Despite President Ma Ying-jeou’s (馬英九) campaign promises and the policies of his administration, which envision a big cake for everyone to share, the reality is very different. The government’s move to allow Chinese investment in Taiwan is a case in point. In the three months since deregulation, Taiwan has attracted just NT$189 million (US$5.87 million) in Chinese investment.
The government has tried to explain why there has been no rush to invest: Taiwan still has too many restrictions on Chinese capital and Chinese visitors; the global economic climate is not favorable; China is partly to blame. It is now nearly a year and a half since Ma’s Chinese Nationalist Party (KMT) regained control of the government, but its core policy — improving cross-strait economic and trade ties — has not produced many benefits.
The government also opened Taiwan to Chinese tourists, but even during the Golden Week holiday following China’s Oct. 1 National Day, only about 1,000 Chinese visitors arrived per day — far short of the predicted 3,000. Japanese and US tourist numbers are also down. As most Chinese tourists come here on low-cost tours and are not big spenders, they generate less revenue than the missing Japanese and Americans.
After all the hype, the opening to Chinese tourists and investment were anti-climactic. Now the government is preparing to sign a memorandum of understanding (MOU) on cross-strait financial supervision and an economic cooperation framework agreement (ECFA) with China. Taiwanese businesspeople are uncertain about the promised benefits of these agreements, while the working class fears they may exacerbate unemployment.
The MOU will allow Chinese banks to open branches in Taiwan. The problem is that China has no private banks — they are all state run. Their branches in Taiwan can therefore be expected to serve a political purpose. If they offer higher interest rates than local banks, they will attract the majority of deposits and can then lend this money to Chinese-invested businesses in Taiwan, allowing them to buy up key resources and take control of the economy.
While the planned MOU is limited to finance, an ECFA would go farther. The Ma administration wants to use an ECFA to connect with ASEAN and avoid marginalization, but this is just wishful thinking. Other ASEAN members may not want Taiwan in their club, and China has not promised to allow Taiwan in.
An ECFA will also make it easier for businesses to move from Taiwan to China, which means less jobs in Taiwan. Taiwan’s market will be open to Chinese agricultural and industrial products and services and China’s low labor costs will make it impossible for Taiwanese firms to compete. The government has promised that imports of Chinese farm produce will be limited and Chinese workers barred, but these measures go against the free-trade spirit of the WTO and an ECFA, casting doubt on their viability. The benefits of an ECFA are far from clear, while the negatives are obvious. It is only natural that Taiwanese workers and some entrepreneurs, especially those in the traditional manufacturing sector, would be anxious.
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