It is clear that whoever hopes to win the presidential election next year will have to propose a sound strategy on how to deal with China: not just politically, but also economically.
The process of cross-strait economic liberalization launched in the 1980s and sustained even under the pro-independence Democratic Progressive Party from 2000 until 2008, accelerated dramatically after President Ma Ying-jeou (馬英九) of the Chinese Nationalist Party (KMT) stepped into office on May 20, 2008. With the signing of the Economic Cooperation Framework Agreement (ECFA) in June last year and various other economic pacts in recent years, the dependence of Taiwan’s economy on China has grown by leaps and bounds.
Putting the political implications of those agreements aside, we will leave it to the history books to judge whether the decision to open the gates to Chinese money was economically sound for Taiwan. A growing number of economists are claiming that China’s economic miracle is heading full speed for a brick wall. Although such predictions have been made for more than a decade, there is evidence that this time the alarmists could be right.
Should such pessimistic forecasts come to pass, the more dependent Taiwan is on China for its economic well-being, the more severe the repercussions of a downturn across the Taiwan Strait will be.
Earlier this month, renowned economist Nouriel Roubini was warning of potentially destabilizing contradictions between China’s short and medium-term economic performance. In his view, China was able to weather the global economic crisis and sustain double-digit economic growth by artificially propping up its economy with major infrastructure projects.
However, this stopgap measure cannot go on indefinitely and already the construction spree is catching up with China as evidenced by low usage of its high-speed rail systems, highways leading to nowhere and steel-and-glass ghost towns. Furthermore, a recent scandal about the safety of China’s new ultramodern high-speed rail system has highlighted the prohibitive cost of construction and operation. The rail system, which was part of Beijing’s stimulus plan for 2008, is already losing money and depends for its survival on bank loans. The Chinese Ministry of Finance last week confirmed that its debt currently stands at US$276 billion, which was almost entirely borrowed from Chinese banks.
A great share of the massive infrastructure projects that have sustained the illusion of a booming Chinese economy has been buttressed by bank loans and many of those are non-performing and will very likely never be reimbursed. Add rampant corruption, as was ostensibly the case with the underused high-speed rail, to this mix and there are the makings of an economic time bomb — the consequences of which for the Chinese economy (and the region) one can only guess at.
For Taiwan, these signs should awaken officials to the need to implement prophylactic measures in the event the Chinese economy implodes. The key to this is threefold: ensuring Chinese money in Taiwan comes from economically sound institutions; redoubling efforts to attract foreign investment from sources other than China; and diversifying export destinations (Taiwan’s exports to China plus Hong Kong last year accounted for about 42 percent of total exports. Inflation, or a major economic downturn in China, would have a serious negative impact on Taiwan’s exports).
While there is no way to avoid significant trade with the giant next door, the candidates in next year’s presidential election should clearly explain to the public how they intend to hedge against a possible rainy day in China. It’s not a question of whether Taiwan should deal with China or not, but how.
It’s not every month that the US Department of State sends two deputy assistant secretary-level officials to Taiwan, together. Its rarer still that such senior State Department policy officers, once on the ground in Taipei, make a point of huddling with fellow diplomats from “like-minded” NATO, ANZUS and Japanese governments to coordinate their multilateral Taiwan policies. The State Department issued a press release on June 22 admitting that the two American “representatives” had “hosted consultations in Taipei” with their counterparts from the “Taiwan Ministry of Foreign Affairs.” The consultations were blandly dubbed the “US-Taiwan Working Group on International Organizations.” The State
The Rim of the Pacific (RIMPAC) exercises, the largest naval exercise in the region, are aimed at deepening international collaboration and interaction while strengthening tactical capabilities and flexibility in tackling maritime crises. China was invited to participate in RIMPAC in 2014 and 2016, but it was excluded this year. The underlying reason is that Beijing’s ambitions of regional expansion and challenging the international order have raised global concern. The world has made clear its suspicions of China, and its exclusion from RIMPAC this year will bring about a sea change in years to come. The purpose of excluding China is primarily
War in the Middle East, global terrorism and the Ukraine war pose significant threats to the global economy. However, according to Global Guardian, a leading security solutions firm, a conflict between China and Taiwan would cause the greatest disruption since World War II. Its Taiwan Shock Index (TSI) analyzes the potential global impacts of such a war. Chinese President Xi Jinping’s (習近平) rhetoric about rejuvenating the People’s Republic of China heavily emphasizes “reunification” with Taiwan. Experts differ on when this might happen. Some point to 2027, the centenary of the Chinese People’s Liberation Army (PLA), as a symbolic and strategic milestone. Others
Many local news media last week reported that COVID-19 is back, citing doctors’ observations and the Centers for Disease Control’s (CDC) statistics. The CDC said that cases would peak this month and urged people to take preventive measures. Although COVID-19 has never been eliminated, it has become more manageable, and restrictions were dropped, enabling people to return to their normal way of life due to decreasing hospitalizations and deaths. In Taiwan, mandatory reporting of confirmed cases and home isolation ended in March last year, while the mask mandate at hospitals and healthcare facilities stopped in May. However, the CDC last week said the number