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Chen shui-bian

Update No: 017 - (31/05/05)

The government in Taipei has rebuffed China's latest overtures to Taiwan, made in the context of unprecedented visits to Beijing by two of the island's top opposition political leaders. China's offer to expand trade links and to allow mainland Chinese tourists to include Taiwan in their travel plans (not to mention the promise of a gift of a pair of giant pandas) has been widely interpreted by Taipei (and in other capitals) as an attempt by Beijing to bolster the credibility of Taiwan's opposition parties at the expense of the ruling Democratic Progressive Party and especially President Chen Shui-bian. China fears that the DPP continues to pursue an agenda that will eventually lead the island to seek full de jure independence from Beijing.
Last month it was KMT Party Chair, and leader of Taiwan's major opposition party, Mr. Lien Chan, that paid an unprecedented visit to Beijing. This month, Mr. James Soong, chairman of Taiwan's opposition People First Party, was in China to meet with Chinese President Hu Jintao. Mr. Soong, who supports reunification with a democratic China (an important caveat), said that he and the Chinese leader discussed a potential cross-Strait free trade zone as well as non-stop cross-strait flights (at present such flights are routed via Hong Kong). President Hu again stressed the necessity of Taiwanese acceptance of the 'one-China' formulation, a message clearly directed toward Taiwan's pro-independence President Chen Shui-bian, who in recent days has appeared increasingly isolated by the succession of opposition figures being granted an audience on the mainland. 
Intriguingly, the joint communiqué issued following Mr. Soong's visit contained a newly worded formulation - "two sides, one China." Whether this represents an acceptable compromise for President Chen's Party remains to be seen, but with much of popular opinion in Taiwan urging a reconciliatory dialogue, Chen's room for manoeuvre may be diminishing. 
Following the two visits, the Chinese state media reported that Beijing would lift a ban on mainlanders visiting Taiwan. Such a move would provide Taiwanese opposition leaders Lien Chan and James Soong with a tangible reward for their recent visits to China. The Beijing Morning Post said that China's National Tourism Bureau would be allowed to join sanctioned travel agency tours to the island. However, the report went on to add that the Taiwanese authorities must reciprocate and allow an increase in the volume of mainlanders allowed to visit the island. Currently, only Chinese citizens who reside overseas or those entering Taiwan from a third country are permitted to enter Taiwan. Taiwanese Premier Frank Hsieh said in a news conference that the government was planning to grant entry to as many as 1,000 tourists per day from China, but did not pinpoint any allowable length of stay. Outbound tourism from China is growing rapidly along with the emergence of a Chinese middle class and Chinese tourists are increasingly courted by Asian countries keen to promote tourism as a new economic driver against a slumping export sector. 

Taiwan again rebuffed at WHO meet
China's largesse towards Taiwan did not extend towards allowing admission for the island to the World Health Organisation where Taiwan is seeking, as a minimum, observer status as a separate health territory. This year's World Health Assembly (WHA) began on 16th May. In addressing the media, Taiwan's Health Minister, Hou Sheng-mou, stressed that, in terms of medical assistance, Taiwan has already moved from the role of recipient to that of donor country. "Whether in terms of foreign medical assistance and cooperation, or relief efforts after the tsunami in South Asia, the government and people of Taiwan have contributed significant moral support as well as material resources." "Establishment of the International Medical Care Management Center of Taiwan is further proof of the nation is willingness to pay back to the international community", he said, and that it would be the international community's loss if Taiwan is prevented from entering the WHO.
Before the annual assembly began, some people in Taiwan had hoped that the recent visits to the mainland by leaders of the island's opposition parties would put an end to Beijing's efforts to intentionally obstruct Taiwan's participation in major international organisations. During those visits, China had promised to do exactly the opposite and help Taiwan take part in WHO-related activities. However, that proved to be an empty promise. At the WHA meet, China again spoke out in traditional terms against those who would support any attempt to bring Taiwan into the fold and in the event, the matter was not put to a vote.

Taiwan: President Chen receives a boost from voters
Taiwanese President Chen Shui-bian together with opposition leaders Lien Chan and James Soong faced a key test of their China policies this month when Taiwanese voters elected a new 300-member National Assembly. The body is not to be confused with the Legislative Yuan (Taiwan's unicameral parliament). The National Assembly is the body that will debate and ratify constitutional changes introduced last year and supported both by the DPP as well as the major opposition party, the Kuomintang in the legislature. In practice, though, the election was a referendum on whether Chen's pro-independence line or Lien and Soong's conciliatory stance towards the mainland is more popular with voters. A strong showing by the latter two politician's parties would have increased the pressure on Chen to show more flexibility towards the People's Republic of China. 
The turnout was low by any standard but of those who did turn out, Taiwanese President Chen Shui-bian received a boost from his Democratic Progressive Party (DPP) having won the largest number of votes (42.52 percent) in the election to the National Assembly, Furthermore, when the DPP's vote is combined with that of the Taiwan Solidarity Union's 7.05 percent, the pro-independence total rises to 49.57 percent. By contrast, the pro-mainland 'pan-blue' opposition KMT and People First Party (PFP) took 38.92 percent and 6.11 percent, respectively, for a total of 45.03 percent. 
This was surprising, given that opinion polls taken prior to the vote had shown strong support for visits to the mainland by the KMT and PFP leaders. However, turnout was just 23.36 percent, which raises doubts about the true reliability of the vote. As ever, Taiwan's electorate is divided, although Chen has claimed vindication in his tough stance towards the mainland. This is hardly the case but it suggests that a breakthrough in cross-straits ties is not imminent.
The National Assembly will convene on May 30 to debate proposed constitutional amendments that would reform Taiwan's legislative process and halve the number of seats in the Legislative Yuan from 225 seats to 113. Also changed would be the manner in which lawmakers are elected by multi-seat constituencies in exchange for a system in which each voter would cast one ballot for a single legislator to represent a district with a second ballot for the voters favourite party and which would then be used to allot seats in a system of proportional representation. A final change to be considered by the National Assembly is its own abolition. If approved, future constitutional changes will be voted on by the Legislative Yuan itself.

Competitiveness goes up but growth goes down
The International Institute for Management Development (IMD) in Switzerland released its annual World Competitiveness Yearbook this month. Among the 60 economies evaluated in the survey, Taiwan is ranked No. 11 overall, up one notch from last year. The United States is ranked No. 1, followed by Hong Kong and Singapore, the only two countries in Asia that ranked higher than Taiwan. Meanwhile China is No. 31, down from last year's 24th place.
According to the Council for Economic Planning and Development (CEPD), the IMD's governmental contact agency in Taiwan, this is the third year in a row that Taiwan has moved up in the IMD's world competitiveness rankings. In 2002, 2003 and 2004, Taiwan ranked 20th, 17th and 12th respectively.
Despite becoming more competitive, Taiwan's rate of economic growth is again slowing. According to the latest figures from the CEPD, Taiwan's economy grew by 2.5 percent in 1Q05, as high oil prices and sluggish exports took their toll more quickly than expected. As a result the government has cut its growth forecast for the year-from 4.21 percent to 3.63 percent -a level that is significantly lower than the 5.7 percent growth rate attained last year. 4Q04 economic growth was only 3.25 percent y-o-y and there have been warnings of a slowdown for some time. An expected surge in domestic demand has thus far failed to materialise, exacerbating the effects of slowing export figures. 
Factors contributing to the export malaise include rising US interest rates and China's efforts to cool its economy. The government had announced a lowering of the anticipated 2005 trade surplus to US$9.4 billion from US$14.9 billion, but maintained its forecast for 2005 export growth at 6.7 percent - down sharply from the 21.7 percent achieved in the 2004 boom year. The Director-general of Taiwan's statistics agency, Hsu Jan-yau , said that Taiwan has "to rely more on domestic consumption for the 3.6 percent growth." The government has projected private consumption growth of 3.0 percent in 2005. This is less than the 3.1 percent in 2004 but times are getting tougher and the government seems prepared to deliver the stimulus needed to achieve it. 
Despite the slowdown, export orders remain brisk, rising to their second highest ever level in April. Export orders, which normally are taken as an indicator of future export growth, rose by 15.4 percent in April year-on-year to a total of US$20.81 billion. The dollar total was slightly below the record of US$20.9 billion recorded in March. Because of the move of much of Taiwan's manufacturing base to the Chinese mainland, many of these orders booked in Taiwan, will actually be shipped from China. Orders from Japan increased at the fastest pace totaling US$2.33 billion (up by 41 percent) while orders from Hong Kong rose by 22 percent, from Europe by 15.8 percent and from the US by 7.2 percent. The United States remains the prime export destination with orders totaling US$5.37 billion.
Actual industrial output in Taiwan rose by 0.63 percent in April after falling by 0.17 percent (revised figure) in March of this year.
In the light of the slowdown, Premier Frank Hsieh has announced several new measures that to boost the economy. According to Mr.Hsieh, the government will provide US$6.4 billion for loans to small and medium-sized enterprises. The government also plans to increase the credit guarantee fund by US$3.2 billion, Hsieh said.
The government is to earmark another US$9.6 billion to extend a measure allowing preferential mortgages for first-time home buyers, which is about to expire in June. First-time home buyers will continue to be eligible for bank loans of approximately US$80,000 in Taipei, or around US$64,000 in other cities, based on an interest rate of 2.565 percent, with 0.125 percent subsidized by the government.
The stimulus package, the premier said, was introduced to address the slowdown in economic growth as a result of crude-oil price hikes and the failure of the Legislative Yuan to approve the budgets for several major government infrastructure projects that were designed in part as a stimulus to domestic growth.
In addition to announcing these economic initiatives, Hsieh provided an outline of his administration's goals and an overview of the country's development over the past few years. Hsieh contended that the general economic climate in Taiwan remains favourable. He cited recent stock-exchange statistics showing a rise in foreign investment in Taiwanese companies to a total of US$105 billion, compared with US$41 billion five years ago.
Nevertheless, the premier acknowledged that there is much to do to improve government efficiency. Noting that Taiwan had jumped one notch on the International Institute for Management Development's rating of its global competitiveness, Hsieh attributed the progress to achievements in the private sector.
"The government, including both the legislative and the executive branches, should be able to reflect this," the premier said, adding, "Otherwise, the government will become a burden that crushes the private sector."

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