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Key Economic Data 
  2003 2002 2001 Ranking(2002)
Millions of US $  406,000    
GNI per capita
 US $ 18,000
Ranking is given out of 208 nations - (data from the World Bank)

Books on Taiwan

Update No: 044 - (29/10/07)

Taiwan celebrated its National Day on October 10 (10/10-or Double 10) and as expected the occasion was rife with partisan rivalry. President Chen Shui-bian eschewed a formal national day address but in remarks made to reporters prior to the parade and celebration, he again called upon the world to criticize Beijing for its record on human rights, its military exercises simulating an invasion of Taiwan, and its military build-up much of which is directed at Taiwan.

KMT presidential aspirant, Ma Ying-jeou and the entire KMT team stayed away from the official celebration and conducted their own rival commemoration at a flag-raising ceremony in Taipei County.

Of course it was all over semantics: the government was bent on pushing its pro-Taiwan agenda and downplaying the concept of "republic of China" while the KMT is bent on maintaining the status quo-at least until an opportune time emerges to negotiate with Beijing over Taiwan's permanent status, which appears to be something less than the full independence that the DPP is seeking.

If pro-democracy supporters were out in full-force supporting the call of President Chen, Taiwan's first and foremost ally, the United States, was conspicuous by its absence. It did not go unremarked in Taipei and elsewhere that the vigour with which Washington has supported pro-democracy activists in Burma during the recent demonstrations against the military junta, stand in stark contrast to the antipathy of the US to democracy in Taiwan.

Increasingly the United States appears to be using Beijing as the cornerstone of its own Asia policy and that means distancing itself from democratic Taiwan. Indeed rather than let China stand alone in the use of its veto power at the Security Council to demolish Taiwan's latest application to join the world body, U.S. Deputy Secretary of State John Negroponte came out publicly in support of Beijing with a statement to media in Hong Kong that the US was against any alteration of the status quo. Local analysts understand the U.S. position but question why such people as a Deputy Secretary of State needs to continue to repeat it. In the words of one commentator: "the U.S. increasingly sees its relationship with China as a zero-sum game: As the relationship with China warms, the relationship with Taiwan must cool." All that is left to do in the eyes of Washington is for Taiwan to negotiate the terms of its own surrender.

Perhaps not all the blame should be placed at Washington's door. President Chun during his seven years as President has made little secret of his desire for independence and has not exactly helped Washington in its efforts to engage Beijing in constructive dialogue. Relations between the DPP and the Bush Administration are hardly those of close allies and if the relationship has indeed cooled in recent years, much of the blame can be traced to the acerbic Mr. Chen who from the outset of his presidency appeared to overplay his US hand in a dangerous game of brinkmanship.

It seems that the Bush Administration is hoping that Mr. Chen's departure from office next year will lead to some settling back into a more statesmanlike relationship or even the status quo that existed for more than two decades after Washington switched its recognition of China from Taipei to Beijing, in the late seventies. The world, of course, has changed much since that time. China was still deciding whether it would allow both black cats and white cats to catch the mice and Taiwan of course was still under a martial law regime that claimed that it was preparing to retake the mainland.

And a regime change does appear likely in Taiwan. Taiwan is now a fully-fledged democracy-albeit one that the U.S. might yet sacrifice to political expediency. Dissatisfaction with the ruling DPP is sufficiently high that Mr. Ma might take the presidency. That at least is the hope of much of the local business community and of China and the United States. Mr. Chen's wholesale undoing of the trappings of the Republic of China might yet prove to be his biggest miscalculation. Of course, he is gambling that with China focused on the Olympic Games, he can rock the boat mightily this time without provoking retaliation. From Washington's standpoint he is an unnecessary wildcard in an already difficult relationship. Mr. Chen got his political training as an activist against martial law. Sadly he never did learn statecraft.

With election season almost upon us the outlook over the short to medium term-at least until the middle of next year will remain uncertain at best with tensions between the two main political camps continuing to remain high. The KMT together with the People First Party, makes up the "pan-blue alliance" controlling the unicameral legislature. The alliance has often played an obstructionist role opposing important legislation, particularly matters involving economic reform for the sheer devilry of it. This has made the government particularly vulnerable. Among the many "ifs" that will come to be written about this particularly rambunctious period in Taiwan's checkered history is whether Mr. Chen would have been quite so assertive on the independence front had he had more success with his economic agenda.

Be that as it may, we can expect no let up in the rivalries between now and the elections. Campaigning has already started for the parliamentary ballot, which is scheduled to take place in January 2008. This will be followed by the presidential ballot two months later. Most pundits put the "pan blues" ahead of the ruling DPP which means by the middle of next year there will likely be a regime change in Taipei. What effect that will have on the international political scene is the great uncertainty at the present time. Probably it could be no worse than it is now.

Economic outlook
At times there appears a disconnect between politics and economics. Even as the DPP seeks to maneuver away from Chinese political influence, pragmatism dictates that the government's economic decision-making must take account of the realities of the emergence of China as a global manufacturing and trading nation.

In the latest move designed to allow the private sector to take advantage of China's burgeoning economy, Taiwan's Cabinet has approved a regulatory amendment that will allow 140 billion New Taiwan dollars, or about US$4.25 billion, of the island's mutual funds to invest in shares of Chinese companies, including those traded in Hong Kong. According to a report in the Wall Street Journal, the amendment will let Taiwan mutual funds invest as much as 0.4% of their assets directly in China-listed stocks, and up to 10% of their assets in Class H shares and "red chips." Class H shares are stocks listed in Hong Kong issued by a company registered and based in China. Red chips are the shares listed in Hong Kong of a company registered in Hong Kong but with most of its assets in mainland China.

With troubles remaining in Taiwan's financial sector, the change is aimed at improving the returns of Taiwan's mutual funds. While Taiwan's main stock index has risen by more than 20 percent this year, this is nothing compared to the gains on the Shanghai bourse. The Shanghai Composite Index has more than doubled so far this year.

With the US economy continuing to post poor returns, Taiwan probably has little choice but to look for further opportunity in China, especially with the Olympic Games due next year which will boost further domestic demand and investment led growth. Increased tourism arrivals to the Asian region generally will provide a further boost to the economy next year.

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