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Economy

How tight an embrace? Taiwan rethinks China ties

With two years left, Taiwan President Ma Ying-jeou might already be done with any new trade accord with China.

TAIPEI -- Taiwan's voters, weary after years of corruption scandals and tension with Beijing, swept Ma Ying-jeou of the Kuomintang into the presidency in 2008.

     Backers of the Harvard-educated Ma expected him to open the island up to Chinese investors and tourists. This has happened, but six years and a re-election later, the economy is stumbling and the public is growing apprehensive about the fruits of Ma's China policy and Beijing's intentions. The president's approval rating has sunk as low as that of Chen Shui-bian, Ma's Democratic Progressive Party predecessor, toward the end of his term.

Not so fast

The occupation of Taiwan's legislative chamber for three weeks in March and April by hundreds of students, who were protesting a move to speed ratification of an agreement with China to liberalize investment in the services sector on both sides of the Taiwan Strait, has made Ma's China-friendly policies seem less credible and thrown into question the agenda for his final two years in office.

     While the Ma administration has said the pact could add 0.034% to Taiwan's gross domestic product, many on the island believe it will hurt smaller businesses and confine youth to low-wage jobs under Chinese management.

     "Ma has rushed the signing of China deals, but he does not care about their content," said Jang Show-ling, chairwoman of the economics department at National Taiwan University. "The services trade agreement will allow Beijing to control our economy as Chinese businesses will be able to invest in local infrastructure, such as telecommunications and transportation."

     To end the standoff with students, the authorities agreed to wait for passage of a law establishing a mechanism for the public and lawmakers to oversee cross-strait agreements before pushing again for ratification of the services trade pact or any new deal. This raises the odds against Ma concluding any more deals.

Buyer's remorse

Even some of Ma's supporters say his troubles stem from a failure to grasp how the average citizen is affected by his China trade policies.

     Willis Chang, a 35-year-old cram school teacher, voted for Ma in 2008 and 2012 because he thought Ma would avoid the conflicts with China that marked Chen's two terms. Now he feels Ma went too far.

     "The Ma administration is arrogant," Chang said. "Officials keep saying the services trade agreement is good, without making its details public. While past China pacts may have benefited big companies, those gains barely trickle down to ordinary people like me."

     Indeed, many large Taiwanese companies have developed profitable operations in China as Ma has fostered friendly ties, but wages and economic growth on the island have remained stagnant.

     Many Taiwanese feel closer cross-straits ties have mainly helped the fat cats get fatter. Tsai Eng-meng became Taiwan's richest man last year as his company, Want Want China, has become a leading snack maker on the mainland. Terry Gou, chairman of Hon Hai Precision Industry, is among the island's wealthiest people, thanks to his company's huge electronics factories in China.

     Meanwhile, at 4.18%, Taiwan has a higher unemployment rate than South Korea, Singapore or Hong Kong. Exports fell 2.3% in 2012, recovering mildly to expand 0.7% in 2013.

     The island's GDP rose 1.26% in 2012, and 2.11% last year. GDP growth was between 4% and 5% during all but one of Chen's eight years in office. The average real wage of 44,739 New Taiwan dollars ($1,485) a month in 2013 was 0.1% lower than it was 15 years ago.

     "Housing prices and the cost of living have been going up," said Vincent Kuo, a businessman with two young children. "I can't see a future and I feel powerless to do something about it."

At what cost?

The Presidential Office said in an email statement to the Nikkei Asian Review that ties with Beijing are fostering "sustainable peace and prosperity."

     "Taiwan's economy grew by an average annual rate of 3.07% during 2008-2012, higher than the global average of 1.9% during that period," the statement says. The administration "fully understands that the public is most concerned with the economy, so boosting Taiwan's economy is the administration's first priority."

     In a poll this month of 1,001 residents by Taiwan Indicators Survey Research, 85.9% of respondents agreed that the economy is sluggish and only 17.9% approved of Ma's governance.

     According to the Ma administration, agreements that have led to direct flights to China and loosened restrictions on tourism, trade and investment have helped the economy. Official figures count a gain of $11.76 billion from Chinese tourists and $877 million in Chinese investment. Taiwanese companies have invested $136.6 billion into China since 1991.

     While critics recognize the need to build closer economic ties with China, they say Ma has not managed the process well.

     "Job opportunities and salaries have been decreasing as more local companies are focusing on China, thanks to the Ma administration's move to relax cross-strait investment regulations," said Hawang Shiow-duan, a professor of political science at Soochow University in Taipei.

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