Sat, Feb 14, 2009 page3

• INTERVIEW: Be wary of China and diversify, Therese Shaheen says

  In the face of the economic tsunami sweeping the planet, a growing number of countries, including the US, are looking to Beijing as a strategic partner. In an interview with ‘Taipei Times’ reporter Jenny W. Hsu yesterday, former American Institute in Taiwan chairwoman Therese Shaheen warned that an overreliance on China could be dangerous and that Taiwan had to rely on its inherent advantages and diversify its investments if it is to weather the crisis

  • By Jenny W. Hsu / STAFF REPORTER
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  Taipei Times: Can you tell us about US President Barack Obama’s policy on Taiwan?

  Shaheen: Generally speaking, Obama’s policy toward Taiwan will not change. It will be based on the “one China” policy, the Three Communiques and the Taiwan Relations Act. But I think there is something broader that forms US policy toward Asia, and that is the US’ priorities at [any given] time.

  In the last administration, the US’ priority was 9/11, which came eight months into [US president George W.] Bush’s first term. Even though US policy didn’t change, that [event] shaped the US’ attitude and perspective for the rest of his term.

  

  Former American Institute in Taiwan chairwoman Therese Shaheen is pictured in Taipei yesterday after she refused to respond to reporters’ questions about whether she would visit former president Chen Shui-bian. Shaheen spoke at a forum organized by Taiwan Thinktank entitled “The New US Administration and its Asia Policy.”

  PHOTO: CNA

  Now, with the Obama administration, I presume it would be the same. Now we have what a lot of people have called the “economic 9/11,” so that would be the top priority of the Obama administration unless something supersedes that. So the US will look at Asia through the eye of the economic crisis. The conventional wisdom [in Washington] is that China is the driving force behind potential Asian growth. I believe the current perception of the US government [is] ... that China is perhaps an equal partner to the US in solving this crisis. My argument today is that it is not.

  The Chinese economy is structurally unsound. I believe the leaders know this and they are trying to correct the problem. But because of years of driving growth up at the expense of rising living standards and, ultimately because it is hollow growth and because everyone looked to China’s growth, growth became the goal, not further developing the economy and the health of the entire economy. So what happened is that the Chinese government became more and more reliant on foreign direct investment and exports at the expense of domestic consumption, exports into China, or rising income and a better standard of living.

  If we use the analogy of boats, Taiwan is a motorboat and the US is a large cruiser, and China is a huge freighter, so it can only move slowly. It’s large ... and it’s not modernized to the extent that Taiwan and the US are, so it would be very difficult to [raise the living standards of the rural poor in China]. China, regardless of the amount of stimulus that it throws at the problems, will not be able to turn as fast, and therefore will not be able to outrun the time it will take the US to get through the recovery.

  TT: How do you think the economic crisis will affect the relationship between Taiwan, the US and China? Should Taiwan be worried that the US will lessen its support in an effort to make Beijing an economic partner?

  Shaheen: I think it’s a legitimate worry, which is why I’m spreading the word that China is in worse condition than any of the developed economies in Asia. The Chinese leaders know this. Two years ago, [Chinese] Premier Wen Jiabao [溫家寶] said the Chinese economy was unstable, unstructured, uncoordinated and unsustainable.

  Many people in the US believe that the PRC [People’s Republic of China] is the US’ banker. This is absolutely untrue. Any country that has a trade surplus with the US or any countries that have goods that are dollar-dominated must have US dollars. They are prisoners of the US dollar ... so their keeping dollars is largely involuntary ... and [China] has to continue to buy US treasury [notes] in order for its dollars to continue to earn what they are earning [now].

  TT: How do you think it will affect political ties between Taiwan and the US? Could the US become so desperate to revive its own economy that it would do so at the expense of Taiwan’s sovereignty?

  Shaheen: No, they don’t need to appease China, if it is understood that China will follow the US out of the recession.

  The Taiwanese economy is much healthier than the Chinese economy. Even though Taiwan has an overreliance on exports, the Taiwanese move like fighter pilots. They make decisions like fighter pilots. Don’t forget who you are.

  The first thing [the Taiwanese] should do is to diversify away from China. I would not put more money in China unless you absolutely have to. Diversify away from China, not because China is bad, but because you should always have a diversified investment portfolio.

  TT: Do you think the Taiwanese government and Taiwanese businesspeople are overreliant on China?

  Shaheen: I say anybody’s portfolio should be diversified. China’s economy has been sick for a long time. There was the stock market crash in 2007 and the housing collapse shortly after, so that means China had its own subprime crisis before the US. So to think China can lead us out of the recession is not correct. Even though Taiwan is in its own sticky wicket ... I believe the Taiwanese people will reorganize, rethink and move to other countries, focus on other industries and the Ma [Ying-jeou (馬英九)] administration can lead Taiwan out of this.

  The Taiwanese can do almost anything because they have good brain power and they are quick movers. Taiwan will turn very quickly, quicker than almost anybody else. But Taiwan does start with a problem that it is being too dependent on China. So it would be absolutely the wrong advice to be more dependent on China ... Taiwan is in the situation it is in because it was already too dependent on China.

  TT: Are you concerned that in order for Taiwan to make any political gains, the Ma or the Obama administration would do so by shortchanging Taiwan or agreeing to become even more dependent on China?

  Shaheen: Generally my answer would be no, and let me tell you why: I have been pushing for the three links for a long, long time. I am for China growing in a healthy way. If the Ma administration can get membership for Taiwan at the WHO, that would be fantastic. Only if real economic sacrifice by Taiwan had to be made to placate the PRC would I have a problem with it. If China can help Taiwan to move on some of these political issues, God bless. But don’t think for a minute that Taiwan should depend on China economically. That is a trap, a spider trap. It doesn’t mean don’t trade with China. Diversification is the key to both economic and political freedom. So don’t make the mistake of not diversifying. It is certainly the time to diversify more.

  TT: Should Taiwan be suspicious of Beijing’s “goodwill” gestures of the last few months? Can Taiwan continue to count on the US for support?

  Shaheen: Taiwan should always think first of its own self-interest and keep that in mind. President Ma has pledged to do this. So I think he should be trusted. The Taiwanese people must know they should not trust anything other than their own self-interest. Think of yourself first.

  Taiwan should count on itself. The US is a friend, but count on yourself. Taiwan ... became the semiconductor capital of the world and ... even when [Taiwanese manufacturers] started to produce in China, I had no problems with that because Taiwan kept up with the best design and the best innovation. This made Taiwan important. Taiwan demanded the world’s attention. Depend on yourself and the world will notice.

  TT: What should Taiwan do to keep its competitive edge?

  Shaheen: Taiwan is in the motorboat. Taiwanese competitiveness is razor sharp ... because it has small and medium-sized businesses and because it has large businesses but not on the scale of Japan or [South] Korea. One reason is because it is a smaller country, but also because of national temperament. Taiwan has many entrepreneurs and small and medium-sized businesses which should be [encouraged], because that’s where you will win.
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