Vice President Annette Lu (
This "mainland fever," Lu said, has not only made Taiwan's economy over-dependent on China, but also seriously weakened its own fundamentals.
"Mainland fever has caused large sums of domestic investment to flow to China and has severely reduced investment here," Lu said in a long speech.
"Naturally it has caused stock and real estate prices to drop," said Lu, adding that investments in China have increased debt rates and reduced savings rates.
"This fantasy about the mainland has triggered uncertainty about the future of Taiwan, causing the relocation of capital and production bases."
Lu made the comments during a speech at a two-day government sponsored economic forum attended by two US Federal Reserve Bank presidents, a former IMF Asia chief, local officials and academics.
Minister of Finance Yen Ching-chang (
In contrast to Lu's view, economic pundits have recently attributed the slowdown to a combination of factors, including a US stock market decline, long-standing banking problems and sagging global demand for electronics goods.
Responding to Lu's statement on China-bound investment by Taiwanese businessmen, Lin Kun-chung (
Lu also used the occasion to try to cool enthusiasm among local firms about investing in China, saying they could be exposing themselves to great risk.
"Blindly following the mainland fever without knowing the risk behind it is not something a wise man does," Lu said.
Lu said that 40 percent of Taiwan's total foreign investment is in China, and two-thirds of that amount is invested in electronics and high technology.
Despite political rivalry, Taiwan businesses have poured more than US$40 billion into China, attracted by a giant market, cheap land and labor, and a common language and culture.
Fearing economic dependence on its giant neighbor, the previous KMT administration banned direct trade and travel with China and barred local investment in strategic sectors and infrastructure under the "no haste, be patient" (
Taiwan firms have clamored for looser China investment restrictions as the US economy -- the nation's top export market -- cools, while China's economy continues to grow at a brisk pace.
The government has agreed in principle to ease restrictions on investment in China and gradually permit direct trade, but details have yet to be hammered out.
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