A new road map for the dragon

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China is wooing Taiwan to script a new economic order that will eventually help it rule the growing markets of the world, reports Shantanu Guha Ray

Battle rules Models at a Taiwanese biz show in Beijing
Battle rules Models at a Taiwanese biz show in Beijing
Photo: Getty Images

MANDARINS OF the World Economic Forum (WEF) are calling it Chaiwan, a term they coined only very recently but one they are confident will gain in currency. More than six decades after Taiwan split from China at the end of the 1949 civil war – and shape a new economic order across the globe.

Economists across the world still talk about the five-nation growth syndrome with India, China, Japan, Brazil and Russia being world business denominators over the next decade. However, with relatively little attention focused on them, the two neighbours have themselves indicated how they wish to resolve the longstanding dispute over Taiwan’s status. However, Taiwan has already rejected reunification under the so-called “One Country, Two Systems” formula which Hong Kong and Macau operate under, with a free press – but with top leaders needing Beijing’s endorsement. The neighbours continue to aim their weapons against each other. While China has around 1,000 missiles targeted at Taiwan, the latter continues to make major arms purchases every year. And no one can hazard a guess as to when a peace treaty will be signed by the two.

That’s politics. As far as economics go, analysts say that China and Taiwan are increasingly focusing on business ties that are seen as mutually beneficial and add that the sovereignty issue may work itself out over time without an armed conflict, as long as neither side crosses the other’s limits. In short, China is letting its economic clout do the talking. “They know the ground realities of developing business across the border,” says Arthur Ding, secretary general of the Taipei-based Council of Advanced Policy Studies, a major think tank.

Chinese President Hu Jintao has already encouraged his government to avoid angering Taiwanese people, and, instead, woo them for business. Thousands of Chinese tourists visit the island nation every month and China has slowly worked towards becoming Taiwan’s biggest trade partner. No wonder, then, that annual trade between the two sides amounts to about $130 billion. Every year, tens of billions are invested by Taiwanese businesses in China – the island nation’s biggest investment destination; an estimated 1.5 million Taiwanese work, live and form the island’s biggest export market. Ties have also been improving in the last 16 months since Ma Ying-Jeou took over as president in Taiwan, replacing the independence- minded Chen Shui-Bian, who enraged Beijing with his drive to boost Taiwan’s global profile.

Taiwan also needs new zones to develop its business. Till date, it’s made an impact only in Vietnam after the nation emerged from the shadows of the war in 1975. For example, 70 percent of businesses in Ho Chi Minh City, Vietnam’s largest, are Taiwanese. By 2008, Taiwan — Vietnam’s largest foreign investor — had invested more than $19 billion in Vietnam. Trade between Taiwan and Vietnam stood at $9.15 billion last year, with Taiwan enjoying a surplus of $6.73 billion. That puts it second only to Taiwan’s surplus against China, which reached $35.5 billion the same year.

And now, if the two nations sign an economic pact in 2010, their economies will become much more inter-dependent and help China – in many ways – to seek a larger global platform to discuss, debate and, eventually, dominate economic issues to its benefit. “A China- Taiwan domination of world markets will swing a lot of businesses to those two nations. China, anyway, has a big head start in exports over a host of nations across the world and maintains a dominating presence in a lot of growing economies,” Ma Tieying, a Singaporebased economist, told TEHELKA.

The trade pact of the Economic Cooperation Framework Agreement (ECFA) with China may boost Taiwan’s economic growth by between 1.65 percent and 1.72 percent, Yiin Chii-Ming, Taiwan’s former economic affairs minister, said in July this year.

Annual trade between the neighbours stands at $130 billion and the figure is growing fast

No wonder, then, that the WEF officials see this as the latest world economic trend and have – justifiably – included Chaiwan in their future summits, both at Davos and the offshoot ones across the world. There are already talks that how – once the economic pact is signed by the two – recession-hit Taiwan will actually get nearly 300,000 jobs and triple its current exports, not just to China but across the world.

CONSIDER THIS point. After the two sides ended a 60-year ban on direct flights and shipping and postal services across the 180km-wide Taiwan Strait last year, Taiwan is also seeking a financial agreement allowing cross-shareholdings for banking and insurance businesses on either side.

If Chaiwan eventually becomes a reality, Taiwan’s economy will get a tremendous boost

Newspaper reports say investors have – so far – endorsed the cross-strait thaw. Taiwan’s Taiex index jumped 62 percent this year through September 29 after a 46 percent plunge in 2008. Many say its definitely better than the 46 percent rise in Hong Kong’s benchmark Hang Seng Index, the biggest Chinese market for foreign capital. In 2009 alone, overseas investors have already pushed an additional $11 billion into Taiwanese stocks compared with a net outflow of $14.4 billion in 2008, says Bloomberg in a recent report.

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THE BIG GAME PLAN

China wants to double trade balance with Taiwan by 2015

Taiwan wants an economic pact with China to generate more jobs

Currently 1.5 million Taiwanese work in various offices across China

China wants Taiwan to shape its SME biz model across the world

After China, Vietnam is Taiwan’s biggest trade partner

China is keen to promote the tourism markets of Taiwan

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“We will continue to strengthen, normalise and sytematise cross-strait economic cooperation,” Wang Yi, head of China’s Taiwan Affairs Office, said in a speech to the day-long Jiangxi Taiwan Economic and Trade Cooperation Seminar in southeastern China, according to a September 21 statement on the Taiwan Affairs Office’s website. The seminar, for the record, sealed deals worth a whopping $1.42 billion, an indication of the growing preference for business across the borders. If Chaiwan eventually becomes a reality, the island nation – currently recognised by just 24 countries – will get a tremendous boost to its growing economy, the 17th largest in the world. And if China is there for backup, global business domination will acquire a definitive meaning for the two foes turned friends.

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