By Hwan C. Lin, reprint from Taipei Times, Nov 18, 1999
China's sheer size in territory and population has often misled many in coping with the cross-strait ties.
Many Taiwanese businessmen are intoxicated with the seemingly "huge" Chinese market; so are politicians from the ruling and opposition parties. One dangerous illusion they harbor in common is that Taiwan's economic prosperity cannot persist without the Chinese market. Thus, many have called for revoking the "no haste, be patient" policy from time to time, hoping that Taiwan government will loosen the bans on three links: direct communication, direct shipping and direct flights.
We need to awaken those who still deeply harbor the market-size illusion. Country size is not tantamount to market size. According to 1998 data from the WTO, China's total imports just account for only 2.5 percent of world merchandise trade, much less than the US's 17 percent, Germany's 8.4 percent, Britain's 5.7 percent, France's 5.2 percent and Japan's 5 percent.
By this measure, the market sizes of some small countries, such as Netherlands (3.3 percent) and Belgium-Luxemburg (2.9 percent), are even a bit larger than China's.
The world's seven largest industrial economies combined absorb almost 50 percent of world merchandise imports, and the world, excluding China, takes up 97.5 percent.
But many people continue to mistake country size for market size.
True, the Chinese market has expanded with the rapid economic growth in recent years. Yet, it is impossible that the Chinese economy can maintain the trend of growth of 8 percent to 10 percent per year.
One-third of China's GDP is currently produced by its highly inefficiently state-owned enterprises (SOEs). These SOEs are just like time bombs.
It is fair to say that China is an inherently unstable economy. Without creditable reforms in many areas, including SOEs, this low-income, developing economy will be full of political and economic risks.
As for Taiwan, its economy has entered a critical stage in which sustainable growth must be fueled by technological advances. In other words, Taiwan's engine of growth in the 21st century will mainly reside in the Shumpeterian innovation process.
China is not a huge market that Taiwan cannot afford to lose. Moreover, China is far from a global center of innovation and ideas.
To adapt foreign leading-edge technologies, Taiwan should rely on the US, Europe and Japan, via corporations' strategic alliances or cross-licensing of patents.
To acquire venture capital for risky research projects, Taiwan needs to access to the US-centered global capital market. The technologically laggard Chinese economy is neither Silicon Valley nor Wall Street.
Many have overexaggerated the role of cross-strait trade and investment relationships in Taiwan's long-term economic prosperity.
Evidence indicates that Taiwan already has close ties with China with respect to cross-strait trade and investment.
It makes no sense to further integrate Taiwan with a nation that is aiming its missiles here. What Taiwan needs today is not to abandon the "no haste, be patient" policy, but to refine it in a legalized, transparent framework.
A limited and prudent economic integration with China remains consistent with Taiwan's long-term interests.
From the perspective of national security and economic prosperity, any unilateral moves by Taiwan for the "three links" would be bold but counterproductive, unless Beijing agrees to sign a cross-strait peace agreement with Taipei, under the auspices of the US or the UN.
China's sheer size in territory and population has often misled many in coping with the cross-strait ties.
Many Taiwanese businessmen are intoxicated with the seemingly "huge" Chinese market; so are politicians from the ruling and opposition parties. One dangerous illusion they harbor in common is that Taiwan's economic prosperity cannot persist without the Chinese market. Thus, many have called for revoking the "no haste, be patient" policy from time to time, hoping that Taiwan government will loosen the bans on three links: direct communication, direct shipping and direct flights.
We need to awaken those who still deeply harbor the market-size illusion. Country size is not tantamount to market size. According to 1998 data from the WTO, China's total imports just account for only 2.5 percent of world merchandise trade, much less than the US's 17 percent, Germany's 8.4 percent, Britain's 5.7 percent, France's 5.2 percent and Japan's 5 percent.
By this measure, the market sizes of some small countries, such as Netherlands (3.3 percent) and Belgium-Luxemburg (2.9 percent), are even a bit larger than China's.
The world's seven largest industrial economies combined absorb almost 50 percent of world merchandise imports, and the world, excluding China, takes up 97.5 percent.
But many people continue to mistake country size for market size.
True, the Chinese market has expanded with the rapid economic growth in recent years. Yet, it is impossible that the Chinese economy can maintain the trend of growth of 8 percent to 10 percent per year.
One-third of China's GDP is currently produced by its highly inefficiently state-owned enterprises (SOEs). These SOEs are just like time bombs.
It is fair to say that China is an inherently unstable economy. Without creditable reforms in many areas, including SOEs, this low-income, developing economy will be full of political and economic risks.
As for Taiwan, its economy has entered a critical stage in which sustainable growth must be fueled by technological advances. In other words, Taiwan's engine of growth in the 21st century will mainly reside in the Shumpeterian innovation process.
China is not a huge market that Taiwan cannot afford to lose. Moreover, China is far from a global center of innovation and ideas.
To adapt foreign leading-edge technologies, Taiwan should rely on the US, Europe and Japan, via corporations' strategic alliances or cross-licensing of patents.
To acquire venture capital for risky research projects, Taiwan needs to access to the US-centered global capital market. The technologically laggard Chinese economy is neither Silicon Valley nor Wall Street.
Many have overexaggerated the role of cross-strait trade and investment relationships in Taiwan's long-term economic prosperity.
Evidence indicates that Taiwan already has close ties with China with respect to cross-strait trade and investment.
It makes no sense to further integrate Taiwan with a nation that is aiming its missiles here. What Taiwan needs today is not to abandon the "no haste, be patient" policy, but to refine it in a legalized, transparent framework.
A limited and prudent economic integration with China remains consistent with Taiwan's long-term interests.
From the perspective of national security and economic prosperity, any unilateral moves by Taiwan for the "three links" would be bold but counterproductive, unless Beijing agrees to sign a cross-strait peace agreement with Taipei, under the auspices of the US or the UN.
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