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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: 085 - (26/02/11)

Enter the rabbit
On 3 February, Chinese around the world welcomed in the Year of the Rabbit. The rabbit (or hare) is the fourth character in the Chinese horoscope and follows on from the Year of the Tiger.

Supposedly, the characteristics of the rabbit are compassion, creativity and sensitivity. If Taiwan is to get through this year without further damage to its international status it will need all the compassion, creativity and sensitivity it can muster.

The overarching issue that it faces of course is its dealing with China. The Economic Cooperation Framework Agreement (ECFA) signed last June is now in effect and the first meeting of the Economic Cooperation Committee is underway in Jhongli, Taoyuan County just south of Taipei. This meeting was co-chaired by Taiwan’s Vice Minister of Economic Affairs, Francis Liang and his Chinese counterpart, Commerce Ministry Deputy Minister Jiang Zengwei. This was the first time the two sides had held talks at such a senior level.

At the February meeting, six working groups were established to deal with issues arising from the bilateral accord. These six groups will deal with (i) trade in goods, (ii) trade in services, (iii) investment, (iv) industrial cooperation, (v) customs matters and (vi) dispute settlement. Negotiations on commodity trade and services must be started by March 12 as set out in the framework agreement, and with more than 5,000 items on the table, talks could take up to two years before any pact is reached. Further meetings of the EEC will be held at least twice annually.

The meetings came days after release of reports that last year China replaced Japan as the world’s second largest economy even though when measured in per capita terms, Japanese are 10 times richer than their Chinese counterparts. According to the World Bank, if present trends continue, China may overtake the USA as the world’s Number One economy around 2025. If it is any comfort, Americans will still be richer for many years beyond that.

While China’s continued rise provides the rationale for President Ma Ying-jeou’s headlong rush to embrace everything Chinese, even to the extent this month of dropping the term ‘China’ and reverting to the term ‘mainland’ when referring to the PRC. Fears continue to be expressed openly in the press, that the Ma approach to China is incautious to say the least and that his presidency continues to paint Taiwan into a corner.

While the government continues to trumpet the economic gains from the ECFA, it may yet be gambling on a house of cards.

China’s continued rapid growth cannot be taken for granted. Economists point to the growing income disparity in China, officially the richest 10 percent of the population have an income that is 23 times that of the poorest 10 percent although unofficially, even Chinese economists put the disparity at a factor of 65. China’s attempt to corner the global commodities market is pushing up global prices and its continued refusal to revalue the yuan is forcing competitive devaluation in other trading nations.

While China appears to be hoping to continue the status quo until such time as domestic demand can replace exports as the driver of growth, it is facing both domestic and external pressures. Domestically there is increasing disenchantment over growth and income disparities, particularly among the poor which have born the brunt of recent food price hikes as well as fear among investors over the asset bubble created through China’s stimulus program during the GFC. Externally its massive trade surplus, now estimated to be over US$2.4 trillion continues to create global imbalances which threaten recovery and, as a knock-on effect, demand for Chinese manufactured goods.

The Chinese government’s sole claim to legitimacy rests on its economic growth strategy which if it fails, could undermine its claim to govern. It is perhaps no coincidence that reporting on recent unrest in Egypt and elsewhere in North Africa and the Middle East has been heavily censored in the Chinese press.

These considerations are certainly not lost on the government of Ma Ying-jeou. He has said all along that his adherence to the vision of one China is on a free and democratic China and a Chinese government in which the KMT has a role to play. If Ma is hoping that the Mandate of Heaven will pass to the KMT, he may be sorely disappointed.

Despite its problems, this is not how the vision is seen on the other side of the straits of course. And nobody, wants to see upheaval in China. Yet China has not set aside its threat of military action against its renegade province if negotiations to bring Taiwan back into the political fold make no progress.

Nor does China give the same weight to issues of freedom, democracy and human rights for which Taiwan has earned much praise over the past twenty years. Over this past month, there have been further reports in the international press regarding ‘massive human rights abuses, economic pillaging and environmental rape’ all in the name of economic progress. Even global brands such as Apple Computers have been found out with suppliers in China, Malaysia and elsewhere committing abuses in areas of child labour and safety standards that are not in accord with international obligations. Such reports should serve as warning signals to Taiwan, critics say; because ultimately, Taiwan’s own record will be compromised.

Critics also point out that the recently touted ‘order’ made by a Chinese purchasing mission to Taiwan for US$1.45 billion in orders with Taiwanese companies was a mere chimera. While the orders have been placed in Taiwan and, ostensibly at least, form part of the benefits under the ECFA. Actually, the goods will be made at Taiwanese factories in China using Chinese workers.

The list could go on and on. This month a major spy scandal surfaced in which a high-ranking Taiwanese military officer was exposed as part of a Chinese espionage ring in Taiwan; the Philippines - in accordance with its own one China policy - repatriated to China 14 Taiwanese accused of fraud and ignored the request of the Taiwanese authorities to send them to Taiwan. (President Ma has protested to the Philippine Government over the incident but not to China.) Despite the ECFA, China continues to sideline Taiwan at international meetings.

In fact it is hard to find any recent development in which Taiwan has gained advantage over China. Taiwan is now playing in the little league whereas China is batting for the World Series.

So, what will the Year of the Rabbit hold for Ma Ying-jeou, his government and the people of Taiwan. Will it play the part of the timid rabbit and continue to ignore the warning signs? Or will it prove to be the bold hare that is nimble of foot and is able to dance around the snares that have been set? Time will tell.

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