News

    Taiwan Looks to China for Massive Economic Boost

    Ralph Jennings

    In Taiwan, the reelection of a president known for easing tension with longtime rival China means a new plunge into economic talks with Beijing. While Taiwan still shies away from confronting its thorny political issues with China, both are embracing new financial and trade deals that will give China a huge role in Taiwan's economy. Those investments could play a key role for an economy that is struggling to compete against its industrialized Asian peers.

    Ma Ying-jeou

    Taiwan President Ma Ying-jeou made major moves to ease tensions with China during his first term and following his re-election in January, Taipei and Beijing pledge to forge ahead with new business deals in the coming years.

    The president's near-term agenda calls for lower tariffs on thousands of import items, relaxed rules for mainland Chinese investors in Taiwan and new legal protection for their interests.

    Wai Ho Leong, a regional economist with Barclays Capital, sees major movement following investment protection deals that Taiwan expects to be signed by July.

    “We’ve had people flows to date, the easing of trade restrictions on both sides, we’ve had cultural dialogue on both sides," said Wai Ho. "The fourth dimension that’s missing currently is capital flows, and I think investment protection act will be a strong catalyst in driving investment flows into Taiwan from China.”

    Investments

    The investment protection deals will provide guidelines to settle legal disputes between businessmen on the two sides. That should give mainland Chinese firms, some of the world’s wealthiest today, more confidence to buy shares of listed Taiwanese firms. Economists believe Taiwan wants to give China a bigger role; already it permits mainland Chinese to purchase up to 10 percent of a Taiwan company without applying to the government.

    Taiwan is expected to let China make larger direct investments in the 247 sectors that are now open to it, and perhaps expand the list. Since 2009, official figures show that mainland Chinese have invested the equivalent of $170 million in Taiwan in various forms. Leong says Chinese companies will eventually acquire outright control of Taiwan firms.

    “The lifting of the investment caps that is currently about 10 percent for most of the industries could be raised to a more substantial level, and I think this paves way for actual M&A [mergers and acquisition] to come in from China,” said Leong.

    Mergers and acquisitions

    Today Taiwan rigorously reviews bids from China for high-value mergers and acquisitions, especially in volatile or politically sensitive industries. The island’s top China policy architect, Lai Shin-yuan, says government agencies in Taipei are studying ways to relax the rules, but not to expect a quick decision.

    She says her government regularly examines the rules for Chinese investors and that when conditions are mature, private equity barriers may ease little by little.She would not estimate when that maturity would come, but says capital is not a problem now. She adds that entrepreneurs are looking more for new markets, stronger branding and technology upgrades.

    Over the next year or two, China and Taiwan also aim to cut import tariffs on about 11,000 items in a deal favoring Taiwanese exporters, who are the lifeblood of the island’s $425-billion economy. An initial 800 tariffs were slashed last year.

    Conflict

    China has claimed self-ruled Taiwan as part of its territory since the Chinese civil war of the 1940s. The resulting chill in relations stood in the way of the type of trade deals common between Beijing and Taiwan’s export-dependent rivals such as South Korea and the Association of Southeast Asian Nations. But as Taiwanese were long allowed to invest in China, two-way trade had surpassed $100 billion per year before 2008.

    That year, as ties with the Chinese economy became crucial to Taiwan’s competitiveness, President Ma dropped his predecessor's tough rhetoric and began looking for deals. His government and Beijing have signed 16 agreements removing previous restrictions on investment, tourism and direct flights. Those accords have brought billions of dollars to Taiwan’s economy.

    Economy

    The boost from China came just in time to cushion Taiwan from the 2008 world financial crisis and a mid-2011 global stock slump. Taiwan’s biggest firms depend largely on world consumer appetite for high-tech gadgets and machine tools.

    Beijing, meanwhile, welcomes the economic and trade dialogue as a way to set the stage for what it hopes will be eventual political reunification. It is also looking out for the returns of its investors such as banks and airlines, analysts believe. George Tsai, a political scientist at Chinese Cultural University in Taipei, says Taiwan will be on alert for any mainland Chinese over-investment that could hurt its bargaining position if the two sides later discuss political issues.

    “Of course China wants to woo Taiwan back to its embrace. In the long run of course the people are concerned with the China threat," he said. "If China’s direct investment becomes too much, the problem becomes how to evaluate possible interests and challenges.”

    After weighing those interests and challenges in the coming months, top negotiators are scheduled to meet by the end of June with an eye toward completing new agreements.

    This forum has been closed.
    Comments
         
    There are no comments in this forum. Be first and add one

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Turkish Kurd Islamist Rally Stokes Tensionsi
    X
    April 29, 2016 12:28 AM
    In a sign of the rising power of Islamists in Turkey, more than 100,000 people recently gathered in Diyarbakir, the main city in Turkey’s predominantly Kurdish southeast, to mark the birthday of the Prophet Muhammad. The gathering highlighted tensions with the pro-secular Kurdish nationalist movement. Dorian Jones reports from Diyarbakir.
    Video

    Video Turkish Kurd Islamist Rally Stokes Tensions

    In a sign of the rising power of Islamists in Turkey, more than 100,000 people recently gathered in Diyarbakir, the main city in Turkey’s predominantly Kurdish southeast, to mark the birthday of the Prophet Muhammad. The gathering highlighted tensions with the pro-secular Kurdish nationalist movement. Dorian Jones reports from Diyarbakir.
    Video

    Video Pakistani School Helps Slum Kids

    Master Mohammad Ayub runs a makeshift school in a public park in Islamabad. Thousands of poor children have benefited from his services over the years, but, as VOA's Ayesha Tanzeem reports, roughly 25 million school-age youths don't get an education in Pakistan.
    Video

    Video Florida’s Weeki Wachee ‘Mermaids’ Make a Splash

    Since 1947, ‘mermaids’ have fascinated tourists at central Florida’s Weeki Wachee Springs State Park with their fluid movements and synchronized ballet. Performing underwater has its challenges, including cold temperatures and a steady current, as VOA’s Lin Yang and Joseph Mok report.
    Video

    Video Somali, African Union Forces Face Resurgent Al-Shabab

    The Islamic State terror group claimed its first attack in Somalia earlier this week, though the claim has not been verified by forces on the ground. Meanwhile, al-Shabab militants have stepped up their attacks as Somalia prepares for elections later this year. Henry Ridgwell reports there are growing frustrations among Somalia’s Western backers over the country’s slow progress in forming its own armed forces to establish security after 25 years of chaos.
    Video

    Video Bangladesh Targeted Killings Spark Wave of Fear

    People in Bangladesh’s capital are expressing deep concern over the brutal attacks that have killed secular blogger, and most recently a gay rights activist and an employee of the U.S. embassy. Xulhaz Mannan, an embassy protocol officer and the editor of the country’s only gay and transgender magazine Roopban; and his friend Mehboob Rabbi Tanoy, a gay rights activist, were hacked to death by five attackers in Mannan’s Dhaka home earlier this month.
    Video

    Video Documentary Tells Tale of Chernobyl Returnees

    Ukraine this week is marking the 30th anniversary of the world's worst nuclear accident, at the Chernobyl nuclear power plant. Soviet officials at first said little about the accident, but later evacuated a 2,600-square-kilometer "exclusion zone." Some people, though, came back. American directors Holly Morris and Anne Bogart created a documentary about this faithful and brave community. VOA's Tetiana Kharchenko reports from New York on "The Babushkas of Chernobyl." Carol Pearson narrates.
    Video

    Video Nigerians Feel Bite of Buhari Economic Policy

    Despite the global drop in the price of oil, Nigerian President Muhammadu Buhari has refused to allow the country's currency to devalue, leading to a shortage of foreign exchange. Chris Stein reports from Lagos businessmen and consumers are feeling the impact as the country deals with a severe fuel shortage.
    Video

    Video  Return to the Wild

    There’s a growing trend in the United States to let old or underused golf courses revert back to nature. But as Erika Celeste reports from one parcel in Grafton, Ohio, converting 39 hectares of land back to green space is a lot more complicated than just not mowing the fairway.
    Video

    Video West Urges Unity in Libya as Migrant Numbers Soar

    The Italian government says a NATO-led mission aimed at stemming the flow of migrants from Libya to Europe could be up and running by July. There are concerns that the number of migrants could soar as the route through Greece and the Balkans remains blocked. Western powers say the political chaos in Libya is being exploited by people smugglers — and they are pressuring rival groups to come together under the new unity government. VOA's Henry Ridgwell reports.
    Video

    Video Russia’s TV Rain Swims Against Tide in Sea of Kremlin Propaganda

    Russia’s media freedoms have been gradually eroded under President Vladimir Putin as his government has increased state ownership, influence, and restrictions on critical reporting. Television, where most Russians get their news, has been the main target and is now almost completely state controlled. But in the Russian capital, TV Rain stands out as an island in a sea of Kremlin propaganda.

    Special Report

    Adrift The Invisible African Diaspora