By Jonathan Standing -
THE re-election of Taiwan President Ma Ying-jeou is a vote of support for his four-year economic rapprochement with China, which has taken annual bilateral trade to some $145 billion and helped cushion the export-led economy from the global downturn.
But several factors could check the speed of further opening this year, including China’s own economic slowdown and change of leadership, as well as Taiwanese concerns over Chinese influence and an unequal division of the benefits — worries reflected in Ma’s reduced margin.
While some sectors of the economy may get a boost, such as tourism, healthcare and education, the concerns plus others including the impact of increased Chinese investment in Taiwan’s hot property market and what China may ask Taiwan for in return, point to a measured pace in relations this year.
“Ma should probably moderate the opening to China,” said Linda Lim, professor of strategy at the University of Michigan’s Ross School of Business.
“People have already seen what it can achieve, it will continue,” she said, adding that the emphasis should switch to how the opening to China could improve linkages with the rest of the world.
Ma had faced attacks over how much sway China has over the economy of Taiwan and over the real benefits of the opening policy for many ordinary Taiwanese struggling with rising living costs, low wages and unaffordable housing.
“The close battle is a wake up call for Ma that domestic issues are important too; closer links with China shouldn’t be the only focus,” said Katrina Ell, economist at Moody’s Analytics.
“Domestic issues have been key in this election as unemployment is rising, income growth is weak and inequality increasing.”
Ma’s policy of controlled opening of the economy since his first term started in 2008 boosted trade and investment, though key sectors such as banking and top-end technology remain only partially open.
The number of direct flights between Taiwan and the mainland went from almost none to 100 a day and some 2.6 million Chinese tourists have visited the island, spending over $3 billion.
The policy reached a zenith in a groundbreaking 2010 Economic Co-operation Framework Agreement (ECFA) that slashed hundreds of tariffs on Taiwan exports to the mainland.
China has become Taiwan’s top trading partner, taking some 28 per cent of its exports last year compared with 12 per cent for the United States. Bilateral trade between China and Taiwan totalled $145.37 billion in 2010, up 36.9 per cent from 2009.
Officially reported and approved Taiwan investment in the mainland totalled $39.3 billion during Ma’s first four years, almost two-thirds of the total $58.3 billion in the 16 years prior to his first term.
There are signs of renewed interest in banking links between the two sides, while Chinese investment into Taiwan has begun trickling in, totalling $170.1 million from when it was first allowed in June 2009 until October 2011.
Ma’s victory is conducive to cross-straits trade and financial exchanges, said Wang Jun, a senior researcher at CCIEE, a top government think tank in Beijing.
“I do not think the pace will accelerate much, but ties will definitely improve. We also need to watch whether Ma will adjust his policies to bring more positive changes. Maybe, there will be some difference in strategies and policies in his second term.”