Two reasons Taiwan must come to terms with China, despite mixed signals from the electorate
- Michael Tai says Taiwan’s economy is now inextricably linked to China, and the Taiwanese people appear unwilling to pay a high price for independence
- In economic terms, China does not need Taiwan in the same way that Taiwan needs China, and Beijing can afford to play a waiting game
As it has no diplomatic ties with Asean states, Taipei is unable to secure free-trade agreements with them, which means Taiwanese components are subject to sometimes hefty tariffs by the bloc. Taiwan’s most important preferential trade pact remains the Economic Cooperation Framework Agreement signed with the mainland in 2010.
But even more problematic is the fact that Southeast Asia simply cannot match Chinese manufacturing prowess. China boasts a comprehensive supply chain able to turn blueprints into prototypes often in a matter of days. Ninety per cent of the world's electronics are made at least in part in Shenzhen and, despite rising wages, it is still more efficient to manufacture in China, according to Masami Miyashita of the Japanese External Trade Organisation.
Secondly, the Taiwanese are not prepared to pay a stiff price for de jure independence. Measured in purchasing power parity (PPP), Taiwan is the 19th richest country in the world, while its GDP per capita of US$52,304 is higher than that of Canada, France, Italy, Japan or the UK. Crime is low and according to the 2017 Crime Index, Taipei is the third-safest city in the world after Abu Dhabi and Munich (Singapore ranks eighth; Tokyo 16th). Raised in prosperity, the current generation of Taiwanese are less hardy than their parents, the force behind the Taiwan miracle of the 1970s and 1980s.
A recent survey showed that 88 per cent of Taiwanese office and factory employees are interested in working overseas, including on the mainland. Meanwhile, the country is facing difficulty recruiting soldiers. With a history of repressive martial law rule, the military is deeply unpopular, and plans to recruit 80 per cent of its manpower needs by the end of 2018 are unlikely to be realised. Taiwanese society enjoys a high degree of personal freedom and autonomy, and young people value personal freedom over a sense of national duty.
Young people believe that China could crush Taiwan with economic power alone and going to war would be a waste of time and money. Neither is the business community prepared to bear financial pain for the sake of independence. Since Tsai came to power, business has suffered as Beijing curbed agricultural imports from Taiwan and slowed the flow of tourists to the island. In the recent elections, the business sector signalled that profits matter.
In economic terms, China does not need Taiwan in the way that Taiwan needs China. The one-China policy, whereby both sides agree that there is only one China but each hold a different opinion as to the meaning of “one China”, offers enough diplomatic ambiguity to maintain the status quo. Tsai refuses to acknowledge the formula and diehard independence advocates in her party are banking on American and Japanese protection if push comes to shove. But that may be wishful thinking as each state ultimately acts in its own best interests.
Dr Michael Tai is a visiting scholar at the National Taiwan University's Graduate Institute of National Development