You could subtitle this post Taiwan Takes A Dive. This is part 2 of my series on the future of China. In this part, I’d like to examine the Chinese threat to Taiwan, the reasons for it, and some potential scenarios.
Taiwan is one of the top industrial economies in the world. It has the third largest foreign currency reserves. It is a democracy and has been an ally of the United States since the Communists conquered the mainland. At the time of this writing, our national policy is to prevent the conquest of the island by the mainland but to oppose any declaration of independence by the Taiwanese government. The United States is in the awkwardly contrived position of supporting the Taiwanese, yet recognizing the communist government of the mainland as China. Yeah, it makes me scratch my head, too.
The Chinese government treats Taiwan as a province in rebellion. Depending upon the pressure that they want to exert, they vary the terms that they use, but there is no doubt that they firmly consider the island a part of China. Indeed, the rhetoric used in many cases places reunion with the island on a par as the hunt for the “Holy Grail”. I am personally convinced that the Chinese would suffer almost any losses to achieve reunion. It’s that important to them.
There are obvious strategic reasons for the Chinese to want Taiwan. There are also strong economic reasons. I cannot read Chinese, so it is difficult for me to judge the strength of mystical reasons for reunion versus the practical ones.
In the table at the end of Part 1, I cite a Chinese spokesman named Jiang Zhijun. His premise is that Taiwan and the other offshore islands which China claims are their front line of defense. Without them, China must defend itself from the mainland, which is a far less desirable strategic position. Chinese history, since the 1700’s, tells them that trouble comes from the sea. They now have the desire and the growing ability to move their homeland defense offshore. Reunion with Taiwan is the heart of that move.
Taiwan is also a top twenty industrial power, and is the number three ranked nation holding foreign currency reserves. Reunion with China gives the Communists a massive and modern industrial base. It can be exploited in situ or dismantled and shipped to the mainland. Control of the reserves postpones for a time the collapse of the Chinese economy. They represent a fresh infusion of cash without any obligation to accompany it. Call it an international version of a bank robbery.
Taiwan sits about 200 miles east of the Asian mainland. Despite their mutual animosity, there is travel and trade that goes on between the two counties every day. Nearly 29% of Taiwan’s exports are to China and the mutual trade constitutes 18% of Taiwan’s overall trade. [LINK] Taiwanese businesses are estimated to have invested up to $100 billion in China. It’s fair to say that there are significant economic ties between the two countries. The BBC interviewed Taiwan’s Prime Minister, Chang Chun-hsiung, in 2001:
Trade - As of November 2000, total indirect trade with the Chinese mainland amounted to US$218bn. Compared to the same period last year, Taiwan-mainland trade increased 22.1%, reaching US$29bn from January to November 2000.
Investments - Over the past two years… Taiwanese [investment in China] increased by 72% in 2000. Mainland statistics show that as of September 2000, the number of approved investments by Taiwan businessmen on the mainland had reached 45,729, totaling more than US$46.5bn. This made Taiwan the fourth largest outside investor on the mainland.
By conservative estimates, more than 30,000 Taiwan factories or Taiwan-invested factories are operating on the Chinese mainland…. Taiwan businesses have created at least three million jobs for the mainland.
Private visits - To date, there have been 17 million visits [from Taiwanese] to the mainland.
Telecommunications - So far, over 186 million pieces of mail have been exchanged between the two sides.
That was four years ago. Clearly the two governments see a benefit in allowing the trade and investment, weighted heavily to the Taiwanese side. From the point of vie of the Chinese, a climate is being created in Taiwan that the mainland is not such a bad place. And, given the flow of investments to the mainland, many more Taiwanese have a vested self-interest in peace between the two nations.
(more…)