The closer summer gets, the more serious China's power shortage becomes. Guangzhou City is implementing a plan in which 4,000 companies are now allowed to operate only five days a week with a rotating two-day weekend. The situation is just as serious in eastern China, where there have been reports that the Kunshan area in Jiangsu Province is turning off the power supply two days each week. This affects many Taiwanese businesses that have set up operations in China, including high-tech industries.
Experts estimate that China's power-supply problem will be dealt with by next year at the earliest. It is hoped that this problem will to some degree slow down Taiwanese investment in China, which would be beneficial to Taiwan's domestic investment and consumption.
There is also a shortage of Chinese high-grade steel. Steel prices soared by 28.1 percent between the first half of last year and February this year, to the joy of large and small Taiwanese steel producers. China Steel earned almost NT$37 billion last year, and pre-tax profits for the first quarter this year reached NT$12.6 billion. In 18 months the corporation's share price has increased from NT$14.9 to almost NT$35, or 134 percent. The market value of China Steel (with equity capital
of NT$94.5 billion) has seen an explosive increase of NT$126.6 billion, while the steel industry as a whole has seen an increase of NT$200 billion to NT$300 billion, a considerable jump.
As it happens, of Taiwan's largest industries, the power and steel industries were the two most eager to invest in China in 1995 and 1996, but they were restricted by former president Lee Teng-hui's (李登輝) "no haste, be patient" policy. In 1995, Formosa Plastics chairman Wang Yung-ching (王永慶) signed a memorandum of intent to invest US$3 billion in the Zhangzhou Houshi Power Plant in Fujian Province. Later, the President Group announced a joint venture with Southland Corporation to invest in a hydropower plant in Wuhan.
Other groups eager to try their luck would not be left behind. Investment in big steel plants was even more popular than in power plants. Large steel manufacturers to announce investment in China from 1995 to 1996 included Chun Yuan Construction, Tah Chung Steel Corp, Yuli and Mingchia. Each project involved at least US$3 billion.
Work on the Zhangzhou power plant began in March 1997. But the other power and steel plant projects were canceled as a result of the "no haste, be patient" policy, and the Zhangzhou project shrank. At the time, they said
that "if we don't leave, all the
others will." But as Taiwanese businesses stayed away, so did US, Japanese and European steel and power-plant firms.
Six years later, in 2002, China began to suffer from shortages of power and steel. Looking back, it was correct to have everyone stay away according to the "no haste, be patient" policy. At the time, Taiwan seemed to have forsaken a prime business opportunity, but six years on, Taiwan's steel industry has made considerable profits. In other words, the real business opportunity lay in staying away, not in going in.
If the government hadn't differentiated between friend and foe, instead adopting a laissez-faire, "all development is good" attitude, Taiwan would have built five or six large steel plants and a dozen power plants in China, investing trillions of NT dollars.
Today, when work on the plants would have been completed, steel prices would have fallen drastically -- just like laptop prices at present. So, in addition to the constant danger that comes with investing in China, Taiwan's steel industry would also have been struggling to turn a profit. No matter how big it might be, China Steel might not have been big enough to escape the consequences. This is a salutary example of the difference between an individual company's interests and the interests of an industry.
Having a dozen Taiwanese-backed power plants would also have meant that China would not have experienced power shortages, that its economic growth would have been smoother and that it would have attracted more investment from Taiwan and
the international community. Taiwan's economic growth would have decreased and, corresponding to this, China may have deployed not just 500 missiles aimed at Taiwan but aircraft carriers as well.
It is a pity that the "no
haste, be patient" policy did not include the IT manufacturing
industry. After 1998, many Taiwanese technology companies moved to China without the effective support of the Ministry of Economic Affairs. This helped make China the third-largest technology-producing economy after the US and Japan. We
also shouldn't forget that about
70 percent of this production
value is created by Taiwanese businesses.
If that hadn't happened, China's GDP would not be as
high and its money diplomacy wouldn't be so cashed-up.
Nor would Boeing have refused a visit by Vice President Annette Lu (呂秀蓮) over a Chinese order for 57 aircraft. Nor would French President Jacques Chirac have kowtowed to Chinese President Hu Jintao (胡錦濤) in the Elysees Palace and opposed a Taiwanese referendum on account of a high speed railway and negotiations with Airbus.
People die for wealth, birds die for food. The same goes for nations, wouldn't you agree?
Huang Tien-lin is a national policy adviser to the president.
Translated by Perry Svensson
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