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Millions of US $  406,000    
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Chen shui-bian

Update No: 028 - (04/05/06)

Taiwan's President, Mr. Chen Shui-bian is increasingly finding himself between a rock and a hard place. Intent on keeping China at arms length, he is being thwarted by fresh overtures from Beijing that are intended to bolster the standing of Taiwan's main opposition party, the Kuomintang (KMT) as the party able to deal with Beijing in a business-like fashion. China's objective of course, is to rid Taiwan of its present government, which it believes (correctly) is anti-Chinese or at least anti-reunificationist. 
In April, China announced a new initiative designed to promote cross-Strait economic cooperation with Taiwan. Included within the initiative were 15 specific new agreements intended to improve market access for Taiwan's farmers and fishermen, incentives for education, healthcare and tourism and a promise to recognise the qualifications issued by Taiwan's universities. "Old wine in new bottles" was the official reaction from Taipei.
The timing of the announcement, coming at the end of a two-day joint economic forum between the KMT and the CCP dealing with cross-Straits relations and attended by KMT Honourary Chairman, Lien Chan, who led a high-profile delegation composed of Taiwanese business people and KMT officials to the meeting. This timing was no coincidence of course, but was, rather, a deliberate effort by China to bolster the image of the KMT as the party that has the blessing of Beijing and therefore best suited to maintaining peace across the Taiwan straits.
The meeting itself was, of course, more about politics than economics, and any economic measures agreed at the forum would have immediate political implications. In fact, the proposed measures all add up to very little but the whole episode, coming as it did just ahead of Chinese President Hu Jintao's US trip points to a growing sophistication in China's diplomacy and its efforts to isolate President Chen, whose anti-Chinese rhetoric has become an embarrassment even to many of his own supporters.
As Taiwan's press was quick to point out, the 15 policy proposals are directed squarely at farmers, fishermen, students and healthcare professionals-all traditional supporters of the Democratic Progressive Party (DPP). The extension of tariff-free status to imports of Taiwanese fruit and vegetables is likely to have little impact, and such items represent a miniscule export item. Fruit imported from Taiwan has proved too expensive in the Chinese market. Preferential import duties for frozen seafood are not particularly significant either. Frozen processed foods are the real money-earner and this category is not included in the preferential treatment.
But it does mean that China will once again dominate the election strategies of both the major political groupings. The KMT will make what political capital it can out of its camaraderie with Chinese leaders while being careful at the same time to avoid claims that it is willing to compromise Taiwan's sovereignty for economic gain. Meanwhile the DPP also will need to come up with some innovative thinking to avoid being accused of stalling further development of Taiwan's important economic relationship with the Chinese mainland. Expect contradictory positions to emerge and a ratcheting up of the political rhetoric as each Party tries to outdo each other as to which has the mantle to take Taiwan forward without leading it into a war with China.

A sigh of relief
President Chen and his entire Cabinet must have heaved a collective sigh of relief that President Hu Jintao completed his not-quite-a-state-visit to Washington without obtaining any fresh concessions from the US side over Taiwan and the Cross-straits relationship. In commenting on Mr. Hu's visit to the US capital, Mr. Chen was decidedly low-key. He was thankful that President Hu did not succeed in further undermining US policy towards Cross-straits issues but stressed at the same time that China's rise as both an economic and military power poses longer-term threats not only to Taiwan but to the entire East Asian region. He again reiterated the need for an arms deal with Washington that, he said, could come in the very near future and which would bolster Taiwan's defence system.
Chinese officials had been hoping that President Bush would censure the Taiwanese president for his earlier decision (February 2006) to scrap the National Unification Council and the 1991 guidelines for reunification but in the event Mr. Bush went no further than to restate US opposition to any unilateral changes in Taiwan's status by either Taipei or Beijing.

The economy
Prospects for 2006 continue to appear robust with real GDP growth again expected at around the 4.0 percent mark (4.1 percent in 2005). A slackening of consumer price inflation is expected from 2.3 percent last year to around 2.0 percent for the current year. A steady slight appreciation against the US dollar is also anticipated throughout the year. Nevertheless, growth will be tempered by the higher than expected oil prices which will serve as a dampener on consumer spending.
The Taiwan Institute of Economic Research (TIER) last month revised its economic growth forecast for this year down to below 4 percent because of slowing private consumption and investment. Other agencies still predict growth to come in slightly higher.
TIER now predicts that GDP growth for this year would only reach 3.91 percent, down from the 4.02 percent figure it predicted in January. TIER's figure contrasts with the figure from another research institution, the Chung-hua Institution for Economic Research, which announced it, would raise its annual GDP growth forecast to 4.17, up from its previous prediction of 4.01 percent.
Surging oil prices and snowballing consumer debt incurred from credit and cash-advance card abuse are expected to shrink private consumption to growth of just 2.8 percent, down from the previous prediction of 3.07 percent, according to TIER,.
TIER estimated that consumer prices would increase by 1.84 percent on average this year, based on an average oil price of US$60 to US$65 per barrel, and an average exchange rate of NT$31.893 between the New Taiwan dollar and the US dollar. The appreciation of the local currency would continue to frustrate exporters, but would lower the costs of imported goods to help restrain consumer prices. Growth in private investment was expected to shrink from 4.09 percent in the prior forecast to 2.35 percent, as several investment projects were still waiting to pass environmental protection evaluation.
Local manufacturers said they were more positive about the economy, pushing up the manufacturing index by 0.49 points from February to 126.05 last month, according to a poll released by TIER.
But high oil prices dampened optimism, as respondents who believed that the economy would improve during the next six months fell to 34.7 percent from the previous level of 58.5 percent, while those who said the economy would get worse increased to 16.1 percent from 7.6 percent, it said. 

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