrhage but also the outflow of talent and technology. Many Taiwanese businesspeople, after investing in and setting up factories in China, return to compete with domestic companies, thus weakening Taiwan's long-term competitiveness.
Indispensable as they are for cooling down an overheating economy, Wen's measures highlight the fact that China's economy is still curbed by an authoritarian government. In the face of economic fluctuation, governments of most capitalist economies let the market determine interest and exchange rates, and hence currency supply and demand. It is uncommon for a government to intervene too closely in economic activity, except when drastic changes occur in the market.
Ignoring market forces, Beijing is attempting to rein in its economy by executive order, putting a halt to major construction and investment projects both nationally and locally. Such strong-arm tactics may illustrate the Chinese government's determination, yet it totally disregards the market, thereby wreaking havoc on the interests of local and foreign investors. It is the non-economic risks of investing in China that most suffering foreign investors have neglected.
Beijing's measures hope to cause only short-term harm -- but with it long-term benefit. No one, however, can be sure that similar measures will not be adopted in future to tighten the economy, nor can one predict the scope, duration or impact of any other measures on industry.
There is one thing of which we can be sure: Beijing's heavy-handed policy has on this occasion served as valuable shock therapy for China-based Taiwanese businesspeople and foreign investors. Investing in China is not as profitable as it appears after all. The capitalist's gold mine is actually a minefield of concealed dangers of every variety -- and the economy is merely one of them.
It is employment pass renewal season in Singapore, and the new regime is dominating the conversation at after-work cocktails on Fridays. From September, overseas employees on a work visa would need to fulfill the city-state’s new points-based system, and earn a minimum salary threshold to stay in their jobs. While this mirrors what happens in other countries, it risks turning foreign companies away, and could tarnish the nation’s image as a global business hub. The program was announced in 2022 in a bid to promote fair hiring practices. Points are awarded for how a candidate’s salary compares with local peers, along
China last month enacted legislation to punish —including with the death penalty — “die-hard Taiwanese independence separatists.” The country’s leaders, including Chinese President Xi Jinping (習近平), need to be reminded about what the Chinese Communist Party (CCP) has said and done in the past. They should think about whether those historical figures were also die-hard advocates of Taiwanese independence. The Taiwanese Communist Party was established in the Shanghai French Concession in April 1928, with a political charter that included the slogans “Long live the independence of the Taiwanese people” and “Establish a republic of Taiwan.” The CCP sent a representative, Peng
Japan and the Philippines on Monday signed a defense agreement that would facilitate joint drills between them. The pact was made “as both face an increasingly assertive China,” and is in line with Philippine President Ferdinand Marcos Jr’s “effort to forge security alliances to bolster the Philippine military’s limited ability to defend its territorial interests in the South China Sea,” The Associated Press (AP) said. The pact also comes on the heels of comments by former US deputy national security adviser Matt Pottinger, who said at a forum on Tuesday last week that China’s recent aggression toward the Philippines in
The Ministry of National Defense on Tuesday announced that the military would hold its annual Han Kuang exercises from July 22 to 26. Military officers said the exercises would feature unscripted war games, and a decentralized command and control structure. This year’s exercises underline the recent reforms in Taiwan’s military as it transitions from a top-down command structure to one where autonomy is pushed down to the front lines to improve decisionmaking and adaptability. Militaries around the world have been observing and studying Russia’s war in Ukraine. They have seen that the Ukrainian military has been much quicker to adapt to