Bonnie Glaser, senior fellow at the Center for Strategic and International Studies in Washington, recently published an article entitled China’s coercive economic diplomacy.
In her article, Glaser asserts that China has used the China-ASEAN free-trade agreement (FTA) — and overseas, investment, assistance and trade — to encourage other countries to consider its national interests when formulating policies.
The trend Glaser observes is not a new one; it is an expression of the Chinese Communist Party’s (CCP) doctrine that everything must serve a political end.
In her article, Glaser, an expert on China, presents a categorized list of major, recent international disputes to demonstrate how China’s policy of integrating politics with economics is becoming ever-more pervasive.
As an example, Glaser mentions the ASEAN Ministerial Meeting held in Cambodia in the middle of last month, which for the first time in 45 years did not release a joint communique. This was apparently the result of pressure exerted by China with Cambodia providing compliant support.
As Glaser explains: “Beijing has provided over US$10 billion in aid to Cambodia. Last year alone the amount of foreign investment pledged to Phnom Penh by Beijing was 10 times greater than that promised by the US.”
Glaser says that China has been offering major economic “carrots” in a bid to expand its influence in Southeast Asia, the “ASEAN plus one” China-ASEAN FTA being one example.
Of course, where there are “carrots,” there are also “sticks.”
For example, after an ownership dispute broke out in April between China and the Philippines over the Scarborough Shoal, known in Taiwan as Huangyan Island (黃岩島), China blocked banana shipments from the Philippines from entering Chinese ports on the grounds that the fruit was contaminated with insects. This dealt a major blow to the Philippines, which exports over 30 percent of its bananas to China.
Consequently, business interests in the Philippines pressured their government to make concessions
In 2010, following Japan’s detention of the captain of a Chinese trawler that had entered waters near the disputed Diaoyutai Islands (釣魚台), China retaliated by blocking shipments of rare earth minerals to Japan.
After the Norwegian Nobel Committee awarded the 2010 Nobel Peace Prize to Chinese dissident Liu Xiaobo (劉曉波), China froze FTA talks with Norway and imposed new veterinary inspections on imports of Norwegian salmon. As a result, last year, China’s imports of salmon from Norway fell by 60 percent.
Glaser’s findings are nothing new for those who have lived through Taiwan’s experience, but now — as a rising Chinese uses economic pressures to achieve its political goals — Glaser perceives that it is gradually encroaching on US benefits and values.
In China there is no such thing as pure economics, but only political economy based on the Karl Marx’s economic theory as outlined in Das Kapital. Economy and politics are inseparable.
There is a clear difference between China’s situation and the kind of relationship that exists between business and politics under capitalism where businesses use their economic muscle to influence politics, pushing for beneficial and preferential policies or preventing things that would be harmful to their interests. Their motive is simply to maximize their profits.
In China, politics is the goal and economics is a means rather than an end in itself.
China does not perform its calculations according to gains and losses on company accounts. In relation to China’s Taiwan policies, this mindset is expressed by a quote by Taiwan’s former vice defense minister Lin Chong-pin (林中斌) once commented, the CCP believes that the cost of “buying Taiwan” is lower than that of taking it by force.
China’s strategy of “buying Taiwan” has made a lot of headway with the government of President Ma Ying-jeou (馬英九), who thinks that Taiwan can deal with economic matters first and leave political issues until later in its dealings with China.
However, Ma’s approach has hit a bottleneck. During Ma’s first four-year term, his administration downgraded Taiwan’s status as a nation under the fig leaf of the so-called “1992 consensus.” Disregarding Taiwan’s sovereignty, the Ma government preferred to dance to China’s tune which opposes Taiwanese independence.
However, it looks as though the Ma administration cannot keep acting this way and China is now upping the ante by pressuring Ma’s Chinese Nationalist Party (KMT) to accept that “both sides of the Taiwan Strait belong to one country.”
The implication is that, if the KMT does not comply, follow-up talks on the cross-strait Economic Cooperation Framework Agreement (ECFA) will not be able to go ahead.
Is the ECFA not a repeat of the “ASEAN plus one” case that Glaser refers to in her article?
The KMT is like a turtle crawling into China’s giant sack and with no other options or exits available it will suffer the same fate — whether it crawls in or tries to beat a retreat. This is one of the main reasons why Taiwan’s economy has lost its drive and is floundering.
Recently Ma’s government has been saying that it wants to save the economy, but one of its suggested remedies is to further open Taiwan to Chinese capital investment. Chinese investors are eager to break through Taiwan’s strict restrictions — such as controls on permitted investment categories, limitations on stock ownership and total investments.
Judging by how China has operated in other countries, winning or losing money is not its primary concern. If China can dominate a country’s companies and their employees and markets, then at critical moments it will be able to influence and even decide that country’s political decisions.
So, is the government’s plan to allow more Chinese investment not tantamount to speeding up China’s strategy of buying Taiwan? Would it be right to view this process purely according to the theory of free-market economics?
Recently, Taiwan’s opposition Democratic Progressive Party (DPP) has been pondering how to get to know China better. Considering the US-oriented perspectives expressed by Glaser, and in view of the KMT’s past mistakes, it should be easy for the DPP to understand if its aspiration of “developing economic and trade relations with China while insisting on Taiwan’s sovereignty” is tenable or not.
The naive fantasy that economics can be separated from politics is not realistic even in a democratic country, let alone in China, where the economy is always placed at the service of politics.
Leaders of Taiwan’s governing and opposition parties must be willing to bite the bullet eventually and work together on walking a more difficult path. That path must involve encouraging research and development and finding ways of keeping technology, job opportunities and tax revenue here in Taiwan, while exploring new markets and linking up with advanced countries.
The China road may look like it is easier to travel down, but there is no such thing as a free lunch, and Taiwan has already started to pay a heavy price.
Translated By Eddy Chang
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