Tsai Ing-wen: Closing in on the Presidency

If elected, Democratic Progressive Party (DPP) chairwoman and presidential nominee Tsai Ing-wen will not abrogate the Economic Cooperation Framework Agreement (ECFA), but would, in handling subsequent negotiations, ensure the process is transparent and subject to legislative oversight so that any agreement would not have to undergo a referendum. That’s what she told the BBC’s Chinese service director Li Wen in an interview on Thursday. The two major opposition parties, the DPP and the Taiwan Solidarity Union (TSU) originally advocated a referendum on ECFA.

Obviously, if Tsai should inherit president Ma Ying-jeou’s desk in May next year – the elections are scheduled in January -, there will be no reset button, and to act as if there was one would suggest that her presidential bid wasn’t serious. It seems that she is  preparing for the details of the job as president, and not merely focusing on getting elected.

Her message to China seems to suggest that, too.

I think better communication will help. Essentially, they don’t know us, because we are not like the KMT. They had a history in the past, either as rivals – now they seem to be less of rivals to the KMT -, and they had this complicated relationship in the past, let me say it that way. And they don’t know us. We are a party that is only twenty-five years old, so it would be good if we had good communications between the two sides, so that they will know us better, and we’d have the opportunity to tell them what we are up to.  We do have a think tank here in Taipei, and we welcome delegations, groups from China to visit us, we give them briefings they would like to have, we answer questions they raise, and I thought that was a good exchange.

If there was an invitation to China, it would come with conditions, Tsai anticipated, in reply to Li Wen’s question if she would accept such an invitiation.

And heaving a sigh that was either tactical, or that genuinely reflected her skepticism about Beijing’s attitude, she added:

I just wish that they can be reasonable.

This was apparently a referral to conditions, not to the CCP leadership itself.

Visits by leaders weren’t the only way to improve communications, she added. Experts, civil society members or party workers could have exchanges anyway.

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Related

» Interviews with Tsai and Soong, Nov 19, 2011
» One ROC, two Interpretations, Oct 10, 2011

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Taiwanese Delegation calls for EU-Taiwan Trade Agreement

A Taiwanese delegation led by deputy minister of economic affairs (MoEA) Sheng-Chung Lin ( Lin Sheng-chung, 林圣忠) attended a discussion or forum at the House of Commons buildings and called for British support for a EU-Taiwanese free-trade agreement which would benefit both the EU and Taiwan. In an interview with the BBC’s Chinese service after the discussion in parliament building, Lin pointed out that such an agreement would not only be beneficial for the EU and Taiwan, but for China, too. There were words of praise for Taiwan’s open-market economy during the discussion, but the BBC report points out that the EU, rather than China, would probably keep the process slow, as all EU member states needed to agree to important EU decisions unanimously. The Taiwanese delegation expressed its hope that Britain could advocate the trade agreement with Taiwan among its fellow EU members.

The European Parliament passed a resolution calling for a free-trade agreement with Taiwan in May this year.

Taiwan News quotes deputy minister Lin as saying that Taiwan has obtained the support of the United Kingdom for its effort to forge an economic cooperation agreement (ECA) with the European Union, and would continue to seek backing from other EU nations in the hope that the trade deal could be signed within two years. Lin had visited the Czech Republic and Ireland before arriving in London.

Radio Taiwan International‘s (RTI) Chinese service quotes from a talk Lin gave to Taiwanese business people who also travelled Britain. He said that Taiwan had won Britain’s support for a EU-Taiwanese ECA (经济合作协议), and pointed out that Taiwan had previously obtained investment opportunities from the Economic Cooperation Framework Agreement (ECFA) with China. He said that the MoEA had held workshops in Germany, Italy, the Netherlands and Denmark in May this year, to build an atmosphere favorable towards a EU-Taiwanese trade agreement. Lin also referred to the European Parliament’s resolution (see above) in favor of a trade agreement with Taiwan. The sooner an agreement with the EU could be signed, the better, RTI quotes Lin. The Taiwanese government hoped that this would be possible in two years, but a specific time was difficult to forecast.

A free-trade agreement between the United States and South Korea is expected to come into effect in January next year, reports the Taipei Times. Taiwan’s MoEA told Taiwanese companies in certain sectors to brace themselves for the effects of the U.S.-Korean agreement, according to the Taipei Times.

A EU-South Korea free trade agreement took effect on July 1 this year, and Lin Sheng-chung warns that this agreement threatened Taiwan. An Economic Cooperation Agreement (ECA) with the European Union would help protect Taiwan’s interests, RTI’s English service quotes Lin.

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Related

» The Lame leading the Blind, June 3, 2011
» Lee Kuan Yew: Free Trade to Counterbalance China, Jan 25, 2011
» ECFA “a Framework .., without substantial content”, Nov 26, 2010

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NPC Press Conference: not so Straight to the Bank

15th press conference during the 4th Plenary Session of the 11th National People’s Congress, March 11, 2011, 10:45, held at a multi-function room of the NPC’s news center’s media center (梅地亚中心).

[Main Link: Enorth, March 11, 2011]
[All links within the quoted questions and answers underneath have been added during translation. The following are excerpts, and no translation of the entire account by Xinhua / Chinese government website / Enorth.
— JR]

Zhou Xiaochuan (周小川), People’s Bank of China’s (PBoC) governor;
Hu Xiaolian (胡晓炼), People’s Bank of China’s deputy governor;
Liu Shiyu (刘士余), People’s Bank of China’s deputy governor;
Yi Gang (易纲), People’s Bank of China’s deputy governor and head of the State Administration of Foreign Exchange [this should include China’s foreign exchange reserves] were taking questions.

Zhu Shouchen (祝寿臣) chaired the press conference,  introduced the four guests from the PBoC, and continued as follows:

This press conference doesn’t provide English translation, please ask your questions in Chinese. Foreign journalists who don’t speak Chinese can also ask their questions in English. Please state your media organization when asking a question. Please start to ask your questions.
本场记者会不提供英文翻译，请用汉语提问。不懂汉语的外国记者，也可以用英文提问。每位记者提问时请报一下媒体名称。现在开始提问。

CCTV and China Internet Television reporter (中央电视台和中国网络电视台记者):

Governor Zhou, current inflation pressures are quite high, and society is expecting increasing interest rate channels ([利]息通道 / 利率通道). But increasing interest rates will also cause an increase in hot money. How will the central bank balance the two difficult questions of exchange rates and interest rates? Another number released today says that the CPI reached 4.9 percent in February, which was basically stable compared with January. Will there be a one-time big adjustment of the exchange rate as the next step against inflation? Thank you.

Zhou:

After the successful national response to the global economic crisis, inflation increased, and under such circumstances, interest rate policies are an essential tool. Any tool of financial policies can have a negative impact, as you have mentioned, as it may lead to more capital inflows. But as you may also all know, China’s capital market hasn’t yet been entirely liberalized, but it is still controlled. We therefore have some tools to manage capital flows. As is also known, there are countries which have no capital market controls, but under these circumstances, monetary policy has to weigh the advantages and disadvantages (进行利弊权衡), and if, after comparing them, the advantages outweigh the disadvantages, such tools will have to be used. Currently, applying the interest-rate policy is a central and essential tool.
Your second question touches on the CPI. China is a very large economy, with a big population, and with a big scale. We therefore say that although the exchange rate has a certain effect on domestic prices, but proportional to the rather small liberalized economy, this effect isn’t really big. So, among the most important tools against inflation, there is no particular focus on tools related to foreign exchange rates, given that there are still other tools. I therefore believe that our exchange-rate policy and interest-rate policy must adhere to the “three characteristics” (三性)1) of which one is gradual (渐进性),  which is to say that we can adhere to a gradual approach in reforming the foreign exchange-rate, and strengthen the exchange-rate’s flexibility.

In a reply to a Phoenix TV (凤凰卫视, Hong Kong) reporter, who asked if, given that inflation or CPI shad still exceeded market expectations (as pointed out in some recent news coverage in February, on January’s CPI, too), Zhou said:

Inflation expectations, I believe, are now generally in a stable condition. That’s to say, when we look at the CPIs of December, January, and February, although they still move at a high level, inflation expectations are now relatively stable. As the central bank has said, we have never ruled out the use of any tool, and that in accordance with the actual economic situation [at at time], control of liquidity in the market may be increased.

Several questions later, replying to another  Hong Kong reporter’s question, Zhou also pointed out that most emerging markets’ CPI was clearly higher than China’s (新兴市场大国多数的CPI都比中国要明显高一些)2).

A question from a French reporter (apparently Point de Vue / 《观点》周刊) about a specific time table for making the Chinese RMB fully convertible (您能不能就人民币完全可兑换这样一个进程给出一个时间表) was answered by deputy governor Hu Xiaolian, but without a specific time table.

Asked by a China Daily (中国日报) reporter if the central bank planned to reduce the share of American treasury bonds in its foreign exchange reserves, deputy governor and head of the State Administration of Exchange Yi Gang replied that diversification had long been the central bank’s policy.

Taiwan Commercial Times (台湾工商时报) reporter:

Through continuous efforts of both sides, the two sides of the Taiwan Strait have signed the Economic Cooperation Framework Agreement (ECFA). Is there a chance that the two sides will implement a monetary settlement system? Would Fujian Xihai Economic Zone make first tests in this regard? According to your point of view, in which fields should the two sides of the Taiwan Strait’s financial businesses develop their cooperation first of all? Thank you. (通过两岸不断努力，稍早前两岸终于签订了金融贸易ECFA协议，近年内两岸有没有可能实施货币清算机制的启动？福建海西经济区会不会在这方面先试先行？依据你们的观点，今年两岸金融业务的开展应该从哪几方面开始优先合作？谢谢.)

Zhou replied with a barrage of good-atmosphere platitudes, ending both his two answers with the more-and-more formula (越来越多), and was assisted with another more-and-more slipslop by his deputy Yi Gang.

A reporter with the Portuguese News Agency (LUSA) was assured that China had confidence in the Euro area, even if the People’s Bank of China  wouldn’t make specific announcements about how many bonds would be bought on which kinds of occasions.

Zhejiang Satellite TV (浙江卫视记者) reporter:

As for our province, Zhejiang, small and medium-sized companies (SMEs, 中小企业) are depending on bank capital, but bank financing is currently very tight. Banks can easily raise interest rates, and the SMEs have absolutely no bargaining power and can be easily harmed. May I ask Governor Zhou how, under a tightening policy, harm for the SMEs can be avoided? Thank you. (拿我们浙江来说，中小企业对银行资金较为依赖，现在的情况是资金很紧张，银行就会顺势抬高贷款利率，中小企业根本就没有议价能力，很容易受伤，请问周行长在紧缩政策下怎么样避免不伤及中小企业？谢谢。)

Zhou:

Since last year, SMEs loans share has risen strongly. In the past, within the bank loans granted, the big companies’ share was quite big, and there were somewhat few SMEs, and their share was comparatively small. With last year’s “three-tiered system”, the loan amounts to big, medium-sized, and small companies were basically the same, each of them with a share of about one-third, which is a good sign.
去年以来，中小企业的贷款比重有大幅度提高，过去在银行贷款汇总数据里面，大企业占的比重相当大，中等企业少一点，小企业比例比较小。去年实现了 “三三制”，银行体系总的对企业贷款里，大型企业、中型企业、小型企业三个组别贷款总量基本差不多，各占三分之一，这是一个好的现象。

As for the situation under the macro-economic changes, with monetary policies being switched from moderately loose to a firm one, capital prices have to rise – that is normal. Big, medium-sized and small companies may all have to shoulder rising interest rates, which is inevitable. Small companies’ increases in capital costs may be slanted into the direction of costs rising more strongly, which can be worked on from two directions. One is to encourage commercial banks to take more care of small businesses, and to further consolidate and develop small companies’ loans. Many commercial banks are aware of this.
至于说在宏观形势变化的情况下，货币政策从适度宽松转为稳健以后，资金价格会有所上升，这是正常的，大中小企业可能都要承受上升的利率，这是必然的。有可能在这种环境下，小企业承受的上升幅度可能会偏高，这可以从两个方面做工作，一是继续鼓励商业银行更多地关照小企业，进一步巩固和发展小企业贷款。很多商业银行也都是有这方面的意识的。

On the other hand, commercial banks must be required to show better abilities in their pricing. Actually, under different economic circumstances, a bank may price its loans according to the risks at the company in question, and reward those with better repayment abilities, and lower risks – and vice versa -, so that the companies will feel that they are treated impartially. We also encourage small companies to choose from the market. Different banks may show different attitudes towards you, may have different opinions about you, and will also price loans differently – this requires choices.
另一方面，要求商业银行有更好的定价能力。确实，在经济条件不一样的情况下，银行会根据企业的具体情况进行有区别的风险定价，对偿还能力比较好的、风险比较低的企业，在定价方面应当与那些风险比较高的企业加以区别，这样使得小企业感到有更加公平的待遇。再一条，我们也鼓励小企业也要在市场上有所选择。不同的银行，可能对你的态度不一样，对你的看法不一样，给你的价格也不一样，这个要有所选择。

As the central bank, we mainly do one thing – to let our credit information system include more SME numbers. All SMEs with a loan history have been included in our credit information system, which can provide commercial banks with data of all kinds, help them to understand the company’s loan situation, and price loans based on that information, including risk premiums. The resulting better accuracy can benefit SMEs. Of course, Chinese SMEs do differ from each other, and can’t be judged across the board. Thank you all.
从中央银行的角度来讲，我们主要做的一件事，就是使我们的征信系统更多地包含中小企业的数字。现在基本上凡是有贷款历史记录的中小企业都已经纳入了征信体系，征信体系可以给商业银行提供更多的各方面的数据，使得他们能够了解企业的资信情况，从而使他们的定价，包括风险定价，都能够更为准确，这样有利于中小企业。当然，对中小企业应该也是有区别的，不是“一刀切”的。谢谢大家。

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Notes

¹⁾ sān xìng (三性, three characteristics) is also a religious term, about good, bad, and neutral seeds, or about the three types of character – good (善性), bad (恶性), and neutral (无记性).

²⁾ For some background concerning Beijing’s computation of the consumer price index (CPI), please read The Emperor’s new Thermometer (February 16), and Seasonal Considerations (February 19).

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Related
The Government’s Macroeconomic Controls, July 1, 2010
“Using” the Credit Squeeze”, January 18, 2010

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Taiwan’s Negotiating Position: a Hyper-Inflated Debate

There seems to be a contrast between international, and Taiwanese coverage on Hu Jintao‘s state visit to America last week. German papers point out that there aren’t great changes in US-Chinese relations perceivable yet (neither for the better, nor for the worse), and that Barack Obama hadn’t forgotten the “humiliations” he suffered at the Copenhagen climate summit, or on his China visit (both events of late in 2009).  Even the National Examiner, “the inside source for everything local”, and a platform which frequently highlights Taiwan’s unresolved international status – the island being by no means an essential “part of China” -, acknowledges that Taiwan enjoys considerable Congressional support, even if the Obama administration sent “mixed signals” to Beijing about Taiwan.

Some Taiwanese media, however, cite concerns that there may be too much convergence between Washington’s and Beijing’s positions, when it comes to Taiwan’s status.

Raymond Burghardt, chairman of the American Institute in Taiwan (AIT, Washington’s unofficial embassy in Taipei), was scheduled to arrive in Taiwan for a four-day visit in Taiwan during which he would meet with president Ma Ying-jeou. Taiwan’s foreign ministry reportedly said that Burghardt is there to brief Taiwan officials on the latest developments regarding Chinese President Hu Jintao’s state visit to the United States. Burghardt is now the AIT’s chairman, but not the actual de-facto ambassador. That would be the AIT’s director, William A. Stanton.

It has been argued that the US-China joint statement of November 17, 2009, which stated that the two sides agreed that respecting each other’s core interests is extremely important to ensure steady progress in US-China relations, marked a setback for Taiwan. This is probably true, although Washington’s definition of what core interests are may differ from Beijing’s definition any time. And the only difference between the 2009 joint statement, and previous administrations’ positions seems to have been that

The United States welcomes the peaceful development of relations across the Taiwan Strait and looks forward to efforts by both sides to increase dialogues and interactions in economic, political, and other fields, and develop more positive and stable cross-Strait relations.

The last paragraph, David Huang Wei-feng (黃偉峰), formerly a member of the Mainland Affairs Council (MAC) with the Chen Shui-bian government, argues, marks a violation of the US Six Assurances (六項保證) made by then US president Ronald Reagan in 1982, which said that the U.S. would not play a mediation role between Taiwan and China. That is how Focus Taiwan renders his views. The Liberty Times quotes him as saying that the wording – the United States encourages all forms of cross-strait dialog^*) (美國鼓勵兩岸各種形式的對話), and that it supports ECFA -, could become an issue in Taiwan’s internal elections and policies (這種說法容易轉化為內部選舉政治的操作).

Some punditry is in order. That the DPP dislikes explicit American statements that support the KMT’s, rather than the DPP’s China policies, is also understandable, especially given the risks for Taiwan that agreements and involvement with China may carry.

But Reagan’s Six Assurances mirrored America’s stake in Taiwan’s de-facto independence. What Huang’s criticism of the joint statement amounts to is a demand that America must put Taiwan first in every way. Not only it’s freedom, but the sanctity of its internal affairs, too. That reminds me of a  behavior more frequently seen on the other site of the Taiwan Strait.

Above all, such remarks only highlight the fact that Taiwan wouldn’t be able to defend itself against a Chinese attack, or even against non-military pressure from Beijing. In that light, of course, it will still help if the Obama administration brings itself to sell Taiwan the weapons it asks for. Military  modernization can bolster Taiwan’s negotiation position vis-a-vis China to quite an extent – and this should happen, the sooner, the better.

But even if some nervousness is understandable, Taiwanese hypersensitivities are not helpful. Taiwan’s de-facto independence depends on America’s preparedness – and ability – to defend Taiwan, if need be. And sometimes, solutions can be cheaper than the sales of military imperial regalia as constantly discussed – fighter planes, submarines, etc.. Laser weapons, for example, can’t stop Chinese invaders, but they can help to defend Taiwan against the approximately 1,100 Chinese missiles targeting the island. And laser developments come at comparatively low costs.

There's a hand, my trusty friend.

I believe that the big debate about Taiwan’s negotiating position depending on arms supplies is hyper-inflated. It matters, yes. But compared to the actual balance of power between America and China, it’s a rather small issue.

As much as Taiwan’s dignity counts (most people who belong to a country probably feel that such matters count), it isn’t only the Ma administration which sometimes puts issues of prestige on the backburner in its interaction with the outside world. Those who criticize Ma for matters of protocol or national dignity should remember how previous president Chen Shui-bian accosted, umm, greeted Laura Bush in Costa Rica, in 2006. That was kind of “high-profile”, but it was low.

Sometimes it’s almost easy to understand why Washington is quite happy with the incumbent Taiwanese president. One would wish for a higher Taiwanese international profile now – but a low profile is still better than an ugly one.

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Note

^*) exact wording:
“Both sides underscored the importance of the Taiwan issue in U.S. – China relations. The Chinese side emphasized that the Taiwan issue concerns China’s sovereignty and territorial integrity, and expressed the hope that the U.S. side will honor its relevant commitments and appreciate and support the Chinese side’s position on this issue. The U.S. side stated that the United States follows its one China policy and abides by the principles of the three U.S.-China Joint Communiqués. The United States applauded the Economic Cooperation Framework Agreement between the two sides of the Taiwan Strait and welcomed the new lines of communications developing between them. The United States supports the peaceful development of relations across the Taiwan Strait and looks forward to efforts by both sides to increase dialogues and interactions in economic, political, and other fields, and to develop more positive and stable cross-Strait relations.“

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Related
Ma Ying-jeou – he said WHAT, May 3, 2010

Legislative Yuan reacts to Advertorial Controversy

The English-language Taipei Times referred to the newspaper contents in question as advertorials in a report on Tuesday.

A German-English / English-German definition (LEO, Munich):

advertorial   – an extended newspaper or magazine text advertisement that promotes the advertiser’s product or services or special point of view but resembles an editorial in style and layout

I’ll stick to the term advertorial, for the time being.

A term more or less equivalent with advertorial, used by the Liberty Times, the Taipei Times’ Chinese-language sister, is 置入性行銷 (zhì rù xìng xíngxiāo). Xingxiao stands for marketing; zhi ru would be placement – placement marketing.

Cabinet-level Mainland Affairs Council’s spokesman Liu Te-shun said late on Thursday that officials will decide if the news reports in question are indeed advertising, but did not say what punishments would be levied for disguising advertising as news,

reports Associated Press (AP), which adds its usual narrative that “Taiwan and China split amid civil war in 1949”.

Taiwan’s parliament (Legislative Yuan) was to make legal amendments to ban concealed advertising, the Liberty Times reported on Friday, and quoted  MAC spokesman Liu Te-shun (劉德勳, see Associated Press quote above) as saying that such a ban would also apply to Chinese advertising of this kind in Taiwan.

Local government delegations from various parts of China had placed advertorials during the past two years, as they visited Taiwan, writes the Liberty Times. This had led to a “China embeds itself in Taiwan” controversy (“中國置入台灣”).  Liu said that the government would make an intranet page available to  organizations and departments dealing with Chinese visits. The page would privide information about how offenses would be fined. According to the Liberty Times, Liu also said that advertising for Chinese goods and services which had access to the Taiwanese market was legal, but adjustments could be made in that field, too, if the need should arise.

Testing the limits as to how blurred the borders between different forms of publication may become isn’t a merely Chinese specialty – what probably made them particularly controversial is that “closer ties” with China, by plane and tourism links, and by framework treaties such as ECFA, are a sensitive issues anyway, given that China threatens Taiwan with “reunification”, and given concerns that too much dependence on Chinese advertising could compromise the independence of the press.

The Taiwanese government itself came under criticism earlier this month for allegedly “buying independent bloggers”.

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Updated/Related
Cominform in Taiwan’s Press: many Cents, January 13, 2011
Economic Cooperation Framework Agreement (ECFA)

Taiwan Municipal Elections: Punching the Cotton

The following is an extractive account of an article which appeared in Singapore’s United Morning Post (联合早报) on Friday, asking why the outcome of Saturday’s Municipal Elections in Taiwan appears to be rather  unpredictable, despite national economic data that – one might believe – should put local candidates of president Ma Ying-jeou‘s KMT in a very favorable position.

Although the municipal elections are naturally local elections,  to be held in five municipalities – Taipei City, Xinbei City, Taichung, Tainan and Kaohsiung -, they may provide clues for president Ma’s chances to win a second term in presidential elections in 2012 (or even just to get nominated by his party again). The electorate in the five cities make up almost 65 percent of Taiwan’s total population of 23 million.

Many of Morning News’ articles don’t seem to last on the internet. If you want to read the original article in Chinese and can’t get there through this link, drop me a line – duibudui@hotmail.de -, and I’ll mail it to you.

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Shen Zewei (沈泽玮), in an article for Singapore’s Morning Post, addresses a question about Taiwan’s municipal elections (to be conducted on Saturday, November 27) which probably preoccupies China’s leadership, too: Why don’t GDP growth by 9.98 per cent and an unemployment rate less than five per cent make the outcome of the elections a predictable success for Taiwan’s ruling KMT government?

Shen quotes Tung Chen-yuan (童振源), professor at the National Chengchi University as saying that a key to explaining the KMT’s current struggling is that the economic data and economic agreements the government keeps publishing hadn’t been converted into the economic benefit of the public (所有政府亮出的经济数据和经济协议都无法转换成民众感受到的经济效益). For one, much of the recent surge in GDP was due to the fact that growth had been so low one year earlier (thus making the discrepancy between growth last and this year so big), and more importantly, there was resentment at worsening disparities in income distribution. The income of the younger workforce was stagnating. What contributed to the current low unemployment rate were government programs for helping people finding employment – but only for temporary jobs. The oppositional Democratic Progressive Party (DPP) had kept avoiding the Economic Cooperation Framework Agreement (ECFA) and cross-strait relations as topics during the municipal elections campaigns, and the KMT’s fists therefore only found cotton to punch into (民进党在这次选举中采取了回避ECFA和两岸议题的战略，固然让国民党的拳头都打到棉花上).

More critically however, ECFA was really only a framework so far, without substantial content – it would only become a plus for the KMT if it added more content, which in turn meant another round of complicated negotiations between Taipei and Beijing. To obtain concessions from Beijing, the Ma government would have to open up Taiwan’s markets  further to China, which would lead to dissatisfaction among the Taiwanese. Disappointment among many pan-blue supporters was, in addition, leading to problems in mobilizing them to vote.

Last but not least, Shih Chih-yu (石之瑜), a professor with the National Taiwan University’s Department of Political Science, is quoted as pointing out that the oppositional DPP was now seen as the party that would rather maintain the status quo, while the KMT was more likely to change the Taiwan’s status [into the direction of “uniting with China”, rather than towards independence, of course – JR]. Voters who preferred the status quo would rather support the DPP now. The fact that economic concessions hadn’t improved Taiwanese feelings toward mainland China (大陆) but rather made them fear that the KMT was tilting towards Beijing, was certainly worth Beijing’s attention. And Tung Chen-yuan [see second paragraph] points to a growing sense of a Taiwanese identity, and growing public support for maintaining the status quo in relations with China. The Ma government therefore needed to amend or complete its strategy concerning contacts with Beijing.

No matter what the results of the elections on Saturday were going to be, the mere fact that the KMT candidates had to struggle in their campaigns were “no small warning” to the party.

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Related
Taiwan News Roundup: “In just Three Seconds”, October 8, 2010
Taiwan, ECFA, and the Traitorama, June 29, 2010

Taiwan’s Security: a Case of DIY

Three Ohio-class nuclear submarines — heavily armed with Tomahawk cruise missiles — are now making a show of US military power closer than usual to China, the Taipei Times reports. The paper quotes US defense analysts, speaking on the condition of anonymity as saying that the move was made to reassure nervous allies in the region, and that moving the submarines into the Pacific Ocean in part reflected US “concern” at China’s failure to reduce the missiles aimed at Taiwan despite a major reduction in tensions across the Taiwan Strait.

Time wrote on Thursday that the submarines usually carried Trident nuclear missiles, but that four of the Ohio-class subs had been refitted with Tomahawk cruise missiles, with three of them now in the region. Each of these submarine could hold a capacity of 154 of these, capable of hitting anything within 1,000 miles with non-nuclear warheads. The three submarines in the region are currently stationed in Subic Bay (Philippines), Pusan (South Korea), and Diego Garcia, a coral atoll and the largest island in terms of land area, of the Chagos Archipelago in the Indian Ocean.

In all, writes Time,

the Chinese military awoke to find as many as 462 new Tomahawks deployed by the U.S. in its neighborhood. “There’s been a decision to bolster our forces in the Pacific,” says Bonnie Glaser, a China expert at the Center for Strategic and International Studies in Washington. “There is no doubt that China will stand up and take notice.”

U.S. officials deny that any message is being directed at Beijing, saying the Tomahawk triple play was a coincidence. But they did make sure that news of the deployments appeared in the Hong Kong–based South China Morning Post — on July 4, no less. The Chinese took notice quietly. “At present, common aspirations of countries in the Asian and Pacific regions are seeking for peace, stability and regional security,” Wang Baodong, spokesman for the Chinese embassy in Washington, said on Wednesday. “We hope the relevant U.S. military activities will serve for the regional peace, stability and security, and not the contrary.”

Australia, Japan, Indonesia, South Korea and Vietnam had all been urging the US to “push back against what they see as China’s increasingly aggressive actions in the South China Sea”, the Taipei Times quotes Time.

Taiwan’s ruling KMT arranged for a smooth passage of ECFA, the controversial Economic Cooperation Framework Agreement with China, in a legislative yuan session on Wednesday that turned violent. President Ma Ying-jeou‘s KMT has a comfortable majority there which helps not only winning votes, but also choosing the path of least resistance in the review procedure of treaties and bills.

The news about the three submarines comes along with news about two multi-national naval exercises in the region in the near future, plus an – unconfirmed so far – one by the US and South Korea in the Yellow Sea. On June 26, Japan reportedly extended its Air Defense Identification Zone (ADIZ) near Taiwan in the East China Sea without consulting Taiwan’s government in advance. Taiwan’s opposition interpreted Japan’s move as an expression of Japanese distrust of Tawain’s incumbent government.

According to the Asia Times, independent observers don’t share the opposition’s opinion (see details there).

But there are other indicators that might support the opposition’s view that Taiwan’s government isn’t trusted. President Ma asked Washington to clear sales of weapons to Taiwan which are apparently stalled. Ma’s public emphasis is on arms supplies from America, rather than on American protection. In an interview with CNN earlier this year, he added that “we will never ask the Americans to fight for Taiwan”.

It may be the case that Beijing successfully discourages American F-16C/D fighter planes supplies to Taiwan. But recent military trends could also be interpreted as an American and a Japanese preference for taking care of the regional status quo by themselves.

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Related
“Arousing Public Mistrust”, May 30, 2010
Taiwan Arms Sales: a Fly-Head sized Benefit, January 8, 2010
Lee Kuan Yew: America must Strike a Balance, Nov 7, 2009

ECFA: China’s Primacy of Politics

As early as in February this year, the Neue Zürcher Zeitung (NZZ, Switzerland) assessed demands by Chinese military officials – reacting to US arms sales to Taiwan – to sell American bonds in retaliation, to create disturbance on the markets:

Did I say something wrong? (Click on this picture)

[…] Of course, in China, military officials aren’t entitled to make such decisions either. But these demands are showing that the Chinese leadership’s much-lauded economical pragmatism is under strong political-ideological pressure which can, at any rate, eclipse economic self-interest. The primacy of politics boosts dangerous trends in China.

It is exactly the example of Taiwan which shows that, when dealing with China, one can’t conclude from economic pragmatism that there would be political pragmatism. Since the Kuomintang and president Ma Ying-jeou define Taiwan’s policies, the relationship to China has strongly improved. Connections with mainland China in terms of travelling, trade, and tourism, have been facilitated. Now, within the usual semi-official framework, talks about some kind of free trade agreement (Economic Cooperation Framework Agreement, ECFA), are underway. But all these pragmatic steps change nothing about the fact that Peking, by means of economic attachment, is trying to get Taiwan back under its wings, and that this is exactly what the majority of the Taiwanese population doesn’t want to allow that to happen.

So, for example, there is the question if Taiwan’s signature to the agreement would allow the island to conclude free-trade agreements with other countries, too. If that should not be the case, the fear of a “Hong Kong-ization”would be refuelled. The suspicion that the agreement is paving the way to “one country, two systems”, would have been confirmed. And under this slogan, a majority of the Taiwanese, still doesn’t want to live.

The NZZ warned that Beijing’s and Taipei’s goals were different – especially as it was facing the ASEAN-plus-One arrangement, a common south-east Asian and Chinese market -, Taipei feared a marginalization of its economy. China on the other hand didn’t have liberalization on its mind, but the implementation of its political claim on the island. Therefore,

the danger that they are talking at cross-purposes, consciously or unconciously, is very high. The two China’s are having their dialog with very different, and possibly unreconcilable, goals. If they will ever be able to understand each other is doubtful. In any case, Beijing’s pragmatism will hit political limits whereever Taiwan’s independence appears.

During the past months, many “international experts” assisted Beijing and Taipei in advocating ECFA. Much of what is written now, after the signing of the ECFA between China and Taiwan in Chongqing on June 29, sounds like if the proponents are becoming scared of their faith in the negotiators’ good (i.e. “unpolitical” or “pragmatic”)  intentions.

“A watched frog never boils”, the Economist wrote on May 8 last year, reacting to Yeh Chu-lan, former Taiwanese Presidential Office secretary-general who deplored that It’s sad that most people in Taiwan are not aware of it — they’re like frogs gradually cooking alive in warm water: By the time they realize the water is boiling, it’ll be too late.

The same or another author with the Economist now takes a much more sober look at the situation:

[…] Among the Chinese concessions will be to let Taiwanese banks in China start doing business in renminbi within two years of opening their branches, as against three years under the WTO rules that apply to most foreign banks. This is similar to the deal China offered Hong Kong banks under a 2004 trade agreement—perhaps a little too similar for Mr Ma’s political comfort, given that Hong Kong is officially part of China. Finally, the two sides will also sign an agreement on intellectual-property rights, which will help Taiwanese firms, a rich source of patents and Mandarin-language entertainment, as well as high-grade varieties of fruit, to battle piracy on the mainland.

China’s largesse is clearly political. It has learned that sabre-rattling, such as it employed in 1996 by launching ballistic missiles over the island, only encourages Taiwanese voters to choose pro-independence politicians. Now it is trying economic sweeteners instead. It hopes that these will prompt voters to choose Mr Ma’s Kuomintang party in the 2012 presidential election rather than the independence-leaning Democratic Progressive Party (DPP).

So Mr Ma must now prove that the ECFA will indeed help Taiwan sign free-trade pacts with other countries, or else risk a public backlash. Much here depends on what Taiwan calls itself in these agreements. “Republic of Taiwan” would please the voters but infuriate China; “Taiwan, Province of China” would do the reverse. Mr Ma has talked of a possible compromise: Taiwan’s WTO moniker, “The Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu”. The DPP claims that China will use its clout to block other Taiwanese free-trade deals no matter the nomenclature. When asked about it on June 24th, Zheng Lizhong, who led China’s talks, appeared to duck the question. […]

Mr Ma will have to show more economic progress before the municipal elections due on November 27th. These will set the tone for the 2012 presidential election. And the DPP is ready for a fight.

And even another more pro-ECFA article of the same paper which moans that Taiwan is entering a lengthy season of frantic politics in which a nuanced debate about trade will be an early casualty concludes with a meeting at Taiwan’s defense ministry.

A defence-ministry official in Taipei points to a map of the island and sweeps his arm around to its east to show where, in the past year or so, Chinese naval forces have begun to extend their war-gaming reach. China is still, he says, a “clear and present danger”. Greed for China’s market is good for the KMT’s electoral prospects; but fear of its long-term intentions can still boost the DPP.

A South China Morning Post (SCMP) article points out that

Much as the United States once believed that economics drove politics in China in the 1990s, the mainland now thinks the same about Taiwan. Beijing’s strategy is to wait for the magical economic elixirs it has given Taiwan to take effect. Once the Taiwanese have tasted the benefits of direct flights, millions of mainland tourists in Taiwan, and the fruits of free investment and trade across the Taiwan Strait, Beijing is optimistic that a political accommodation with Taiwan can be reached through negotiations and patience. This betrays a fundamental lack of understanding about the arc of Taiwanese history over the past three decades and what matters to the Taiwanese now. During the 1980s and the first half of the 1990s, a mass democracy movement forced the KMT to hold free elections, end military law and censorship, and normalise Taiwanese society. While Taiwan’s politics are messy and its judiciary weak, Taiwan’s vibrant civil society enjoys the same political freedoms as people in North America or Europe.

And Ma, the article suggests, is

politically vulnerable because, although Taiwan’s economy has made a sparkling recovery in terms of gross domestic product and other conventional economic indicators, Taiwan’s working people are waiting, with increasing impatience, for some of the benefits to trickle down to them.

They will be waiting for a long time since the main effect of Ma’s mainland-oriented economic policies is that Taiwanese businessmen are being enabled to extend the life of their moribund business model even longer by relocating to the mainland to exploit its cheaper labour, instead of investing in new technologies and the service industry in Taiwan.

It was rather exceptional for the international media early this year that the Neue Zürcher Zeitung’s (see beginning of this post) actually realized that there is a Chinese primacy of politics. But it still didn’t quite wrap it up. When you are dealing with a country that puts ideology first, you can’t put business before politics yourself without risking security.

This isn’t only true for Taiwan, but for every free society.

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Related
ECFA: The Price of letting Taiwan Down, July 1, 2010
The Primacy of Politics, June 13, 2010