Evolving tale of two Chinas

BY KEVIN RAFFERTY

SPECIAL TO THE JAPAN TIMES 

APR 11, 2014

OSAKA – Popular democratic protests against the ways in which democratically elected leaders are — allegedly — abusing their powers are becoming something of the flavor of the month across the world.

In one small place — I hesitate to call it a country for obvious reasons — mostly student demonstrators have shut down Parliament and decorated it with cherished portraits of founding father Sun Yat-sen and cruel caricatures and ugly slogans of the current president, accusing him of selling out to big money and to China. They proffer their symbol, the sunflower, which they present as a sign of hope.

This may be described as a tale of two Chinas.

Undoubtedly the biggest economic success story of recent years in the world has been the steady rise of the People’s Republic of China — from an impoverished country dancing to a hardline Communist Party tune to the world’s second-biggest economy with distinct capitalist characteristics still under the hard-line political leadership of the same Communist Party.

But there has been another Chinese success story that has been less heralded. The place in question is a diplomatic pariah since it dares to call itself the Republic of China and claims to be the legitimate government of all China, even though it is a small offshore island of 35,833 sq. kilometers with 23 million people, whereas everyone knows that the real China is a giant land of 9.7 million sq. km and 1.3 billion people.

Just 22 countries today recognize the Republic of China, headquartered on the island of Taiwan, as the government of China. Taiwan was the island to which the Kuomintang (KMT) government of Chiang Kai-shek fled in 1949 after it was defeated by Mao Zedong’s Communist forces.

Until Oct. 25, 1971, the Republic of China held the United Nations seat for China. But then the general assembly voted to replace it with the People’s Republic of China, and most countries followed the U.N. by taking their diplomatic flags to Beijing.

The remaining countries that recognize Taiwan are mostly small Caribbean and Oceanic states plus the Holy See, which stays with Taiwan because the new Communist rulers of Beijing kicked it out of the country in 1951, and talks to re-establish the Vatican’s mission in Beijing have floundered over the Communist rulers’ determination to keep the Christian churches “patriotic.”

In spite of its political pariah status, Taiwan has enjoyed great economic success. Growth of gross domestic product since 1992 averaged 4.5 percent, and per capita income reached $20,706 in nominal terms in 2012 according to the International Monetary Fund, or $38,400 in terms of purchasing power parity (PPP). Income in PPP terms makes Taiwan the 18th-richest territory in the world ahead of even Japan (on $35,855 in 22nd place). For comparison, China’s GDP per capital was $6,569 in nominal terms and $9,055 in PPP, putting China in 93rd place by PPP.

Today, in spite of its small physical size, Taiwan is the 28th-biggest economy in the world, with a rich and diversified industrial sector, especially in modern areas like computers, electronics, semiconductors and IT. Trade has been a mainstay of growth, and has expanded from $180 billion or 82 percent of GDP in 1992 to $650 billion or 140 percent of GDP in 2012, making Taiwan the world’s 19th-largest trader.

Taiwanese companies produce 94 percent of the world’s motherboards and notebook personal computers. Taiwan Semiconductor Manufacturing Company produces most of the computer chips used by U.S. concerns such as Qualcomm and Nvidia. Acer and Asus are well-known international computer makers, and Quanta and Wistron are original design manufacturers for global PC brands.

Along with the expansion of trade internationally has come a boom in economic relations with old enemy China. Trade with China has expanded to $122 billion a year, heavily in Taiwan’s favor, making China Taiwan’s most important trading partner. Cumulative Taiwanese investment in China has grown to $58 billion, and investment in China represents 80 percent of Taiwan’s foreign direct investment.

Companies like Taiwan’s Foxconn Technology, which assembles products for Apple, won fame and notoriety for employing hundreds of thousands of workers in China.

Under the rule of Taiwan President Ma Ying-jeou, who heads the modern KMT, relations between China and the pretender offshore island have grown apace. Direct flights between China and Taiwan were resumed seven years ago, and these days have expanded to 118 flights a day linking Taiwan with 54 cities in China, with business executives jetting to China and Chinese tourists going to Taiwan.

Ma has followed a consistent policy of improving trade and economic relations with China, and boasted that he has signed 21 agreements with China. But last year, according to furious critics, he went a step too far when he agreed to a services trade pact with China. The critics complained that it had been agreed behind closed doors and its implications had not been properly considered.

Initially the KMT reacted by agreeing to a clause-by-clause review of the deal and public hearings about its effects. But last month after a standstill in the legislature, the KMT leaders declared that time was up and that the pact would be put to a final vote — which triggered the student sunflower protest and sit-in of Parliament.

Ma claims: “The pact will be a boon for Taiwan’s overall economy and lead to the creation of 12,000 jobs in Taiwan. It’s a guarantee of Taiwan’s future competitiveness.”

Critics doubt that. They fear Taiwan is losing jobs to China and that Chinese companies are beginning to copy and displace Taiwanese investors. Investment traffic has been more lopsided, with 90,000 Taiwanese investments in China, but only 400 from China on Taiwan, mostly in restaurants and wholesalers, which don’t create many jobs.

Some foreign economists agree with the criticism and say that Taiwan is making a mistake to concentrate so heavily on China. It should instead be seeking greater competitive business opportunities with upgraded technological products selling to developed economies of the U.S., Japan and Europe rather than selling low-value products into China, where it will be vulnerable to developing Chinese industry. This would also create new better paid high-tech jobs in Taiwan.

Lurking in the background are dark political shadows, not merely the connections between the KMT and big business on both sides of the Taiwan Strait. In the days since the death of the old dictator Chiang, Taiwan has developed a vibrant democracy, with elections, a vociferous, sometimes unruly, parliament, and a lively and open press. The contrast with China in terms of political freedom and values is obvious.

“The government has fallen into the palm of big money here in Taiwan,” claimed 25-year-old Miles Lin, a protest leader quoted by Reuters.

He is not alone in distrusting Ma, whose popularity rating had fallen to single digits even before the protest erupted. Many young Taiwanese feel little affinity with China and fear that China may try to take over the island.

It is a difficult equation. The KMT asserts that the “1992 Consensus” is the best way, under which both China and Taiwan recognize that there is only one China but say “no reunification, no independence and no war.”

The opposition Democratic Progressive Party says the democratic status of Taiwan makes it distinct from China. Reuters quoted Joseph Wu, the DPP’s director of policy research, as saying, “Taiwan being independent is a reality.”

Any such declaration might be too much for Beijing that is increasingly keen to assert itself. China’s President Xi Jinping asserted in October that a political solution to the question of Taiwan’s sovereignty could not be postponed indefinitely.

Will U.S. President Barack Obama draw a red line against any Chinese incursion across the strait, and more important, will he convince Beijing that he would enforce it?

Kevin Rafferty is a professor at the Institute for Academic Initiatives at Osaka University.