- Registration time
- Last login
- Online time
- 184 Hour
- Reading permission
Taiwan is heavily dependent on China. Some would even say Taiwan has an unhealthy reliance on China. It is currently exporting about 37% of total exports to China, with USA a distant second at 15%. Taiwan is only importing about 12% from China. |
However, China is not dependent on Taiwan. Here are the numbers for 2004, as 2005 is not available yet. China exported to US 21%, Japan 12.4%, South Korea 5%, Germany 4% of total exports. Another words, exports to Taiwan were so small that it didn’t even show up in the export distributions. Import for 2004 was Japan 17%, Taiwan 12%, South Korea 11%, US 8%, Germany 5.4% of total.
This makes sense because China is already the third largest economy (PPP) in the world. What is huge trade to Taiwan is relatively small to a much larger economy like China. The relative size difference is the reason China has leverage over Taiwan.
Upon closer examination, the 12% imports from Taiwan include both goods and services. China does import from Taiwan, high tech and other services mainly via Hong Kong. If you only count the goods, the import number is actually less than 12%. China does benefit from high tech via Taiwan, but Taiwan is clearly not the best in high tech. Japan and South Korea have a well deserved reputation for being the most high tech countries and China can do better with those two countries (trade, learn the new technologies, creating the manufacturing infrastructure to make the high tech products and services, etc.) Therefore, China can certainly go elsewhere to get the high tech help, and offer as an incentive, access to its huge domestic market, and I think it’s a safe bet it will have no problems finding help around the world. Looking at the trade distributions (both imports and exports) its clear that while China do benefit from high tech trade with Taiwan, it has other avenues to replace it if necessary. Imagine a China import trade distribution like this: Japan 18%, South Korea 13%, US 10%, Germany 8%, and Taiwan 6%. If China wants to add India into the mix and import say 4%, then Taiwan can even get less than 6%. Since some people are emphasizing high tech, it is smart for China to work with the best, and most high tech countries, namely Japan and South Korea.
I am mindful that China is a manufacturing juggernaut, and I haven’t even mentioned manufacturing durable goods. When you factor that into the mix, well you should be smart enough to get the picture!
If that is not enough leverage for you, how about financial leverage. China is on pace to have the largest currency reserve in the world. If you count currency swaps, it is essentially equal to Japan and most likely overtake Japan this year. What does that mean? China has enough financial liquidity to move interest rates, and move markets as we saw last July. Furthermore, it’s basic finance that those who have savings (China’s liquidity) have leverage over those who have large debts, as China is a world lender. As Taiwan’s debts increase, it is more vulnerable to lost of financing!
Lastly, China can also influence other countries not to do business with Taiwan should it threaten independence, because they can cut off access to China’s markets. That is a large penalty that China can use to maintain the regional dynamics. If you look at how the Taiwanese businesses reacted after CSB’s New Year’s speech, and the internal discord (four premier and counting), and the fact that the legislature is making CSB a lame duck, despite his efforts to counter it, the smart Taiwanese people clearly understand what is practically at stake! All the political rhetoric and ideology doesn’t change that. As I wrote before, practical reality trumps political ideology, as we are see more and more examples of just that!
[ Last edited by raymondusa at 2006-3-26 09:19 PM ]