The Economic and Politic in Taiwan - Essay Example

The Economic in Taiwan Outline This paper presents an economic and political outlook for Taiwan Policy differences with China are discussed Deceleration of gross domestic product growth Budget deficit Consumer price inflation Taiwan dollar against the American dollar Current-account surplus The strength of the global economy remains uncertain. the Economist Intelligence Unit expects GDP growth of 2.2% in the US in 2003, accelerating to 3.1% in 2004. GDP growth in the EU is expected to be just 1.1% in 2003, as a result of continued weakness in investor and consumer sentiment and stagnant growth in trade volumes. Prospects for the Japanese economy remain poor: Japan's GDP is forecast to expand by a yearly average of just 0.4% in 2003-04. The SARS virus has had a significant short-term impact on many East Asian economies. (Clark 1-7) Fears of catching the virus, in conjunction with the measures taken to contain it, have led to a sharp reduction in regional travel, tourism and retail spending in the most affected economies. As a result, even in the best case scenario, economic growth in the region will suffer into the second half of 2003. The rising impact of SARS (in line with a rising number of cases) on private consumption, coupled with a lower than expected rise in GDP growth in the first quarter of 2003, has led us to reduce our forecast for economic growth in 2003 as a whole from 3.7% to 3.2%. A stronger recovery in both domestic and external demand will result in GDP growth of 5.4% in 2004. Taiwan is unlikely to face significant inflationary pressures until late 2003 as domestic demand remains sluggish and international inflationary trends continue to be benign. Entry to the World Trade Organisation (WTO) in January 2002 has reduced imported inflation and will continue to put downward pressure on prices in the forecast period. Following the US-led war in Iraq, prices on international oil markets have eased. As a result, we expect the consumer price index to rise by an average rate of only 0.3% year on year in 2003. Stronger domestic and international demand for goods and services are expected to revive price pressures in 2004, lifting inflation to an annual average of 1.4%. We expect the CBC to allow the currency to remain weak, mainly in order to maintain the competitiveness of Taiwan's exports against those of Japan and South Korea. However, exports are unlikely to receive a major boost as a result, owing to general weakness in world demand, but the measure will help Taiwan producers to maintain market share. The CBC will allow the New Taiwan dollar to appreciate significantly only once there is sufficient evidence of a sustained recovery in GDP growth. Accordingly, in 2003 the currency will strengthen slightly in line with faster GDP growth late in the year, and as a result, average NT$34.79:US$1. Once the recovery in GDP growth gains momentum in 2004, the currency will appreciate further, to an annual average of NT$34.24:US$1 in 2004. The rate of growth in merchandise exports in US dollar terms has recovered since the second quarter of 2002. However, US demand-- the US is the destination for close to one-quarter of total exports--for Taiwan's exports has remained weak since the beginning of 2003. In addition, some of the year-on-year growth in exports during 2002 reflected base effects of comparison with 2001, when Taiwan's US dollar export earnings suffered double-digit declines. (Chu 79-104) The weak Taiwan dollar policy adopted by the CBC, mainly owing to the weakness of the Japanese yen, will not be enough to strengthen exports significantly. Nevertheless, exports to Asia, in particular China, will continue to provide some stimulus to the country's external sector. Imports have also been rising since mid- 2002. This trend is likely to be interrupted by fragile domestic demand (not helped by SARS) and the loss of momentum in export growth, although import growth is still expected to outpace export growth in 2003-04. As a result, the current-account surplus will narrow from US$25.7bn (9.1% of GDP) in 2002 to US$17.4bn (5.6% of GDP) in 2004. A long history lies behind this issue show how China and Taiwan have been separated from each other. After China lost a humiliating war with Japan, the Treaty of Shimonoseki was signed in 1895, which ended the first Sino-Japanese War. China was forced to cede the province of Taiwan to the Japanese. It was not until 1945 when the Japanese were finally defeated, that they surrendered Taiwan. With the defeat of the Japanese, the Chinese quickly seized control of Taiwan, and set up their own government. Corrupt Chinese government authorities caused resentment among the people in Taiwan. (Tzong-shian 5) In February of 1947, two years after China took over Taiwan, the people of Taiwan revolted against China. However the Chinese were able to quell the uprising in a matter of months and afterwards the Chinese declared Taiwan a province of China. Following a tough war with Japan, China needed time to heal its wounds. However Chinese communists took advantage of China's condition and started a nationwide rebellion. The Nationalist Army, having just fought a grueling war with Japan, was very vulnerable at the time. The Communists, led by Mao Zedong, had little trouble overthrowing the Nationalists and took over China in 1949. As a result, Chiang Kai-shek, the first president in Taiwan, led the Nationalists fled to Taiwan. The Communists' plan to invade Taiwan, however, was thwarted when the United States intervened by sending naval forces to defend Taiwan. Should Taiwan be reunified with China The question sounds simple enough, however this issue could end in war between the two. The first stasis is fact and definition. The Chinese believe that once the Japanese surrendered Taiwan, Taiwan was there's once again even if they had ceded the province. Taiwan argues that once the Chinese ceded the province they no longer had any claim over the island. In addition the Chinese believe that all Chinese people should be united. Taiwan however believes that it does not need China's assistance. Taiwan has established a strong economy on its own and has a government, which the people respect. The second stasis is the cause. The economy growth between China and Taiwan has become more far apart from each other. The trouble began when the communists defeated the nationalists in 1949 and the nationalists fled to Taiwan. China has attempted to invade Taiwan ever since the nationalists occupied the island. The United States has prevented any attack by China on Taiwan. Taiwan enjoyed a time of prosperity, in which it received military protection from the United States. During this time the United States also extended immense economic and military aid to Taiwan, which allowed Taiwan to slowly build up its economy. By the time the United States stopped sending aids to Taiwan during the mid 60's, over four billion dollars had flowed into Taiwan's economy. With the U.S. having helped Taiwan begin a road of economic growth, Taiwan was left to fend for itself. Not only did Taiwan not fail, it actually was able to continue its economic growth. Industrial production was estimated to have risen over 300%, while exports tripled and import doubled. During this time, Taiwan flourished with its modern economic development and had a growth rate higher than most other Asian economies. (Copper 139)Taiwan's tremendous economic success has made it very valuable in the eyes of the Chinese. The third stasis is quality and value. There are lots of differences between people live in China and Taiwan. In a recent pole taken in Taiwan, the majority of the people wished that things remained as they are now. The majority of the people who reside on Taiwan do not wish to reunite or be reunited unless it is on their terms with democratic China. The people of Taiwan are happy with the status quo, and they believe that communism will destroy everything they have worked so hard to achieve. Taiwan wishes to remain a democratic society, and they believe that that goal will be impossible if they reunite with communist China. China on the other hand believes that Taiwan can be reunited with China and still maintain a strong economy without any significant changes to their society. The fourth stasis is action. Both countries have their own national interests and are deciding what to do to make their own country stronger. China has consistently made efforts to prevent Taiwan from gaining international recognition. Taiwan had made great strides in the direction of democracy, while authoritarianism and political repression declined. During the 60's Taiwan's internal government and its international status underwent few changes. (Laothamatas 11-22) Chiang Kai-shek was reelected president in 1960 and again in 1966 by the National Assembly. Taiwan was diplomatically recognized throughout the world and its foreign trade expanded. Taiwan's good fortune would not last, however. In the early 70's, Taiwan's international status was quickly dissipating. The United States, swayed by the Chinese government, began to seek contact with China. This led to Taiwan's expulsion from the United Nations in 1971. Taiwan's seat was given to the People's Republic of China. In 1972 Unites States President Richard Nixon made a trip to China and as a result the U.S. opened a liaison office in China. The United States ended all formal diplomatic relations with Taiwan in 1979, after it had negotiated formal relations with China. The defense treaty signed between the United States and Taiwan ended the following year. In a matter of a decade Taiwan had lost its international status to China and protection from China by the United States (. To this day, China still intimidates other countries from forming any political ties with Taiwan. For example, the Venezuelan government ordered a state governor to cancel a scheduled trip to Taiwan, for fear that it might antagonize China (cnn.com). The Chinese claim that it is justified in urging other countries not to maintain diplomatic relations with Taiwan, because they perceive Taiwan as a renegade province. Another action that has been taken in recent year would be the policy of China and U.S. according to Taiwan's independence. China has publicly stated that if Taiwan declares its independence, it would take military action. This has drawn extreme criticism from countries all over the world. Even though the United States has stated that it would not support Taiwan's independence, it would not tolerate any attack on Taiwan by China. Despite the military action, there is also a question of jurisdiction in this issue. The Chinese have strongly expressed their view that the Unites States should not intervene in this matter. The Chinese learned recently that the United States might possibly provide Taiwan with military equipment to defend against missile attacks. In response, China's Foreign Minister Tang Jiaxuan stated, "If some people intend to include Taiwan under theater-missile defense, that would amount to an encroachment on China's sovereignty and territorial integrity and also be an obstruction to the great cause of peaceful reunification of the motherland'". Furthermore a senior Chinese official warned the United States that such an action would be "considered a hostile act and would 'certainly lead to serious consequences.'" Relations between China and the United States have suffered greatly over the controversial subject of Taiwan. In the past few months Taiwan and China have resumed talks, the first negotiations between the two since 1995. Taiwan sent Koo Chen-fu, a billionaire Taiwanese businessman and high-ranking member of Taiwan's ruling Nationalist party, and a team of top Taiwan legal experts to Shanghai to meet with Chinese officials. Koo arrived at Shanghai on a flight from Hong Kong because Taiwan prohibits direct flights to China. This is symbolic of just how far apart the two countries are concerning the reunification issue. Currently, Taiwan's policy regarding its relationship with Beijing is officially a one-China policy but one that promotes separation until the conditions for unification is right. This is clearly evident with Taiwan's ban on direct trade, transport and postal links with China. This is just one of many examples that exhibits the volatile relations between China and Taiwan. The debating issue of Taiwan's desire for independence can be easily seen through from the methods of fact and definition, cause, quality and value, and also action. The difference of culture or economy between Taiwan and China has grown more as the time goes by. People in Taiwan and China will have to face the revolution that will occur inside and outside of the country in later years, for which it might be another World War, and the U.S. might as well get involved. Works Cited John F. Copper, Taiwan: Nation-State or Province (Boulder: Westview, 1996), 139. Yun-han Chu and Tse-min Lin, "The Process of Democratic Consolidation in Taiwan: Social Cleavage, Electoral Competition, and the Emerging Party System," in Taiwan's Electoral Politics and Democratic Transition: Riding the Third Wave, ed. Huang-Mao Tien (New York: M. E. Sharpe, 1996), 79-104. Cal Clark, Taiwan's Development: Implications for Contending Political Economy Paradigms (New York: Greenwood, 1989) Yu Tzong-shian, The Story of Taiwan: Economy, 3rd ed. (Taipei: Government Information Office, December 2000), 5. Anek Laothamatas, Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism (Boulder: Westview, 1989) Read More