May 13, 2021

Taiwan tries to shake China’s economic dependence


Special envoy to Taipei (Taiwan)

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Taiwan, the «Other China» which remains separate from the authoritarian Beijing communist regime since the end of the civil war seven decades ago, yesterday held its seventh free elections since 1996 under the long shadow of Hong Kong’s protests. With an area somewhat smaller than Extremadura, this island of 23 million inhabitants once again demonstrates that democracy can also work in the chinese cultural world Despite what Beijing says, it has been proposed to unify it by good or bad.

But the biggest risk to Taiwan It is not an invasion from the continent, but its economic dependence on the gigantic Chinese market, which is its main trading partner. Since 1998, when the “thaw” began to be noticed on both sides of the Formosa Strait, its bilateral trade has increased from 5,020 million dollars (4,520 million euros) to 150,500 million dollars (135,000 million euros) in 2018 With 41.2% of Taiwanese exports heading to China (including Hong Kong) and 19.3% of its imports from the mainland, this small but industrialized island is one of the few countries that has a trade surplus with the « global factory ». Leader in high technology, such as semiconductors and microchips, the same applies to its trade balance with the rest of the world, which in 2018 amounted to 622.2 billion dollars (560,000 million euros) and presented a positive balance of 49.6 billion dollars ( 44.7 billion euros).

53,000 million euros was the GDP in 2018, with a per capita balance of 22,530 euros. The growth was 2.6%

With a million entrepreneurs who have set up factories in the continent for their cheap labor, Taiwan is one of the largest investors in China. Thanks to a common language, culture and history, the continent remains the favorite destination of Taiwanese capital despite the increase in labor costs due to the rise in living standards, which has opened the deck to other emerging countries in the region such as Vietnam, Indonesia and the Philippines. From 1991 to February of last year, Taiwanese investment in China totaled 183.4 billion dollars (165,000 million euros) in 43,401 projects, but other studies estimate that it could double up through tax havens. Among these investment firms, Foxconn stands out, the Taiwanese multinational that has one million workers in 13 factories in China, where all the electronic devices of Apple, Sony, Dell, Hewlett-Packard, IBM, Toshiba and Motorola. In addition to this giant, Taiwanese small and medium-sized entrepreneurs have implemented the successful manufacturing model on the continent that made their country one of the “Asian Tigers” alongside Hong Kong, South Korea and Singapore.

Despite these figures, tension has increased between both parties since President Tsai Ing-wen of the Progressive Democratic Party (PDP), took power in the 2016 elections. Faced with the approach brought by the Kuomintang nationalist party (KMT) during its previous eight years of government, in which twenty important trade agreements were signed, Tsai’s sovereign speech frightens Beijing , which has tried to torpedo it economically and diplomatically.

Isolation

On the one hand, the regime has banned individual trips of Chinese tourists to Taiwan, which have fallen from 3.3 million in 2015 to 2.6 million in 2018. Instead, tourists come from Southeast Asia, but spend considerably less than the Chinese and they stay in cheaper hotels. On the other, it has since snatched seven states that previously had diplomatic relations with the Taipei Government. Only 15 countries, including Paraguay, Nicaragua, Belize, the Vatican and small Pacific islands and the Caribbean they recognize the Republic of China, official name of Taiwan.

Trying to avoid this diplomatic isolation, which does not prevent the Taiwanese from traveling without a visa to 160 countries, the PDP Government has launched its “New Southbound Policy” over the past four years to strengthen ties with Southeast Asia. To the 10 members of Asean, second destination of Taiwanese exports, the countries of the south of Asia, Australia and New Zealand, with whose Government an economic cooperation agreement was signed in 2013. But both the agreement and the economic partnership with Singapore of the same year were signed by the previous KMT Executive.

«The Southbound Policy has worked on people-to-people relationships, attracting tourists and students with scholarships. But I doubt it was a political success, ”Ross Feingold, an analyst and lawyer based in Taipei, who advises multinationals on investment risks in Taiwan for more than 20 years, tells ABC. In his opinion, “although Taiwanese companies have invested heavily in other countries, it has been due to the problems of the commercial war between United States and China and there have been no free trade agreements because Southeast Asian countries have been reluctant to sign them because of pressure from China.

165,000 million euros is Taiwan’s investment in China, but other studies estimate that it would double-track tax havens

In addition to the “Southbound Policy”, the Government launched in 2016 the so-called “New Economic Development Model”, which aims to boost innovation and new technologies to create employment. With a Gross Domestic Product (GDP) of 590,000 million dollars (530,000 million euros) in 2018 and per capita of 25,004 dollars (22,530 euros), Taiwan is an advanced society and is around the 20th place in the lists of International Monetary Fund, the World Bank and the UN. But it suffers the same problems as the rest of the western world. In an increasingly globalized and competitive planet, its development has reached a ceiling and young people face stagnant wages, difficulties in buying a home and a dark future for their pensions. Well educated and speaking Mandarin, they can at least emigrate to mainland China because of the job opportunities offered by their growth. Although there they can earn up to double what they would charge on the island, their emigration once again demonstrates the growing Taiwanese dependence on the continent.

Between 1950 and 2000, the island’s economy grew at an average rate of 8.2%, which then slowed down to 3.8% between 2000 and 2014. After a pyrrhic 0.8% in 2015, it picked up until 2.6% of 2018 despite political disputes with China. «Judging by the statistics, the PDP Government is doing very well in the economy, but it has caused a mess with a series of reforms such as energy transition and labor laws», values ​​Ho Ming-sho, Professor of Sociology at the National University of Taiwan.

In his opinion, the biggest problem on the island is China, since “Hong Kong protests have demonstrated the reality of the principle of‘ ‘one country, two systems’ ’, that the president Xi Jinping equals the 1992 Consensus on Taiwan ». For that reason, he believes that “the most reasonable thing is to expect Beijing’s pressure to increase,” since “nothing can prevent China from undermining Taiwan’s democracy.” To guarantee its political independence, the island wants to detach, or at least reduce, the tremendous economic influence of the continent. And, incidentally, demonstrate that democracy is also possible in Chinese culture.

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