25 October 2016
A file photo shows students storming Taiwan's parliament in 2014 amid protests over a proposed services trade pact with China. Credit: Lee Chung Wei
A file photo shows students storming Taiwan's parliament in 2014 amid protests over a proposed services trade pact with China. Credit: Lee Chung Wei

Why Beijing may lose some of its economic hold over Taiwan

Beijing used to think that economic pressure can swing things its way in Taipei. But the old strategy now lacks bite as Taiwan, just as in Hong Kong, is seeing some emerging generational dichotomy.

Seniors may bow down to an aggressive Beijing in exchange for some immediate perks, but it is an entirely different situation when it comes to the younger generation.

Most youngsters in Taiwan have strong feelings about the island’s independence and are willing to do whatever it takes to prevent their government from sacrificing the island’s political future in exchange for Beijing’s rewards.

The 2014 Sunflower student movement, which successfully stalled a services free-trade pact with China, is evidence of this.

The economic benefits from Beijing’s individual visit scheme or free-trade accord flow only to the big businessmen, like realty or retail barons, while the ordinary Taiwanese are left footing the bill and suffering the side effects.

If things are not kept in check, it will only result in growing wealth disparity and a disenchanted and disenfranchised youth.

The average monthly salary of Taiwan college graduates, for instance, has already been stuck at NT$22,000 (US$675) for years.

Even some mainland scholars, like Li Yihu (李義虎), director of Peking University’s Taiwan Research Institute, think that while the mutual affinity seen during Ma Ying-jeou’s (馬英九) tenure is now beginning to evaporate, the shape of things to come can be something like “cold peace”.

If frictions rise between Beijing and Taiwan’s new government led by Tsai Ing-wen (蔡英文), the mainland could respond by scrapping minor trade concessions or cutting back on tourist quotas.

However, the efforts to win over Taiwan people through economic carrots won’t be halted, as Beijing would not want to see its decades-long campaign bite the dust. 

We will see more mainland capital and students and other personnel heading to the island, even in the Tsai era.

For Taiwan’s new leader, the issue of capital and personnel flows can be a useful bargaining chip when it comes to dealing with mainland counterparts.

Relying on China for economic goodies can never be a free ride, especially now as the mainland struggles with its own economy.

In contrast to a grim landscape on the mainland, nations such as Vietnam, the Philippines, Myanmar and India are now seen as better prospects. 

As all those countries are faced with a menace from China, in terms of territorial and other disputes, and have Washington and Tokyo’s backing, they may develop a sense of brotherhood.

Against this backdrop, Taiwan will be a key ally for them.

Tsai has already said that she will seek stronger cooperation with various countries in the region.

“The first step is to strengthen the vitality and autonomy of our economy, reinforce Taiwan’s global and regional connections, and actively participate in multilateral and bilateral cooperation and free trade negotiations including the TPP and RCEP,” Tsai said in her inauguration speech last Friday.

“We will also promote a new southbound policy in order to elevate the scope and diversity of our external economy, and to bid farewell to our past over-reliance on a single market,” she said.

Tsai’s “New Southbound Policy” could indeed alter the game for Taiwan, helping reduce Beijing’s economic influence in the island.

This article appeared in the Hong Kong Economic Journal on May 23.

Translation by Frank Chen

[Chinese version 中文版]

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Students rally outside the Presidential Palace in Taipei during the 2014 Sunflower Movement. Photo: Bohuei/Flickr

Taiwan’s new leader Tsai Ing-wen says she will seek stronger ties with Southeast Asian nations in a bid to reduce the island’s economic dependence on China. Photo: Bloomberg

Former full-time member of the Hong Kong Government’s Central Policy Unit, former editor-in-chief of the Hong Kong Economic Journal

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