Cross-Strait New Normal: Competition or Cooperation?
United Daily News Editorial (Taipei, Taiwan, ROC)
October 30, 2014
Executive Summary: Recently, cross-Strait relations entered a consolidation phase.
Politically, the hoped for Ma Xi meeting turned out to be a bust. Xi
Jinping has reverted to "one country, two systems." Hong Kong's Occupy
Central movement and Taiwan spies turning Mainland students have been
making waves. Economically, the situation is equally worrisome. The
economic slowdown on the Mainland is here to stay. Xi and Li continue to
push for reform. They hope to upgrade the mainland economy. This is
leading to a qualitative change in cross-Strait economic and trade
relations. As a result, cross-Strait competition is gradually overriding
the former "win-win" relationship. This is apparently becoming the
Full Text Below:
Recently, cross-Strait relations entered a consolidation phase. Politically, the hoped for Ma Xi meeting turned out to be a bust. Xi Jinping has reverted to "one country, two systems." Hong Kong's Occupy Central movement and Taiwan spies turning Mainland students have been making waves. Economically, the situation is equally worrisome. The economic slowdown on the Mainland is here to stay. Xi and Li continue to push for reform. They hope to upgrade the mainland economy. This is leading to a qualitative change in cross-Strait economic and trade relations. As a result, cross-Strait competition is gradually overriding the former "win-win" relationship. This is apparently becoming the norm.
In mid-September, this newspaper published a report on cross-Strait relations. The report revealed that people are concerned about cross-Strait economic and trade relations. They think it is changing from a mutually beneficial relationship, to a more competitive relationship. Cross-Strait trade and the peace dividend consitute the cornerstone of cross-Strait relations. We must respond to this new cross-Strait economic norm, by establishing a new framework for long term economic cooperation.
Since the second half of 2011, Mainland economic growth slowed from over 9% to under 8%. Growth went from high speed to medium speed. According to a Chinese Academy of Social Sciences forecast, this year the Mainland's economic growth rate fell to about 7.3%. Next year it will fall to around 7%. The Mainland economy continues to slow. This will probably lead to internal controversy over "steady growth." But Xi and Li are determined to promote reform. They are not looking back. In May of this year Xi Jinping repeatedly mentioned the "new normal." He was reminding people on the Mainland that they must take the economic downturn in stride. They are committed to changing their economic model. They are pursuing economic growth rooted in quality and innovation. In other words, for the next several years, Beijing will be using the time to make changes. It will temporarily sacrifice economic growth in order to upgrade the Mainland economy. This "new normal" will be a key factor in cross-Strait economic development.
An upgraded version of the Mainland economy provides Taiwan with an opportunity, but also a challenge. In recent years, the Mainland's rapid industrial transformation has increased competitive pressures on Taiwan. The Mainland has a vast market of 1.3 billion people. Economic restructuring and market reforms have a powerful magnetic effect on capital, technology, and talent. They provide investment opportunities for Taiwan. Considerable core technology and professional personnel and managers is flowing to the Mainland. This will seriously undermine Taiwan's own economic transformation and upgrade momentum.
The Mainland's industrial sector receives strong support from Beijing. It competes with Taiwan businesses for personnel, technology, and market share. Taiwan's two major export industries, the ICT industry and the petrochemical industry, are feeling the heat. Over the past two years, the Mainland's ICT industry grew at an alarming rate. In particular, Mainland brand smart phones and tablet PCs swept the low-end market. They pose a serious threat to the survival and development of Taiwan businesses. The State Council recently moved to support the Mainland's semiconductor industry. It intends to spend at least 600 billion RMB building foundries. The goal of the Mainland's semiconductor design industry is clearly to challenge Taiwan leaders TSMC and MediaTek. If Taiwan's ICT industry fails to transform and upgrade itself, experts estimate both its brands and OEM industry will lose out within five years.
The Mainland's petrochemical industry is also gaining on Taiwan's. The Mainland's Coal Chemical Technology and petrochemical industry production capacity continue to expand. Taiwan's industry is finding it harder to breath. Taiwan's most important raw material export is a chemical fiber known as purified terephthalic acid (PTA). According to news reports, exports fell precipitously between 2011 and 2013, from 108.1 billion NTD to 15.9 billion NTD, as much as 80%. Taiwan-based investors have abandoned Taiwan and fled to the Mainland. The China Petroleum System industry has invested in the Mainland's Fujian Ligure naphtha cracking plant. That should be seen as a warning sign. Taiwan and Mainland industries are in increasing international competition with each other. Some magazines have called it "A Mainland threat, hitting us full force." Such characterizations are not alarmist.
Cross-Strait economic competition has become the new normal. This underscores the urgent necessity of institutionalized cross-Strait cooperation. So-called institutionalized cooperation should not be limited to ECFA, the STA, and other market-opening mechanisms. The two sides' market systems and governments are different. They need a coordination mechanism that avoids vicious competition, avoids excessive government intervention, and market distortions. This will enable cross-Strait cooperation to truly benefit both sides.
In terms of overall resources and personnel movement, the two sides should establish an overarching "big roof one China framework" with two distinct regions. Coordination of policies and regulations would promote balanced two-way flow, reducing the negative impact of the Manland's economic magnet effect on Taiwan.
More importantly, the Mainland economy is being upgraded, and Taiwan's economy is undergoing transition. They can benefit each other by cooperating. They can engage in both bilateral cooperation and regional cooperation. A collective effort by industry, government, and academia, can develop specific objectives, projects, and roadmaps, to ensure orderly long-term cooperation. If the two sides adopt this path, they can turn competition into cooperation, Let the "Taiwan Dream" and "China Dream" coexist. The current stalemate in cross-Strait agreements can be broken. Cross-Strait relations can acquire new momentum, enabling it to advance.
2014.10.30 02:47 am