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| March 25, 2000 | atimes.com | ||
|  | China THE MIDDLE KINGDOM: Economic warfare? By Bradley Martin If Beijing reaches the end of its patience with Taiwan's refusal to reunify on the mainland's terms, one way it could choose to attack is using economic warfare - of which the island has just gotten a taste. As early as November, Taiwan Defense Minister Tang Fei warned that the first step in a determined attack by the mainland might be sabotaging Taiwan's financial system and its power grid. If that scared and demoralized Taiwan's people sufficiently, it might not be necessary to proceed with grabbing outlying islands, firing missiles and imposing sea and air blockades. As for sabotaging the financial system, Chinese Premier Zhu Rongji's pre-election warning against choosing a pro-unification figure showed how that could work. The stock market panicked for a few days. The government poured in gigantic sums to avoid a free fall. It spent the equivalent of an estimated US$3.6 billion to prop up the market in the week before the election. In the wake the election of the pro-independence party's nominee for president, things soon calmed down - for the moment, at least. But Taiwan and the mainland remain on a collision course. In due course China might be tempted to test just how deep the Taiwan government's pockets really are. But power over the other side's economy is by no means a one-way street. China's ambitious program of market-oriented reform and development requires vast amounts of investment from overseas. By the end of 1999, according to statistics from the Ministry of Foreign Trade and Economic Cooperation, more than 340,000 foreign-invested enterprises had been set up using foreign capital totaling $307.8 billion. For the last six years China has been second only to the United States in absorption of foreign investment, according to a recent dispatch from the Beijing regime's Hong Kong-based news agency Zhongguo Tongxun She. Last year foreign-invested businesses accounted for just under half the country's total imports and exports and over 15 percent of non-agricultural employment. That's foreign investment and China, of course, does not categorize Taiwan as foreign but as the holy and inalienable soil of the Middle Kingdom. However, ''foreign'' investment dropped by almost 10 percent last year for reasons that include the Asian financial crisis; fickle capital movements by international funds; an increasingly inward-looking, euro-focused Europe; and wage increases in China's coastal regions that rendered them less competitive globally. Where to go to make up the difference? China was already luring investments from Taiwan ''compatriots'' - and it has recently been making elaborate efforts to attract more. Rules to implement the country's Taiwan Compatriot Investment Protection Law went through four drafts and innumerable investigations in 15 provinces and municipalities on the mainland, according to Renmin Ribao (People's Daily), the Communist Party organ. Only at the end of 1999, after all that effort, did the authorities enact the rules - satisfied that they met the demands of prospective investors from Taiwan. Basically, Taiwan investors are promised that the state will not nationalize or requisition their investors - except in ''special circumstances,'' in which cases they are guaranteed legal due process and just compensation. The rules, according to Renmin Ribao, ''contain rather detailed provisions on some hot issues of general concern to Taiwan businessmen.'' Reading between the lines of the examples offered, it becomes clear why those issues were ''hot''. Officials at various levels seem to have been accustomed to considering their Taiwan ''compatriots'' cash cows, who could be given the runaround in the approvals process and hit up for various fees and surcharges to which mainland enterprises are not subject. They've also been denied credit and have had trouble finding suppliers. All this discriminatory treatment is to stop, the new rules say. That's no doubt reassuring to Taiwanese thinking of investing on the mainland. Sabotaging the Taiwan economy, on the other hand, would not be reassuring. If reformers Jiang Zemin and Zhu Rongji have the upper hand in Beijing, that will be taken into account when push comes to shove. (Special to Asia Times Online) | |||||||||
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