Friday, July 28, 2006
SUSIE GHARIB: Taiwan is one of the world`s leading traders, but that heavy reliance on exports comes with a risk. Trade with two particular markets, the United States and China, is critical to the country`s economy. And if either were to suffer a downturn, Taiwan would be hit hard. That`s why Taiwan`s government is urging business to diversify. But as Rian Maelzer reports from Taipei, that message is proving to be a tough sell.
RIAN MAELZER, NIGHTLY BUSINESS REPORT CORRESPONDENT: These days, some one-fifth of Taiwan`s exports go to the U.S. And about two thirds of the island`s $35 billion annual output of semiconductors is destined for products that end up in the U.S. Still, Taiwan`s reliance on the U.S. market has declined steadily over the past decade to be replaced by a much more problematic reliance on China.
HU SHENG-CHENG, CHAIRMAN, COUNCIL FOR ECONOMIC PLANNING: There are two risks, economic risks. What happens if the Chinese economy doesn`t do well and we depend too much on the Chinese economy? Second, is how Chinese might take political advantage of our dependence on its economy.
MAELZER: Nearly 40 percent of Taiwan`s exports last year went to Hong Kong and China combined and 70 percent of its foreign direct investment goes to the mainland.
FRANK HUANG, CHAIRMAN, TAIPEI COMPUTER ASSOCIATION: Almost 5,000 membership. I guess 80 percent of these membership has a site of production or business in China. So it`s become important. We have no choice. We must cooperate from Taiwan to China on the economic side.
MAELZER: That outflow of goods and capital has happened despite Taiwan imposing controls on investment and not allowing businesses to ship directly to the mainland, forcing them to go through Hong Kong instead. The government is gradually easing those restrictions, but at the same time pushing business to diversify their markets and investment. But it`s a lot more than economic opportunity that makes China so attractive to Taiwan business. The powerful historical, cultural and linguistic ties also make China an irresistible draw, to such a degree that Taiwan business has virtually ignored Asia`s other emerging powerhouse, India. And that doesn`t look about to change.
DANIEL CHEN, CHUNG-HUA INSTITUTION FOR ECONOMIC RESEARCH: Mostly they think it`s not really so exciting, because language, because of the distance, because of the undistributed income in India.
MAELZER: The diversification drive has shown more signs of success in southeast Asia, with Taiwan now the number one foreign investor in Vietnam, number three in Malaysia. But some feel the whole policy is misguided.
GARY CHIA, YUANTA PACIFIC SECURITIES: The collective intelligence and collective willpower of the business people in Taiwan is quite impressive and it`s been so for 30 years and it shouldn`t be a concern of the government to really direct investment to one region or another.
MAELZER: And in reality, it`s not just a case of Taiwan becoming economically reliant on the mainland, but of the two becoming interdependent.
DAVID HUANG, VICE CHAIRMAN, MAINLAND AFFAIRS COUNCIL: According to the Chinese ministry of commerce, out of the top 100 Chinese exporters, export companies in China, there are 33 owned by Taiwanese businessmen and the number one exporter in fact again is a Taiwanese-owned company.
MAELZER: It`s a trend most business people and analysts here feel makes it less likely political tensions across the strait will boil over and make Taiwan regret getting so close economically to the mainland. Rian Maelzer, NIGHTLY BUSINESS REPORT, Taipei.