Introduction:
This research paper examines and discusses the economic links and conflicts prevailing between the People’s Republic of China (PRC) – mainland China – and its much smaller island neighbor, Taiwan, which calls itself the Republic of China (ROC). The two countries enjoy an uneasy truce – fundamentally because China does not recognize Taiwan as an independent nation, and has an ongoing ambition to bring Taiwan back as part of one unified China.
Taiwan and China are a little over 100 miles apart across the Taiwan Strait, which is part of the South China Sea and connects in the north to the East China Sea. However, the PRC and the ROC are much further apart politically. The PRC has ambitions to link the mainland with Taiwan by bridge or undersea tunnel, but that objective is so far not shared by Taiwan.
Some Background
The Chinese regime, based in the capital, Beijing, has always considered its island neighbor of Taiwan to be a part of China, and has the military capability to take possession of Taiwan by military action, but is restrained by Taiwan’s alliance with the United States, which would oblige the US to step in and support Taiwan if China were to exercise that option.
Since China and Taiwan split over 60 years ago, the mainland government has viewed Taiwan as a rebellious province that must be re-absorbed. Setting aside the option of a military solution, the Chinese United Front Work Department – a wing of the Central Committee of the Chinese Communist Party – has a mission to gain control of various groups which are not affiliated with the Communist Party. Many of those groups are outside of mainland China and include a business organization called the Taiwan Merchants Association, which also has branches on mainland China. At a June 2014 meeting of the Shenzhen branch, a senior Chinese Community Party official, Li Jiafan, spoke of the Chinese dream of reunification, claiming that “The Chinese dream is also the dream of the people on both sides of the Taiwan Strait – our dream of reunification.”
According to this Reuters article, various documents and others sources accessed by Reuters reveal that those remarks by Li Jiafan were just one element of what Reuters call a concerted campaign to inhibit any greater degree of Taiwan independence, and – ultimately – to re-absorb Taiwan’s population of circa 23 million into China. The Reuters article also reports that the United Front is also very active in Taiwan itself, targeting influential Taiwanese people like local leaders, doctors, academics and others, with the objective of reducing opposition to and building support for reunification. By influencing Taiwanese businessmen working on the mainland, and others in Taiwan, Beijing’s objective is to have an effect on the future local elections in Taiwan, hoping to soften opposition to Beijing’s goal of peaceful reunification.
Strengthening Economic Links
According to Chris Barker (Oct. 2013), the Chinese regime has prioritized its foreign policy objective of economic development, since formally recognizing in 1978 that China must interact on a global basis to achieve success in both economic and social development. The PRC’s so-called “Good Neighbour Policy” (GNP) is now promoted instead of pursuing an armed liberation objective, resulting in Beijing encouraging increased economic integration in what it calls “Greater China.” Barker sees the future of this economic integration as having a good chance of success based on the fact that mainland China has a vast pool of cheap labor, whereas Taiwan leads in the availability of capital, good enterprise management, and excellent capability in high-tech manufacturing. As an example of the progress of economic integration, Barker offers the statistics that in 2006, 70 percent of Taiwan’s outgoing investment was to mainland China, totaling in excess of US$100 billion, and the volume of annual trade between the two reached almost US$80 billion.
Barker also notes that there have been various measures taken (separately) by both the PRC and ROC governments, which have resulted in increased economic interdependence. The PRC designated Shenzhen as a special economic zone; affording Taiwanese investors preferential terms for investment and in 1987 Taiwan ended martial law which had inhibited trade. Perhaps the most important changes occurred in 2008 when a joint agreement introduced “direct cross-Strait shipping, daily cross-Strait flights, and improved postal services and food safety.” Then, in 2010, the signing of a preferential trade agreement reduced trade barriers further and reduced tariffs.
Why There Are Still Deep Divisions between China and Taiwan
Whilst this year (2014) has seen the first formal contacts between Chinese and Taiwanese government officials (since 1949), there are as yet no firm plans for such a formal meeting between President Ma Ying-jeou of Taiwan, and his Chinese opposite number, Xi Jinping, even though such a meeting has been mooted by Taiwan. The principal – but not the only – reason is that the civil war that triggered Taiwan’s split from China is not (officially) over. Because the Beijing government does not recognize the validity of a Taiwan government, it cannot therefore accept the existence of its president. Although the last military action between China and Taiwan ended around four decades ago, followed by talks between the two parties around the beginning of the 1990s, further progress to date has been less than rapid, with serious talks not commencing until after Ma Ying-jeou was elected in 2008, because the Beijing regime recognized him as having a less confrontational approach to China-Taiwan politics.
The meetings earlier this year between senior officials of Chinese and Taiwanese government organizations were seen as a concession by Beijing, which to a limited extent assigned the Taipei regime some legitimacy. However, from China’s viewpoint, the venue for a meeting involving Ma Ying-jeou and Xi Jinping is a tricky issue to resolve. If it were at a wider international event, China would see that as allowing “foreigners” to be involved in what it perceives as a merely domestic matter. On the other hand, if Ma Ying-jeou were to visit Beijing for such a meeting, that could imply that he was being recognized as the president of Taiwan, which would be inconsistent with China’s stance on Taiwan, yet his people in Taiwan would object if he were not to be given that recognition. That thorny issue is yet to be settled.
A secondary reason that is nonetheless important to many people in Taiwan is that the use of the term “Chinese province” to describe Taiwan is strongly objected to. They are descendants of people whose home was in Taiwan when it was ruled by Japan before 1945, and whose ancestral links with mainland China are therefore tenuous. They object to any formal link with the PRC and want Taiwan to declare full independence.
Taiwanese Resistance to Economic Integration
In addition to the reasons given above, there are many Taiwanese who fear that closer economic links with mainland China will bring complete economic dependence on China, which represents a real security concern for Taiwan, along with a weakening of Taiwanese national identity.
Active resistance by elements of the Taiwanese population to increasing economic integration was manifested in March 2014 when students belonging to the so-called “Sunflower Movement” occupied the Taiwanese parliament, scattering sunflowers within the building. They were protesting about elements of a trade deal between Taiwan and the PRC, called the Economic Cooperation Framework Agreement (EFCA). The protestors – highly suspicious of China’s motives – view the agreements as part of a Chinese strategy to make Taiwan ever-more dependent on trade with the PRC, effectively drawing Taiwan “into its net.” There was reportedly widespread support in Taiwan for the student protestors, who estimated crowds of as many as 500,000 sympathizers on the streets. Those opposing closer economic ties with China look apprehensively at the situation in Hong Kong, where an increasing degree of direct Chinese control is also causing mass protests. According to Pilling (2014), “Beijing’s plan to lure Taiwan into its embrace risks backfiring.” He sees the real possibility that the Taiwanese elections in 2016 may see voters reject the current ruling Kuomintang nationalist party led by Ma Ying-jeou, and replace it with a government run by the opposition Democratic Progressive party which declares stronger support for Taiwan’s full independence.
However, that could escalate the PRC-ROC crisis, because the PRC is committed to an invasion of Taiwan if it should ever declare full independence from China. When China’s president Xi Jinping suggested that the Hong Kong model of “one country, two systems” would also be good for Taiwan, Ma Ying-jeou reassured his people that he is against full integration with China by reiterating on TV his “three no’s” policy: “no unification, no independence, no use of force” and urged Beijing to grant Hong Kong “full-fledged democracy.” Although Xi Jinping is reputed to be a strong leader, the protest movements in Hong Kong, Taiwan and Tibet bring suggestions that he might be losing his grip on the nation, or at least on its periphery. Pilling cites a China expert – John Garnaut – who sees these situations as undermining China’s image of “an inexorably rising power” based on the knowledge that while China is pressing ahead with various territorial claims in the South and East China Seas, and is expanding its commercial interests in Africa and South America, some of what it considers its own territories are slipping away from its control.
Chinese Takeover of Taiwan Already Happening?
The fears of a covert takeover of Taiwan by mainland China may well be entirely valid, according to Shihoko Goto (2014). She sees the huge volumes of goods, people, and investment capital flowing from mainland China to Taiwan as evidence that the PRC is succeeding in taking over effective control of the Republic of China. In her view, whilst the Taipei regime may have perceived that securing closer economic ties with Beijing would provide the wanted economic growth, the plan may not have produced the anticipated outcome. She reports that the majority of the customers purchasing luxury goods from the Taipei boutiques or patronizing Taipei’s wine bars are Chinese tourists, who comprise the largest single group of Taiwan’s tourists. In 2013, there were almost three million tourists coming from the mainland of China, thanks in part to the numerous direct daily flights between the two countries. Investment in Taiwanese real estate by Chinese nationals is pushing up prices by a huge amount – some estimates put the increase at over 200 percent in the last 10 years, primarily due to the intervention of mainland Chinese, resulting in Taiwanese workers struggling to afford to buy their own homes. Furthermore, because the booming Chinese economy means that Taiwanese workers can earn more on mainland China, up to 80 percent of Taiwanese under 30 years old have indicated an interest in relocating to mainland China to secure better pay and benefits.
Taiwan could dramatically reduce its dependence on mainland China as a major trade partner by signing up to the proposed US-initiated Trans-Pacific Partnership agreement which would have a dozen or so members, but the establishment of the agreement is being delayed by internal US administration wrangling, which is seriously hurting Taiwan’s economy. According to Goto, Taiwan’s global trade share has fallen by almost 30 percent from a 2000 peak.
A Pessimistic View of the Economic Integration
Andrew Nathan – a Political Science professor at Columbia University and a Chinese politics expert – admitted to being “rather pessimistic” about China’s increasing influence over Taiwan’s economy through the growing economic ties between the two parties. Acknowledging Taiwan’s geostrategic significance, he stated that those ties increase Taiwan’s vulnerability to Chinese influence, and ponders on what Taiwan could and would do in order to resist the effects of the economic power wielded by mainland China. He acknowledged that economic integration has become the PRC’s principal strategy in its ambitions for Taiwan and that it is progressively gaining ground in that regard. In his view, because the geographic location of Taiwan is so strategically important in the event of a Chinese naval action (Nathan describes Taiwan as the “unsinkable aircraft carrier”), China seeks to unify with Taiwan, principally to remove the biggest obstacle to the development of its naval powers in the South China Sea and beyond.
Conclusions:
The research undertaken has indicated that although the PRC still has ambitions to re-unify with Taiwan – which it regards not as an independent nation but as a rogue Chinese province – it has been compelled to set aside the strategy of military action against Taiwan by virtue of Taiwan’s treaty with the US. Instead, China has adopted a policy of growing economic integration with Taiwan, which not only helps China’s burgeoning economy, but also is progressively giving it greater influence in the Taiwanese economy and society. Taiwan’s trade is greatly dependent on its trade with mainland China, which is also its principal source of tourists and an important source of capital investment too, including in the real estate sector. Taiwan does not share the objective of reunification, nor does it support China’s proposal to construct a road link (bridge or tunnel) across the Taiwan Strait. Overall, Taiwan resists Chinese pressure for reunification, although the increasing degree of economic integration could make reunification unavoidable, unless Taiwan significantly expands the numbers of its trade partners.
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