(04/08/05) Clyde Prestowitz on Voice of America
CHINA - TAIWAN ECONOMIC TIES
Voice of America
Copyright 2005 Federal Information & News Dispatch, Inc.
April 8, 2005
Radio Scripts - Focus 8-656
CHINA - TAIWAN ECONOMIC TIES
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
Taiwan's economic prosperity is clearly linked to China, notes Clyde
Prestowitz , president of the Washington based Economic Strategy
[ PRESTOWITZ ACT ONE]
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.
[LILLEY ACT ONE]
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.
[LILLEY ACT TWO]
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.
[ PRESTOWITZ ACT TWO]
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.