Monday, June 8, 2015

Mainland Capital Turns to Korea, Taiwan Increasingly Marginalized

Mainland Capital Turns to Korea, Taiwan Increasingly Marginalized
China Times Editorial (Taipei, Taiwan, ROC)
A Translation
June 9, 2015

Executive Summary: South Korea is Taiwan's major trade competitor. It is also Mainland China's major trading partner. Ask Mainland business leaders whom they prefer to do business with. Is it Korea or Taiwan? The answer is obviously important. The decisions made by business people will determine the future of cross-Strait and PRC-ROK economic and trade relations. As matters stand, the answer appears self-evident.

Full Text Below:

South Korea is Taiwan's major trade competitor. It is also Mainland China's major trading partner. Ask Mainland business leaders whom they prefer to do business with. Is it Korea or Taiwan? The answer is obviously important. The decisions made by business people will determine the future of cross-Strait and PRC-ROK economic and trade relations. As matters stand, the answer appears self-evident.

Ma Yun likes Taiwan. He has gone to a great deal of trouble to lecture at NTU. Two thousand admission tickets were snapped up instantly, paralyzing the Net. Unfortunately young peoples' passionate response to Ma Yun has not persuaded the government. As of March and May this year, Alibaba and Taobao remain accused of being "Mainland capital disguised as foreign capital". The Ministry of Economic Affairs has demanded divestiture within six months and a 120,000 NT fine. Ma Yun joked bitterly, saying that the world was changing so fast even he didn't know whether his capital was foreign capital or Mainland capital. 

By contrast, Ma Yun's simultaneous overtures to South Korea have been a roaring success. Taobao established itself in South Korea this May. South Korean Deputy Prime Minister gave Alibaba's South Korean Pavilion plentiful media coverage and a high profile debut. According to Mainland China's Commerce Department, the Mainland invested 1.19 billion USD in South Korea in 2014, up from 481 million USD in 2013, a 147.2% increase.

In 2014, the Chinese mainland became, for the first time, a net exporter of capital. Foreign investment reached 120 billion USD. During the first four months, foreign investment surged 36.1% over the same period last year. Mainland capital is welcomed among developed regions. During 2014, Mainland investment in the US increased 23.9%. Mainland investment in the EU increased 1.7 times, far higher than the overall increase in foreign investment. British Ambassador Sebastian Wood said that over the past five years, Mainland Chinese investment in Britain has grown by 85% per annum. The Financial Times estimated that over the next 10 years Britain would desperately need capital for basic infrastucture projects, and provide a major opportunity for Mainland capital.

Mainland capital is welcomed the world over. Only on Taiwan is Mainland capital unwanted. Mainland investors encounter huge institutional barriers on Taiwan. Prior to 2009, Taiwan flatly rejected all Mainland capital. During Ma Ying-jeou's term, the door was opened ever so slightly. But over the past several years, the door has remained partly closed. Consider market access. Foreign capital is allowed unless specifically prohibited. Mainland capital is prohibited unless specifically allowed. Foreign investment is approved after the fact. Mainland investment requires approval before the fact. An excessively high threshold for Mainland capital has long made capital investment in Taiwan difficult. Last year, the Sunflower Student Movement halted the entry of Mainland capital. According to Executive Yuan Investment Commission statistics, January-November 2014 approved Mainland capital projects fell by 10% over the same period last year.

Taiwan still has a considerable store of wealth. It considers its funds sufficient. It says it "lacks markets, not capital". But regional economic integration is real. Taiwan and South Korea have highly similar industrial and trade structures. In recent years, the global economy has cooled.  Governments everywhere are seeking opportunities abroad. South Korea has taken the lead. 2014 data shows that the FTA coverage rate for the US, EU, ASEAN, and other economies reached 36.81%, six times that of Taiwan. South Korean FTA is expected to take effect. Mainland capital is turning toward South Korea. Foreign capital is also likely turn toward Mainland China. Investment in Taiwan continues to shrink.

Taiwan should have little difficulty recognizing its own dilemma. A sluggish domestic market, low return on capital, a substantial outflow of foreign capital, money unable to make money, and a loss of economic dynamism. Private capital investment in real estate has inflated housing prices, provoking public resentment. Faced with similar predicaments, South Korea maintained open markets. Taiwan did the opposite. Beginning last year, Taiwan broke off talks on the STA, MTA, and other market integration processes. It continues to impose limits on industry, and sits idly by while the Mainland and South Korea increase cooperation, enhancing the competitiveness of South Korea relative to Taiwan. Taiwan fears competition, yet stubbornly rejects Mainland capital. This is sure to accelerate the economy's downward spiral.

The Mainland economy is a giant magnet. It has large volume and a strong magnetic field. Taiwan has no alternative. Ernst & Young says the purpose of the Mainland's One Belt, One Road is to advance its competitive industries and transfer surplus production capacity to countries along the way. Mainland capital is leading regional economic change. If Taiwan's habitual rejection of Mainland capital persists, it will soon be marginalized by regional integration. By then the question will not be whether Taiwan allows Mainland capital to come to Taiwan, but whether the Mainland is willing to let Taiwan play at its table.

Taiwan's difficulties require clear thinking. Taiwan must change course and get back on track. For Beijing, Taiwan's upcoming 2016 election presents a multitude of political variables. To avoid uncertainty, the Mainland's policy toward Taiwan will naturally become more cautious and conservative.

The Mainland authorities must realize that winning hearts and minds is the basis of all political and economic strategy. The Sunflower Student Movement marks the appearance of the younger generation on the stage of history. Their vision will determine the peoples' future. Mainland China must adopt a policy that inspires young people. For example, young people on Taiwan are most concerned about rising housing prices and their inability to buy a home. The Mainland may wish to consider consultation with the SEF. The Mainland could invest in the construction of decent housing, providing low-cost housing to young people wh need homes. Shattering stereotypes, and exploring the feasibility of such moves is better than nothing.

陸資轉向哈韓 台灣邊緣化加速
2015-6-9 中國時報











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