Signs in China and Taiwan of Making Money, Not War

Yoshie Furuhashi furuhashi.1 at
Tue May 15 00:24:21 PDT 2001

New York Times May 15, 2001

Signs in China and Taiwan of Making Money, Not War


KUNSHAN, China, May 11 - Despite the visions of war conjured by President Bush's suggestion that the United States could help defend Taiwan from a Chinese invasion, the social and economic integration between the mainland and the island is stronger than ever, and growing.

Tension across the 100-mile strait separating the two sides of a decades-old civil war has recently ebbed considerably. Some experts say that if the trend continues, Taiwan's government will soon be unable to afford antagonizing China, and that the cost to China of attacking Taiwan may become prohibitive.

Nowhere is that on starker display than in Kunshan, a town that Taiwan built. About 10 percent of Taiwan's $50 billion investment in the mainland has landed here, just off the 60-mile highway from Shanghai to Suzhou.

And almost all of the town's tax revenue comes from 900 Taiwan companies that have transformed the once ramshackle farming community into one of China's brightest new cities.

During the spring and autumn wedding seasons, a few women a month here marry men from Taiwan. The women wear dresses from brightly-lit bridal shops with names like Ruby, Venus and Taiwan Flavor. They move into one of the town's upscale Taiwanese compounds, like Beautiful Crystal Plaza or Treasure Island Garden, a reference to Taiwan. And they bear children who are half of the mainland and half of Taiwan.

"What we may be seeing in cross-strait relations is a kind of Hong Kong-ization of Taiwan-mainland relations," said Orville Schell, a longtime China watcher now at the University of California at Berkeley.

He noted that the economic promise of friendly ties with Beijing had earlier eroded the anti-Communism of Hong Kong's business elite and smoothed the territory's 1997 return to mainland rule.

"Simply put, the tension of politics may be cut by the imperatives of business and trade," Mr. Schell said.

Kunshan's silver 20-story city hall rises across from a massive science and culture exhibition center, still under a wrap of sheeted scaffolding.

Near the center of town, freshly painted pastel apartment blocks line streets so clean and orderly that they look more like Tokyo than China, where urban centers are more often a mess.

Businessmen from Taiwan patronize restaurants like Taipei Small Town or Champs Élysée, which serves whipped iced tea - a fad imported from Taipei - and Taiwanese marinated pork with rice, served in a Japanese-style lacquered box as it is in Taiwan, which was a Japanese colony from 1895 until the end of World War II.

"Even in 1995, the streets were run down," said Lu Caiping, a middle-aged woman standing amid clouds of tulle and organza in a wedding shop along Advance Street. "Now the sidewalks are paved with granite."

Taiwan's economic presence on the mainland has risen steadily for the last decade, even though the island and China have never formally ended the civil war that left the Communist Party in control of the mainland after 1949 and Chiang Kai-shek's Nationalist forces in control of Taiwan.

Chiang and his archfoe Mao Zedong both died in the 1970's, and Taiwan, under pressure from business people eager to take part in China's economic opening to the world, began allowing indirect travel, trade and investment in the mainland in 1987. Taiwan has since become one of China's top investors.

Investment accelerated markedly after a devastating earthquake on Taiwan in 1999. The quake temporarily shut down much of the computer-related industry on the island, which is prone to quakes, prompting many technology companies to shift production to China. Taiwan investors are also drawn to the vast mainland market. Half of Taiwan's high-tech products are now made on the mainland.

Belligerency and political mistrust may still, of course, vanquish economic imperatives.

China's weapons purchases and recent sharp increase in military spending are directed almost exclusively at Taiwan. China has not slowed the frequency of its military exercises or new missile deployments facing the island, which in turn has not slowed its own program to acquire weapons.

The same economic growth that is drawing Taiwan to the mainland is financing Beijing's military expansion, aimed at giving China a coercive edge over Taiwan.

Talks between the two governments show no sign of resuming after breaking down two years ago. China's leaders, trapped by their Marxist-Leninist past, have yet to define a more democratic future in which Taiwan might want to take part.

Growing economic ties to Taiwan's business community could even work against political reforms as that community becomes increasingly reliant on a stable government in China to protect its investments and interests, Mr. Schell said.

But there have been no military tensions in the strait since President Chen Shui-bian of Taiwan was elected a year ago. And he has proven more open to developing economic ties than was his predecessor, Lee Teng-hui.

Taiwan investment on the mainland is booming, and at any one time there are hundreds of thousands of people from Taiwan living in or visiting China.

As much as $10 billion has poured into China from Taiwan in the last two years, compared with $40 billion in the previous decade, when the country had already become the main destination for overseas investment from the island of 23 million people.

Cross-strait trade reached $30 billion in 2000, making Taiwan China's sixth-largest trading partner.

By some estimates, Taiwan is poised to invest more money in the mainland in the next three years than it has in the last 10. If so, that could further blend the two economies.

"After visiting Taiwanese companies along the Shanghai-Suzhou corridor, I'm convinced that the cross-strait issue will resolve in 10 years," said Andy Xie, an economist at Morgan Stanley in Hong Kong.

In his New Year address this year, President Chen said China and Taiwan should begin "the integration of our economies, trade and culture" to gradually "build a new framework of permanent peace and political integration."

He opened direct trade and transport between the mainland and two tiny Taiwan-controlled islands hard against the mainland coast, and he is reviewing such links between the mainland and Taiwan proper.

He plans to begin allowing mainland tourists to visit Taiwan later this year and is considering relaxing restrictions governing Taiwan investment on the mainland. Taiwan companies regularly ignore the rules by investing through offshore companies in any case.

"Over the long run I believe that economic integration will lead to some kind of social and political integration," said Lin Chong-ping, vice chairman of Taiwan's Mainland Affairs Council, in a telephone interview.

Taiwan's investment in the mainland, most of which comes into the country indirectly through Hong Kong, once focused on Guangdong Province in southern China, lured by cheap land and low-cost labor.

It has more recently migrated north toward Shanghai and shifted into increasingly advanced technologies and larger, longer-term projects.

Formosa Plastics, Taiwan's largest enterprise, is considering plans to invest in a huge petrochemical plant in Ningbo, south of Shanghai. And last year Winston Wong, the son of Formosa Plastics' chairman, joined President Jiang Zemin's son, Jiang Mianheng, to break ground on a $1.63 billion Shanghai plant that will produce circuit-etched silicon wafers - the most critical component in computer chips. Nearby, another Taiwanese-financed wafer foundry, as the plants are known, is under way.

"With China entering the World Trade Organization, we are looking more at the domestic market here than at China as a base for exports," said D. C. Yang, the former head of the Shanghai association of Taiwan business people.

While no exact figures are available, he estimates that there are a quarter of a million people from Taiwan in Shanghai at any one time. There are many more living in or visiting the south.

"East China is becoming the hub of Taiwan investment radiating out to other parts of the country," Mr. Yang said.

The highway between Shanghai and Suzhou has become a technology corridor, with Kunshan drawing most of the investment because of prompt service to investors by the town's mayor and easy access to Shanghai, just 40 minutes away.

And despite a recent mainland spy hunt that has led to the arrest of ethnic Chinese scholars visiting China, Beijing is more welcoming to people from Taiwan today than any time in the last decade.

It has drastically increased the number of mainlanders allowed to visit Taiwan and aggressively courted visits from Taiwan opinion leaders, including legislators, former government officials, scholars and celebrities.

Taipei and Shanghai have exchanged visits by deputy mayors. And Taiwan's former prime minister, Vincent Siew, is currently in China to lobby for a common market between the mainland and Taiwan. He is the second vice chairman of Taiwan's main opposition party, the Nationalist Party, to set foot in China in less than six months.

"In cross-strait relations, we are in something of a race between the forces of economic integration and political separation," said Mr. Schell. "Barring some really nasty bump in the road, I would bet on integration."

More information about the lbo-talk mailing list