Wisconsin Public Radio

Manufacturing is still critical to the economy United States. Clyde Prestowitz, says it's time to start realizing the positive spillovers that manufacturing creates... Read more  

Events & Activities

Stephen Olson at Chinese Development Institute Conference


 Clyde Prestowitz giving presentation to CDI...


Steve Olson teaching trade negotiations at the Mekong Institute...


Stephen Olson to speak at upcoming workshop organized by the International Institute for Trade and Development on 

"Economics of GMS Agricultural trade in goods and services towards the world market"

Chiangmai, Thailand Sep 8-12.

(04/08/05) Clyde Prestowitz on Voice of America on China -Taiwan Economic Ties

(04/08/05) Clyde Prestowitz on Voice of America
Voice of America
Copyright 2005 Federal Information & News Dispatch, Inc.
April 8, 2005
Radio Scripts - Focus 8-656

Jela de Franceschi

INTRO: In focus today: China and Taiwan, some say, resemble the proverbial two scorpions in a bottle. If one attacks the other, both will die. After half a century of official separation and clandestine cooperation the two are today caught in a similar predicament. Increased economic interdependence has brought their economies closer together, but diverging views on Taiwan's sovereignty prevent their political reconciliation. VOA's Jela de Franceschi takes a closer look at the complex relationship between Taiwan and China.

TEXT: Like it or not, China and Taiwan comprise a single economy, say observers.

Taiwan is the largest source of foreign investment in China, and the bulk of China's high-tech exports originate in Taiwanese-run factories.

The Taiwan Institute of Economic Research estimates that the country's investment in China has reached to about $160 billion and grows four to six billion dollars a year.

Taiwanese businesses own from 60 to 70 percent of the Chinese information technology market. And about 50,000 Taiwanese firms operate in mainland China.

Observers say the strong inflow of Taiwanese investment was a factor that led to widespread privatization of Chinese state-owned enterprises in the late 1990's. For China, further development plans such as industrial upgrading into high-tech manufacturing are written with Taiwan in mind.

Taiwan, in turn, benefits from the cheap labor and expanding market of mainland China.

China is Taiwan's largest trading partner, surpassing Japan and the United States. Total trade between China and Taiwan exceeds $40 billion dollars per year, accounting for more than 10 percent of Taiwan's gross domestic product.

Taiwan's economic prosperity is clearly linked to China, notes Clyde Prestowitz , president of the Washington based Economic Strategy Institute .


Taiwan is more dependent on China than China is on Taiwan. Taiwan needs China as a production base. The reason Taiwanese industries are investing in China is because China is the low-cost location for production. Production in Taiwan is no longer competitive in the world markets. If the Taiwanese companies want to remain competitive, they have to produce in China, without it Taiwan dies.


James Lilley, of the American Enterprise Institute and a former U.S. ambassador to China, says the cross-strait ties are increasingly personal with large numbers of Taiwanese citizens, living, studying and working in China.


There is probably over a million Taiwanese living there, maybe 300,000 in Shanghai alone. They are living in their own communities. They have their own churches. They have their own associations, and there is a lot of intermarriage.


About half a million businessmen from Taiwan bring with them important management techniques and trade networks.

The personal touch also helps calm volatile political relations across the Taiwan Strait. Beijing sees Taiwan as a breakaway province and claims territorial rights. China's new anti-secession law, designed to preempt Taiwan's independence sparked mass demonstrations in Taipei.

Still, strong economic ties ease political tensions, contends ambassador Lilley.


I think this forms a healthy restraint on war talk in the straits. It is not going to rule it out, but it is going to be a restraining factor. The leading Taiwan businessmen, for instance, recently interceded with the president of Taiwan Chan Chui-bien, to limit his talk that provokes China. There seems to be emerging in China something of a lobby, too, which says: Cool it on Taiwan. There is a general feeling that you don't kill the goose that lays the golden egg. You have to put up with the rhetoric. But between the rhetoric and the reality there is a gap.


Indeed, a new generation of power brokers in Beijing prefers doing business to reuniting with Taiwan, says Mr. Prestowitz . He predicts China and Taiwan will eventually reach a political compromise.


The lobby is the new Chinese leadership. They have been making all kinds of friendly moves toward Taiwan recently and will probably continue to do so. Somewhere down the road, in the next 10 to 25 years, I think there will be some kind of an accommodation on this issue.


As long as China and Taiwan benefit from growing economic ties, say analysts, they should remain peaceful.

Join our mailing list

Latest Publications

The Betrayal of American Prosperity.

The Trans-Paific Partnership and Japan.

Making the Mexian Miracle.

Industrial Policy and Rebalancing in the US and China.

The Evolving Role of China in International Institutions.


Contact us

Economic Strategy Institute

1730 Rhode Island Avenue, NW, Suite 414 |  Washington DC  |  20036
Ph (202) 213-7051  |  Fax (202) 965-1104  |  info@econstrat.org