A published data shows that Taiwan’s exports to mainland China have fallen sharply, adding to the island’s suspicion of Taiwan’s recent strategy to strengthen its ties with the mainland.
Taiwan announced that its exports in February fell 28% from a year earlier, which was the sixth consecutive month of decline, and exceeded the expectations of many analysts. In the first two months of this year, Taiwan’s total exports fell by 37.2%, of which exports to mainland China decreased by 50%. The mainland is the biggest buyer of Taiwanese products. Economists believe that combining the first two months of this year is a good ruler, because this year and last year's Lunar New Year are just in different months.
Before the release of export data, Taiwan has published a series of bad data. Taiwan has a population of 23 million and is located outside the southern coastline of China. Although it is small in size, it is commercially developed and has some of the world's largest high-tech producers. Two weeks ago, the Taiwan government announced that the economy contracted by 8.36% in the fourth quarter of 2008. Some economists predict that this year's decline will reach 11%.
Kenneth Lin, a professor at the National Taiwan University's Department of Economics, said that Taiwan's economic problem lies in its excessive dependence on exports and mainland China, which is why the authorities' strategy has failed to work.
The economic downturn has complicated the agenda of Taiwan’s President Ma Ying-jeou. Ma Ying-jeou was elected nearly a year ago, when he promised to strengthen economic ties with mainland China, which will make Taiwan's economy more prosperous. Ma Ying-jeou has already contributed to a series of major changes: the first direct navigation since the split between the two sides in 1949. The two sides are still negotiating on strengthening financial industry cooperation and possible free trade agreements.
Mainland China is enthusiastic about the Ma Ying-jeou government and believes that this is the best opportunity to strengthen cross-strait economic ties in the near future, and the mainland government hopes that closer economic ties will bring about final political unification - this is the most important national goal of the Chinese government. Chinese Premier Wen Jiabao said in his annual government work report to the National People's Congress last week that cross-strait relations have made major breakthroughs and the Chinese government hopes to reach a peace agreement. In response, Taiwan expressed its intention on Monday to set up an agency to assess military contacts with mainland China.
But more and more Taiwanese no longer believe that strengthening relations with the mainland will strengthen the Taiwan economy. A poll conducted by Taiwan’s Mainland Affairs Council, which was responsible for mainland policy last December, showed that 37% of the population believe that the pace of opening up to the mainland is too fast, which is more than double the 18% in March last year.
Nearly a quarter of Taiwan’s exports are sold to mainland China. China's economy is growing faster than other major economies. But a large part of these exports are processed in China and then exported to the US and other end markets. Some economists believe that China is beginning to replace Taiwanese products with domestically produced electronic components, thereby exacerbating Taiwan's decline in exports to the mainland.
Compared with the 50% decline in mainland exports, Taiwan’s exports to Japan fell by only 14%, and exports to the United States fell by 25.7%.
Some of the benefits of strengthening relations with the mainland are not obvious. Direct cross-strait flights have led to an increase in the number of mainland tourists to Taiwan, but the total is only one-third of the forecast. Plans to establish funds and allow mainland investors to invest in Taiwan's stock market and real estate have not yet been realized.
Taiwan’s opposition Democratic Progressive Party has begun to adjust its policy toward changes in the public’s mindset. Last year, the Democratic Party’s candidate’s policy toward the mainland was similar to Ma Ying-jeou. However, the DPP has now returned to its traditional opposition to strengthen its economic ties with the mainland; and it claims that if Ma Ying-jeou promotes a free trade agreement with the mainland, it will launch a protest.
Even senior business leaders say that Taiwan needs more than just a mainland-first strategy. Wang Zhentang (JTWang), chairman of computer giant Acer Inc., said the current government is trying to implement some policies, but they have not elaborated on high-level positioning and long-term goals.