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Books on Taiwan
REPUBLICAN REFERENCE
Area (sq.km)
35,980
Population
22,603,001
Capital
Taipei
Currency
New Taiwan dollar (TWD)
President
Chen shui-bian
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Update No: 027 - (06/04/06)
Many people believe that Taiwan's President Chen Shui-bian is
becoming more and more of a liability when it comes to dealing with China. There
is no doubt that Mr. Chen is an avowed believer in democracy and he has over the
course of his political career played a credible role in moving Taiwan on the
path to becoming one of the most free of Asia's countries (despite perceptions
that Taiwan's legislature remains one of the most corrupt). Yet at times he
appears to have difficulty in distinguishing between his past role as an avowed
democrat and that of a presidential statesman schooled in the classrooms of
realpolitik.
President Chen continues to take delight in provoking the leadership in Beijing
despite the evidence - confirmed at the polls last December, in which Mr. Chen's
Democratic Progressive Party suffered a resounding rebuff - that most Taiwanese
want to let sleeping dogs lie and get on with the business of building a
prosperous lifestyle.
The president's February 27th announcement, taken after a meeting of the
Executive Yuan (Taiwan's Cabinet) that he would scrap both the National
Unification Council as well as the 1991 guidelines for reunification of Taiwan
with the Mainland has left many people perplexed as to his strategy. The common
assumption is that with support flagging for the DPP and with populist Taipei
Mayor Ma Ying-jeou now in command of a reinvigorated Kuomintang Party, Mr. Chen
is hoping to boost support for his own party by provoking China into a reaction.
If that was the plan then it does not seem to have worked. Disillusionment
within the DPP appears to be running deep - only 20 per cent of the membership
bothered to vote in the January elections for a new party chairman. Mr. Chen,
who in scrapping the NUC broke at least one of the five pledges he made upon
first assuming office in 2000 (which were not to declare Taiwan's independence
from China, not to change Taiwan's official name, not to hold a referendum or
change the constitution and not to renounce the NUC or its guidelines for
reunification). In recent years the NUC has been a moribund body in any case and
it is difficult to see what was achieved by Mr. Chen's action.
Partisan politics are therefore once again to the fore - both over the future
direction of cross-straits policy as well as constitutional reform. With the
2007 elections for a new Legislative Yuan (Taiwan's unicameral parliament)
looming on the horizon we can expect increased acrimony on political exchanges
and especially with regard to the differing approaches of the DPP and the KMT
towards the mainland.
Washington appears to be as equally displeased with the actions of Taiwan's
president as is China and Beijing appears for the moment to be content to let
Washington take the front running on any chastisement that is due. KMT Chair Mr.
Ma was in the United States last month where he stressed his willingness to
reach a consensus and sign a peace accord with Beijing, normalise cross-straits
ties and establish mutual confidence building mechanisms. If Mr. Chen is going
overboard in his efforts to provoke China, his opponent seems to be bending over
backwards in the opposite direction to appease Beijing. As one local newspaper
put it "it was as if the Chinese government had no missiles pointing at
Taiwan and Beijing was a benign and rational regime."
Mr. Ma, of course, is a consummate politician and is selling himself as a
pragmatist. No matter how naïve his approach may be when subjected to analysis,
he is seen as being decisive and a problem solver and, as such, is gaining in
popularity. Contrast this to the DPP which after six years in office still has
not learned this valuable political lesson. Instead of calming the waters and
telling people what they want to hear, DPP politicians look back into the past
and bash the KMT for its authoritarian roots and China for holding back Taiwan
from achieving normal statehood. The DPP also appears at odds with itself and
President Chen's recent statement has only exacerbated the problem.
Seen by many as becoming increasingly autocratic there are growing signs that
others within the party are now standing up to Mr. Chen. The recent decision by
the DPP to cancel a debate over the party's China policy suggests that the DPP
is far from achieving a consensus on the wisdom of the actions of its Executive.
A clear rift is emerging between the Executive Yuan and party headquarters.
While some reining in may be in order, it has to be measured for fear of further
damaging the party. If not healed then the division between the executive arm of
government and the party machine may well counter any advantage the DPP enjoys
through its incumbency in the run up to the legislative elections. Increasingly
the DPP is seen as having lost direction. It may also lose the next election
because of it.
Catholic Church may be the next to leave
Faced with a continued loss of diplomatic allies, the writing appears to be
on the wall with regard to the move of the Embassy of the Holy See from Taipei
to Beijing. The Vatican's top envoy to Taipei has signalled that the Vatican is
reaching out to China and ready to enter into an "official dialogue"
with Beijing over the establishment of diplomatic relations. Hong Kong's new
cardinal, Joseph Zen had earlier signalled the likelihood of the move in asking
Taiwan's Catholics to "understand" that Pope Benedict XVI had made the
reinstatement of ties with China one of his priorities and that in the process
his links with the 300,000 Catholics on Taiwan may have to be sacrificed.
Any move does not appear to be imminent. As part of his statement, Cardinal Zen
said that China needed to change its mindset towards the Vatican before the Holy
See would switch recognition. Nevertheless since the death of Pope John Paul II,
low-level contacts between the Vatican and Beijing had increased.
For the meantime, the freedom to practice religion enjoyed by Taiwanese, stands
in stark contrast to the state-controlled churches allowed by Beijing. As such
an official move by the Catholic Church from Taipei to Beijing may be some time
in coming unless Beijing believes that recognition by the Holy See is worth the
price it would have to pay by granting further religious freedom, in order to
ensure Taipei's further isolation.
The economy
The government's harder line towards China took its toll on investor
sentiment with the Taiex dropping to its lowest level this year following a
government announcement in late March (March 24) that as part of its hardening
stance, government regulators would also be looking more closely at China-bound
investments. Business generally does not support the DPP stand on China and
continues to look to China as its manufacturing - and increasingly, consumer -
base.
According to the new policy line, China-bound investment projects exceeding
US$20 million or those involving sensitive technologies with be required to go
through a tighter screening process before being approved. This new measure will
come into effect starting June 30th.
Despite the tighter investment rules - details of which remain to be announced -
Taiwan is still hoping to benefit from an influx of Chinese tourists. In
particular, Taiwan's tourism bureau sees a growing opportunity to tap the
lucrative market for health tourism. Taiwan intends to seek out those Chinese
who can afford local prices by tapping not only the mainland China market but
also Chinese communities throughout Asia.
On the trade front, in February, Taiwan's balance on merchandise trade fell into
deficit for the first time since May 2005. Nevertheless export orders in the
same month rose at their fastest pace in more than a year led by demand for
notebook computers and a robust demand for semiconductors. Trade figures
reported during the first two months of any year need to be treated with a
measure of caution because of the distortions induced by the lunar New Year
holiday - which this year fell in early February.
There appears to be widespread optimism that despite lingering problems with
consumer confidence, Taiwan's economic performance this year will be better than
last. According to present estimates, the economy grew by 4.1 per cent last year
- a sharp deterioration from the 6.1 per cent recorded in 2004 (but that was an
exceptional year for most countries). Overall real GDP is expected to hover at
an average annual rate of around 4.2 per cent over the next two years with most
of the growth coming from private consumption and gross fixed investment.
Despite all the political noise, Taiwan is well positioned to benefit from the
anticipated growth in Chinese import demand and analysts are expecting exports
to grow by around 7.6 per cent this year - mainly on the strength of this high
demand from China. The one spoiler for Taiwan in achieving a good year is the
level of consumer debt. Taiwan has around 400,000 credit card holders in a
population of 23 million and the average debt per card is around US$15,400.
Total volume of unsecured lending in Taiwan is more than NT$800 billion (US$24.7
billion). In an effort to avoid a consumer debt overhang of the scale than
blighted South Korea some while back the government has reintroduced a plan to
cap the interest rates charged by the banks on cash, credit card and mortgages
back to 12 per cent - down from 20 per cent.
As long as consumer confidence can be propped up and Taiwan's people continue to
spend, the prospects are that 2006 will be a good year.
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