With the Ma Ying-jeou (馬英九) administration aggressively deregulating cross-strait policies, Taiwan must heed the potential negative impact of overreliance on the Chinese market, analysts said yesterday.
The IMF first forecast China’s GDP growth at 11 percent for this year, but has cut it to 8.5 percent. Last month, IMF Managing Director Dominique Strauss-Kahn said the figure could fall to 5 percent.
As 80 percent to 90 percent of Taiwan’s foreign investment goes to China, many are worried that China’s slowing growth, falling exports and rising unemployment could hit the nation hard.
National Taipei University economics professor Wang To-far (王塗發) said a negative impact was inevitable because of the country’s overreliance on China’s economy.
“China’s situation is similar to that of a Buddha made of mud trying to cross a river — meaning it has enough problems saving itself,” he said. “Without 8 percent growth, China cannot create enough jobs. When unemployment becomes a problem, social unrest will follow.”
The Ma administration did not seem to realize the severity of the problem, Wang said, but believed cross-strait deregulation could salvage the domestic economy.
Taiwan’s economy is export-based, Wang said. During the 1960s and 1970s, the US bought 40 percent to 50 percent of the country’s exports, he said, but this dwindled after 2000. Now the US buys 20 percent of Taiwan’s exports, while China buys 40 percent to 50 percent.
As China’s GDP growth has slowed, exports to China have dropped by 50 percent, Wang said.
“In the early days, when our economy depended on the US, many worried we should not put all our eggs in one basket, because when the US sneezed, we would catch a bad cold,” he said. “Now, the situation has reversed and is even worse.”
Wang said economic and political uncertainty were bigger problems in China than in the US.
Economics cannot be separated from politics, Wang said, adding that most of China’s economic policies were part of political maneuvers to ultimately incorporate Taiwan into China.
Because of pressure from China, other countries have balked at signing free trade agreements and other economic accords with Taiwan, Wang said.
Although it was too early to tell when China’s economic power would catch up with that of the US and Japan, overreliance on China posed a great risk to the nation both economically and politically, Wang said.
“It is like exposing your neck and allowing somebody to wring it,” he said. “China’s strategy is clear. They let Taiwanese merchants pressure their government to push Beijing’s political agenda.”
National Taiwan University economics professor Kenneth Lin (林向愷) agreed that economy and politics go hand in hand.
“A precondition for a sovereign state is economic independence,” he said. “When a country has little or even no economic freedom, political problems will follow. It is like when a person is financially dependent, that person does not have the right of free choice.”
Lin said the Ma administration attached too much importance to what globalization, and China in particular, would give the domestic economy.
“China represents many opportunities, but the country’s overreliance on China is turning such an opportunity into a crisis,” Lin said.
A responsible government must consider the potential advantages and disadvantages of any policy, Lin said, but the Ma administration seems to be ignoring the risks posed by overreliance on China.
Part of the government’s strategy to beat the economic slowdown is to increase domestic consumption and public spending, in part by issuing consumer vouchers.
But Lin doubted the effectiveness of these policies. The country’s borrowing money to revitalize its economy only showed it lacked competitiveness and the capacity to act effectively in an economic crisis.
Professor Tung Chen-yuan (童振源) of the Graduate Institute of Development Studies at National Chengchi University said China’s slowing growth and the global economic downturn had eclipsed the benefits of cross-strait liberalization.
While China’s economic clout grows, Tung said he expected Washington and Tokyo to pay more attention to Beijing’s opinions on various issues. However, he did not think the US and Japan would abandon Taiwan because they have strategic interests here.
As long as Taiwan has a clear strategic objective, Tung said the government did not necessarily need to set political preconditions for cross-strait economic exchanges.
For example, Tung said, Washington hoped to see China’s economic liberalization lead to social and political reform.
In addition, the former Chinese Nationalist Party (KMT) administration set three political preconditions for opening up cross-strait transportation links, Tung said, but these did not work as bargaining chips.
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