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Economics

Taiwan: Waiting for China

15 January 2012

Taiwan: Waiting for China

By Gwynne Dyer

The most important thing in Taiwanese politics is always left unsaid. When I interviewed Ma Ying-jeou in 2008, just before he won the presidency for the first time, he was happy to talk about the details of his plans for better relations with the People’s Republic of China: direct flights, more trade, and the like. But ask him about the long-term future, and all you got was platitudes.

Ma has just been re-elected for a second term as president (14 January). “We’ve won,” he told jubilant supporters. “In the next four years, ties with China will be more harmonious and there will be more mutual trust and the chance of conflict is slimmer.” All true, but it still does not address the question of where all this harmony is taking Taiwan.

In his first term, Ma did everything he promised. Direct flights to the PRC resumed in late 2008, a 2009 agreement between Taipei and Beijing facilitated investment flows between the two countries, and a comprehensive trade deal was signed in June 2010.

Ma’s victory this time was smaller than in 2008: then he had a lead of seventeen percentage points; now he’s down to six. But that’s probably due mostly to the country’s slow economic growth and the widening income gap between rich and poor in recent years. There is no evidence to suggest that he lost votes because he was getting too close to China.

So here’s the question. If Ma, like almost everybody else in Taiwan, has no desire to live under Communist rule, then why is there majority support for closer ties with a giant neighbour (about 65 times as many people) that refuses to recognise the legitimacy of Taiwan’s government? Beijing even threatens to attack Taiwan if it ever declares independence from China. What can the Taiwanese be thinking?

This is where it all goes silent, except for the platitudes. But with a little thought you can figure out the logic behind the position of Ma and his supporters in the Kuomintang Party.

They know that Beijing could do terrible damage to Taiwan if it attacked, but they also know that it won’t actually do that unless Taiwan formally declares independence from China. Beijing is willing to live with the present ambiguous relationship for a long time to come, if necessary.

Meanwhile, Taiwan has to make a living, and it has been losing market share to China’s cheaper exports for two decades now. The favoured solution is to invest in mainland industries and subsidise Taiwan’s much higher living standard with the profits. Mainland Chinese investment in Taiwan’s hi-tech sector would not hurt, either. Time for better relations with the mainland, then – but what about the future?

The thinking goes like this. We can cozy up to China now because it serves the interests of a great many people on both sides, and it doesn’t really endanger our de facto independence. Taiwan is not disarming, and China still can’t move an army across the 180-km (110-mile) Strait of Taiwan; its navy isn’t strong enough. As for the long run, it will take care of itself, because the Communist regime in Beijing will not last forever.

Nobody knows when it will end, but most politicians in Taiwan have a fair idea of how it will end. Sooner or later the Chinese economy will stumble into a recession – the enormous housing bubble in China is currently the most likely cause – and unemployment will soar. People’s mortgages will be underwater, banks will fail, and the regime’s credit will run out.

Ideology is dead in the People’s Republic. The regime insists that it gives the people “socialism with Chinese characteristics,” but in fact it gives them “unbridled capitalism with Chinese characteristics” – including a plague of corruption that mainly benefits Communist Party members. All this is tolerable while everybody’s income is rising; it is no longer acceptable when incomes are falling.

China is a capitalist country, and it has not been granted some special exemption from the business cycle. Every once in a while, in capitalist economies, a major recession comes along. This is hard enough to manage in a democracy. It is potentially lethal for a dictatorial regime whose only remaining credibility is its reputation as an economic miracle-maker.

So Taiwan’s best strategy is just to wait. Make deals on trade and investment, keep talking to Beijing to reduce the risk that some hothead will launch missiles at Taiwan, but don’t get into talks about reunification with a Communist-ruled China. It’s not hard to avoid such talks, since Beijing doesn’t recognise the Taipei government as a legitimate negotiating partner.

And wait. The wheel will turn, and eventually there will be a different, democratic China that Taiwan can safely rejoin (though it will certainly still insist on retaining a lot of autonomy). Meanwhile keep the mainland regime sweet, and make some money.

The United States government, by the way, completely agrees with this unspoken strategy. The last thing Washington wants is to be dragged into a war with China by its defence guarantee to Taiwan, and it was quietly delighted to see Ma win the election. So was Beijing. No crisis here.

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To shorten to 725 words, omit paragraphs 3, 10 and 15. (“In his…2010”; “Nobody…out”; and “The United…here”).