White Paper on China Policy for the 21st Century
November 30, 1999
Preface
Taiwan
is entering the new century keeping in pace with the rest of the world.
In the new century, the new President
of Taiwan not only bears responsibilities to Taiwan, but also to the global community.
Taiwan, located at the cross line of
Western and Eastern influences, undertakes both the friction and insecurity of cultural
conflict, and plays an equilibrium role among international power struggles. The President
of Taiwan in the new century must ensure the security, survival and development of Taiwan.
Furthermore, the President must lead the Taiwan community that has a majority
consisting of immigrants to foster its unique vitality, flexibility and creativity.
This would provide substantial contribution to the future progress and harmony of
civilization.
The new President's responsibility
regarding Taiwan and the world rests upon how the government under his leadership would
deal with the serious and difficult subject of cross-strait relations.
The difficulties of the relationship
between Taiwan and China result from conflicting and contradictory perceptions of reality.
We do want to build friendly relations
between Taiwan and China, but the hostility and antagonism of the Beijing government
forces both sides to engage in a zero-sum game with no alternatives.
We hope that China can remove its
barriers to democratic development and become an influential force in the Asia Pacific
region. But the current totalitarianism of the Beijing government causes the
cultural differences of both sides to be greater.
Although, we promote bilateral economic
and trade connections that should be mutually beneficial and prosperous. There is
still an underlying fear of harming Taiwan's national security in the pursuit of economic
profit from China's markets.
This fear is in fact the result of
cultural conflicts, which will certainly be carried from this century into the next. Thus,
one of the most important goals and responsibilities of the President of Taiwan in the
next century is to have a China policy that seeks order and stability.
A peaceful Taiwan Strait where both
China and Taiwan co-exist and cooperate in the Asia Pacific region would assure to Taiwan
and the world the foundation for long term stability and security.
In order to establish this foundation,
the Democratic Progressive Party intends to use the next century as a starting point in
time to promote the overall normalization of relations between Taiwan and China.
This would be the nexus for our China policy in year 2000. Under this goal, Taiwan
should be more assertive in its national security while at the same time be more proactive
in its communications with China. Providing assistance to contribute to the progress
of China would be part of this plan.
The major goal of establishing normal
relations between Taiwan and China is premised on national security, with the building of
a consensus on national status, establishing stable mechanisms for interaction, and
developing economic and trade relations as the concrete themes. We expect the future
leader of Taiwan to have a China policy that is principled and yet flexible enough to
respond to new ideas. This policy must also be consistent with public opinion and
accountable to the people.
Taiwan's goal is to pursue peace and to
build order out of conflict. It is an inevitable mission for the new President of
Taiwan for the next century!
Building National Consensus on Taiwan's
Status
- Taiwan is a nation with independent dominion,
named the Republic of China in accordance with the current Constitution.
- Taiwan is not a part of the People's Republic of
China.
- Taiwan and the People's Republic of China are two
states, neither belonging to the other.
- In terms of independent sovereignty and national
interest, the relationship between Taiwan and People's Republic of China, based on similar
culture and ancestry, will be more special and closer than with other nations.
- The direction of the special relations between the
two nations and any decision to change the current status must have the consent of the
people of Taiwan.
Due to the hostile policy and actions
of the Beijing government toward Taiwan's territory, there is no complete consensus on
national identity in Taiwan. A national consensus must always be the foundation upon which
we prepare or even execute any policy. A national leader is required to fully integrate
public opinion because the priority of the national interest is to fully realize public
opinion, and from it, form a consensus.
In order
to integrate national consensus into our the China policy, one must first of all be
realistic in facing Taiwan's situation and its international reality. We must
recognize the reality that Taiwan is different from Mainland China and has independent
sovereignty. Only in this way can we consolidate our national identity and avoid
being trapped in chaotic hurdles.
Taiwan meets all the conditions for
statehood: Taiwan's territory includes Penghu, Kinmen, Matzu and other surrounding
islands; Taiwan has a population of 22 million; the government is elected democratically;
and its rights do not derive from any foreign authority. Even if our independent
status is not popularly recognized by international governments, this does not alter
Taiwan's de facto reality. Past public opinion polls support the view that we are an
independent nation, and virtually none will accept the authority of the Beijing
government. Continued confusion of Taiwan's status will not only distort public opinion,
but also further lead the international community to undermine our position in favor of
China's position. Since the establishment of the People's Republic of China in 1949, it
has never incurred a political relationship with Taiwan, and it naturally has no right to
participate in deciding the ownership and future of Taiwan.
Once we can reach a consensus on
complete autonomy, we will move toward the normalization of relations with China, and make
the maximum effort to improve cross-strait relations.
Although the people of Taiwan pursue
political autonomy, the long- standing relationship between Taiwan and China in history,
culture and ancestry is undeniable. From the angle of geopolitics, Taiwan should co-exist
with China. It is impossible for Taiwan to confront China for a long time. Regarding
economic development, Taiwan cannot separate from China's market. Only through
normalization of the relationship with China can Taiwan be under due protection and its
economy be fully developed. With motivating factors of mutual benefit and joint
prosperity, the current status of the Taiwan Strait should be defined as a special
relationship between the two sides.
Any special relationship may change the
current status, but our position is open. The Democratic Progressive Party once
specified in the "Resolution Regarding Taiwan's Future" in May 1995, that
any change concerning the current status of independence shall be decided by
plebiscite by all residents in Taiwan." In other words, any possibility cannot be
excluded in advance, and the DPP must accept any solution that is supported by the
majority of the people.
Establish
Stable Interacting Mechanisms
Beijing's hostility has led to a
stalemate. The reason is that there exists the difference in the political systems of both
sides, one is totalitarian and the other is democratic. To overcome the major
difference and to establish a stable order, the only feasible direction is through mutual
respect and understanding of differences, before overcoming the differences. Gradually we
must establish various kinds of interacting mechanisms.
The Democratic Progressive Party must
possess sufficient wisdom and vision to engage in dialogue and cooperate with the Beijing
government on various issues. This is to improve mutual understanding, cultivate
mutual trust and reduce differences in perception through multiple channels. In the long
run, we should seek cooperation with those in China willing to respect the complete
sovereignty of Taiwan, including individuals, organizations and groups, to jointly promote
the improvement of the Chinese political environment and diminish the difference of the
two nations in democratic development. Therefore, we will formulate future bilateral
interacting mechanisms through the following four proposals of positive negotiation,
comprehensive dialogue,diversification of communication channels, and assisting China's
democratization.
I. Constructing
Positive Negotiations
- Taiwan should initiate open
dialogue and negotiation with China.
- The objective of dialogue and
negotiation is to cultivate mutual trust, and further normalize relations between Taiwan
and China.
- National sovereignty should not
be negotiated.
- Negotiation results should be
approved by the Legislative Yuan or by the 22 million people of Taiwan.
In order to promote peace between
Taiwan and China, Taiwan should engage in comprehensive dialogue and negotiation with
China.
Cross-strait relations will enter a new
stage in the following century. Taiwan should no longer use outdated thinking in any
negotiation with China. Our attitude toward dialogue and negotiation with China should
turn from being passive to being active. The objective of dialogue and negotiation is to
normalize relations between Taiwan and China and enhance peace and prosperity between both
sides through mutual trust. Our objective is to reach reconciliation with China, while
continued, systematic dialogue and negotiation are necessary procedures to realize
reconciliation. As long as the national sovereignty and dignity can be adequately
protected, we should try all efforts to further dialogue and negotiate between Taiwan and
China.
II.
Engaging in Comprehensive Dialogue
- We welcome talks on all issues,
including functional and political.
- Various bilateral economic and
trade matters, military confidence building measures, peace treaties, etc., should be
incorporated into the scope of dialogue.
- Issues that arise from
cross-strait exchanges should be the priority in negotiation.
Cross-strait relations will enter a new
stage in the following century and we must face future exchanges with a new vision
In the next century, we should develop a brand new vision. The new round of dialogue need
not be limited to the subjects of the Koo-Wang Talks.
In terms of economic and trade matters,
especially those related to air and marine transportation, we should enter into
negotiations on navigation rights in order to promote Taiwan as the Asia Pacific Regional
Operations Center, and facilitate the bilateral travel of Taiwanese businessmen.
Concerning sea-land transportation, we request China to open international harbors such as
Huangzhou, Dalian, Shanghai, and Tianjinn, to reciprocate our opening of the two major
harbors of Kaohsiung and Keelung. Direct navigation and expedient shipping should be
the priority. For air transportation, we propose unilateral operation by Taiwan but with
the principle of mutual benefit and profit sharing for both sides. During
negotiation, we must first ensure national security and then pursue mutually favorable
interests. We hope to normalize naval and air transactions under the WTO framework
in the short term, and in the long term, promote Taiwan to become a major market for naval
transportation and aviation industries, as well as a major competitor in the global
economy.
Concerning the subject of protection of
bilateral investment, as both sides are to participate in WTO, we think the unilateral
exchange of investment, trade, and business trips will gradually change to a bilateral
course. Therefore, we urge both sides to engage in negotiation on signing an
investment protection agreement, setting up mutual trade representative institutions, and
legislating investment protection laws. We intend to realize Taiwan and China as
equal WTO members. Meanwhile, we should set up trade representative offices in
China. Under equal and mutually favorable conditions, we will allow China to set up
trade representative offices in Taiwan.
Regarding confidence building measures
(CBM), besides the basic discrepancy existing in both sides, the risk of misperception and
miscalculation exists. The geographical distance between Taiwan and China is very
close, so the chance of conflict is extremely high. In the absence of mutual trust,
any accident may be interpreted as an intentional act, and further raise an overall
conflict. In order to avoid a military confrontation, Taiwan and China should
develop confidence building measures as early as possible.
Confidence building measures cannot
guarantee no occurrence of war. It can only reduce the risk of war. However,
negotiation and implementation of confidence building measures can cultivate trust
and promote consensus for a peaceful resolution.
We propose the content of confidence
building measures as including the following:
- Transparent measures -- Include
the transparency of military practice and troop mobilization; transparency of military
procurement and sales information.
- Communication measures --
Include setup of hot line, mutual visits of military personnel, mutual participation into
international seminars, exchange of military trainees, and joint participation in
international organizations.
- Navy security measures --
Include marine rescues, resolution of fishing disputes, and crime prevention in the
Strait.
- Restrictive measures -- Set up
a buffer zone; discuss guidelines for action in the middle line between Taiwan and
China.
We admit, the current situation is far
from conducive to an overall, substantial CBM framework; there are still many barriers to
overcome. However, the difficulty in sea-land cooperation and transparency measures
is relatively smaller, because the function of CBM is to reduce the possibility of a
conflict. What it represents is the concern for human lives. Therefore, we
practically focus on subjects that are less confrontational, to serve as the major subject
of negotiation and basis for mutual trust.
To further the dialogue between Taiwan
and Mainland China on military security, it is necessary to reinforce our national defense
strategy and civilian research team. On one hand, this is an alternative to the
military system and it avoids confronting the egotistical military personnel participating
in discussion. Civilian personnel are more flexible in adapting to the current
discussions of Straits Exchange Foundation (SEF) and Association of Relations Across the
Taiwan Strait (ARATS).
On the subject of dialogue to reach a
peace agreement, Taiwan and China should realize a consensus on an ultimate goal and a
transitional dialogue framework can be set up to improve the interacting relationship of
both sides.
Both sides may engage in long-term
dialogues concerning the feasibility of signing a peace treaty. We think that a
peace agreement should have the following content:
- According to the United Nations
Declarations, a dispute should be settled peacefully without engaging in the use of force.
- The existing border between
both sides should not be invaded in order to guarantee complete respect for the other
side's territory.
- Neither side should represent
the other in the international community, or take action on the other's behalf.
- Both sides should exchange
representative offices.
To sign such an agreement is extremely
difficult. However, it is necessary to develop dialogue on this subject. These
difficulties are not unique to Taiwan and China. Before East Germany and West
Germany signed their basic agreement, they also went through lengthy negotiation. Only
after formulating more than ten agreements on issues such as postal administration,
telecommunication, radio channel, cargo transit receipt/delivery, travel convenience,
railway transportation, and accident compensation, did both sides establish mutual trust
and confidence.
Matters related to public interest
incurred through bilateral exchange must take priority. This includes topics such
as: business arbitration, juridical assistance, and mutual attack on crime.
III. Diversification
of Communication Channels
- In order to improve
communication and set up mutual trust, it is required to communicate with various
organizations and groups in China.
- Formal coordination and
negotiation should be conducted by the government and authorized institutions.
- Bilateral formal negotiation
channels between SEF and ARATS should be promoted, to eventually include official
government participation.
- Complement bilateral dialogue
through Track II diplomacy.
As a negotiation partner, Chinas
evolution into a pluralistic society is a positive direction. The dialogue between Taiwan
and China cannot be limited to the existing institutions and authority of the Beijing
government. On account of the long-term objective of normalizing relations, we should
further the understanding of the Chinese people about Taiwan and strive to encourage
pluralism and diversity in China. Therefore, positive dialogue with various organizations
and groups within China should play an important role in the future communication.
At present, the SEF and ARATS provide
the only authorized channels of negotiation across the strait. Formal negotiations
involve public law and thus should be led by the government, or government authorized
institutions. The SEF-ARATS negotiation is currently in authorized civilian form.
In the future, as negotiation subjects become comprehensive, official participation
should be gradually enhanced, so as to move to a new stage in official negotiation and to
ensure that the negotiation results are executed with public authority.
In addition, we suggest reinforcing the
communication between both sides of the strait through Track II Diplomacy.
Track II Diplomacy refers to the
communication channel consisting of scholars and experts or government officials
participating as private entities. Through informal discussion, the goal is to
explore mutual understandings to prevent the formal diplomacy of Track I from being
trapped into a deadlock.
Passive resistance is inferior to
active participation. We should initiate various Track II conferences to involve both
sides of the Strait or even other Asia Pacific countries concerned about the situation of
Taiwan and China, including government officials or scholars, with a chance of direct
communications. To be specific, talks initiated by Taiwan should have the following
characteristics:
- Supported by government, and
held by designated private sectors on a periodical basis.
- The participants should be
professional, and have substantial influence on the decisions of government or political
parties.
- Concerning different issues,
different kinds of communication mechanisms should be provided. For example, for economic
or trade, a trade forum for both sides can be set up. Regarding security, a cross-strait
security forum can be set up; and a cross-strait cooperative judicial forum can be built
to deal with illegal immigrants and crime. Moreover, the future direction of relations
between Taiwan and China is to establish a national status forum to allow both sides to
express their own opinions.
In addition to the forums initiated by
Taiwan, we should also actively participate in various existing dialogue channels. For
example, forums held by American organizations such as the National Committee On US-China
Relations, The American Assembly, and National Committee of U.S. Foreign Policy have been
useful. We should prudently evaluate the discussed topics, participating candidates,
and messages to be conveyed. It is also useful to strive for changing the bilateral forum
into a three-party or multiple-party forum, to avoid message twisting and mutual
mistrust. Furthermore, we must seek to participate in such international security
forums such as CSCAP and ARF.
IV. Encourage China's
Democratization
A secure relation between both sides of
the strait can be created from diversification of negotiation and communication channels.
However, the fundamental conflict is that while one side is a free and democratic state,
the other is a totalitarian state. If this conflict continues to exist, the stability of
the cross-strait relations would be only temporary. To create long-term stability, Taiwan
has to assist China in its path to democracy. Because we firmly believe human rights and
democracy to be universal values, we should help promote these values. Moreover, as long
as there is a totalitarian giant by its side, Taiwan cannot be secure. Thus, the
democratic promotion of China concerns not only the welfare of Chinese people, but also
the welfare of those living in Taiwan.
Those who can aid the democratic
promotion of China include Western nations, international organizations and the Chinese
democratic movement overseas. However, the role of Taiwan is also essential.
Although Taiwan has similar cultural influences to China, Taiwan already has a mature
democratic system. The experience of Taiwan verifies that the Chinese are not destined to
endure totalitarianism. As long as Taiwan exists, China cannot reject democracy on the
argument that authoritarianism is compatible with Chinese culture.
The Democratic Progressive Party is the
only party under influence of Chinese culture to successfully promote democracy. On how to
change a governing system, the Democratic Progressive Party is rich in experience. We will
cooperate with any individual or group to pursue democracy in China and to promote the
transition of its political system. At the current stage, Taiwan may promote the following
policies:
- Invite Chinese academic and
government officials to Taiwan in order to observe democratic elections.
- Set up fellowships or
scholarships to subsidize Chinese academic field in the study of promoting democracy.
- Expand exchanges with various Chinese political
parties, including Chinese communist party, democratic parties and various groups in China
promoting democracy.
- Establish a good interacting relationship with the
Chinese overseas democratic movement.
- Provide assistance to the current local elections
in China, including training of the election staff and providing computer ballot systems,
etc.
Develop
Economic and Trade Cooperation Relationship
Under the objective of normalizing
cross-strait relations, we adopt an open attitude to economic and trade development, and
hope the Beijing government can focus on joint prosperity rather than argue over
sovereignty. If the Beijing government keeps bypassing Taiwan's friendly overtures,
without diminishing its hostility and use of force toward Taiwan, it would be difficult to
develop meaningful proposals and maintain favorable conditions.
In order to substantiate the policy of
"base strengthening, go west", the future cross-strait economic and trade
policies of the two states should be conducted according to the following principles:
First, the economic and trade
connections between the Taiwan and China should consider both national security and
economic interest.
Second, Taiwan needs a comprehensive
strategy for the development of economic security that will replace temporary and passive
policies with long-term positive management.
Third, we will, on any subject,
including the economic and trade issues negotiate with China. Both parties should develop
a better understanding and trust during the negotiation process.
- Options for economic and trade
should not be limited to the two policies of "no rush, be patient" or
"courageously march west."
- Strengthening the economy
should form the basis for economic and trade connections.
- Economic and secure development
policy should be built with concurrent consideration of proactive and defensive policies.
- Only by friendly overtures and
creative proposals can we create economic prosperity for both sides.Provide
assistance to the current local elections in China, including training of the election
staff and providing computer ballot systems, etc.
Trade between Taiwan and China has
always been a controversial issue. For a long time, the domestic attitude has often
been trapped into the myth of having to accept either a closed door or open door policy.
People tend to think that if "not rush, be patient" is not the answer,
then "courageously march west" is the solution. The way thinking
oversimplifies the complexity of cross-strait economy and trade. Essentially, there
are both economic interests and security risks.
In Taiwan's interest, cross-strait
trade has been an important part of the economic development in Taiwan. However,
national security risks should be considered as well.
The traditional perception puts
economic and security interests in opposition to each other. The current
governmental restrictions on navigation, trade and investment are formulated from this
assumption. But such measures are outdated.
The passive policy of restricting
investment to China belongs to a different context. It can only serve as an interim
policy to give Taiwan time to strengthen itself. But the aging ruling party forgets
how to conduct long-term proposals after providing auxiliary measures. In the
long-term, the DPP feels that we must actively upgrade the economic capacity of our
nation, to lessen Chinas ability to threaten us economically. We would be
augmenting our economic strength by establishing an active policy.
Upon both Taiwan's and China's entry
into WTO, the current economic and trade restrictions against China may be affected.
First of all, Taiwan currently requests that products of China should be imported
by a third party. Whether this violates the Most Favored Nation treatment of WTO has been
controversial. Second, unless China is found dumping its products, or if our
national security is violated, we cannot black list China, because this regulation may not
conform the free trade spirit of WTO. Third, according to GATS of WTO, Taiwan must
provide the Most Favored Nation treatment and Civilian treatment to China and thus the
restriction on inbound Chinese capital and entrance of Chinese businessmen will be more
difficult. Fourth, although WTO does not stipulate direct navigation of aircraft,
the issue related to Taiwan's development of local operation branches with reduced travel
costs will arise.
To solve the economic and trade
problem, we must reduce the assumed conflict between national security and economic
interest. Both of these two major interests must be considered when we develop our
strategy for economic security.
The basic objective of a strategy for
developing economic security is to ensure economic resources (including capital and
markets) can be channeled smoothly to facilitate basic economic conditions that are free
from threatening forces. The strategy promotes economic prosperity while at the same
time, it would protect the territory and maintain independent sovereignty. Basic
material conditions, national identity and national infrastructure are all within the
scope of security considerations.
Strong economic forces guaranty
Taiwan's security. The fundamental strategy to develop economic security is to
replace passive control with positive management; expanding the market rather than
resisting against market trends. Measures include expansion of the market,
accumulation of national wealth and foreign currency, prevent financial deficit and
unemployment, solidify national consensus, and increase living standards through economic
strength. At the same time, we must reduce risk by means of establishing
institutional or systematic guidance, using advance warning index systems, and maintaining
stable sources of raw materials, labor market, export market, financial market and
securities market.
Concretely, we should take the
following measures:
I.
Positive Measures
(I)
Strengthen economic integration with advanced nations
From the viewpoint of 'relative
interests', both advanced and developing nations must cooperate. Cooperation with
developed nations can bring advanced technology and is less likely to cause deterioration
of income allocation. Therefore, cooperation with advanced nations is the priority
and cooperation with developing nations should be more conservative.
1. The
trade connection between Taiwan, USA and Japan should surpass the existing most favorable
nation treatment level required by WTO and gradually evolve toward bilateral waiver of
tariffs. This would create an environment that facilitates circulation of various
products.
2. Encouragement
of Joint ventures with advanced nations, finance, low interest rate loans, and other
favors should be provided by the government for the guidance and assistance in information
and technology.
3.
Joint venture with such developing nations, in particular China, must focus on the
industries unable to develop in Taiwan domestically. No government restriction is
required, nor is it required to provide special incentives.
(II)
Concentrate on Developing High Tech and Innovative Industry
As long as the industrial development
and upgrade in Taiwan is successful, there is no need to worry about industry outbound
movement. As long as the suppliers of Taiwan can control key technology and maintain
superiority product design from China, we need not worry about the economy of Taiwan being
absorbed by China. Industrial upgrading is the fundamental outlet for Taiwan.
This would focus on developing high tech, innovative industries to solve the economic and
trade risk problems.
1. Considerably
upgrade the quality of manpower in accordance with the standards of advanced nations as
well as upgrade the percentage of those receiving college education to be above 40%.
2. Encourage
R&D, strengthen protection of intellectual property rights, and patent rights through
a reference report system.
3.
Simplify the underwriting and OTC standard of high technological
companies. Open the securities report system to facilitate new rising industries to
acquire capital.
4. Encourage
opening research labs and other technical service industries, to enable medium and small
business entities to input in the high tech industry.
5. Encourage
university laboratories to cooperate and exchange information.
6. The
government should expand the existing labor training to further guide and aid private
industries in strengthening professional training.
7. The
government should adopt functional incentive measures, to subsidize industries to engage
in technical research, product development, talent cultivation and training.
(III)
Develop navigation rights negotiation, reduce corporate operation costs, and attract
multi-national industries to come to Taiwan.
The WTO has no strict regulations about
navigation rights. But in order to reduce corporate operation costs and to attract
multi-national industries to invest in Taiwan, to build Taiwan into the operation center
for the entire Asian market, we may, under conditions of national security and mutual
benefits, call upon China to negotiate on the subject of navigation. Some creative
proposals are:
1.
Sea-land transportation: We can negotiate with China and request them to
open the ports of Guangzhou, Dalian, Qingdao, Shanghai, and Tienjin on a reciprocal and
mutually beneficial basis. We would open the two major harbors of Kaohsiung and
Keelung to facilitate direct navigation.
2.
Air transportation: Both parties should discuss unilateral operation by Taiwan airlines,
with the profit to be shared by both sides. This would help Taiwan develop into a
regional operations center and reduce the cost of business travel..
II.
Defensive Measures
(I) Diversify
Export Market, Reduce the Reliance on the Market of China
At present, 18% of cargo of Taiwan is
exported to China. Trade with China accounts for 266% of the trade surplus
difference. At this rate, by the year 2005, the reliance of Taiwan on the market of
China will reach as high as 26%, with trade surplus percentage to further reach 300%.
Relatively, the reliance level of China on Taiwan market is less than 2.5%, and has
been in deficit to Taiwan. But if armed conflict occurs, the injury suffered by
Taiwan will be higher than that of China. In order to avoid the risk, the following
measures should be taken:
1. Build
an advance warning system for various products exported to China. The total export
level is 15-20%, with individual product export levels to be determined by the nature of
the product.
2.
Financial incentives should be provided to products exported to other nations by
simplifying custom declaration procedures and reducing commission rates, in order to
diversify the export market.
3.
Develop the high value-added industries, strengthen international marketing ability, so
that Taiwan's products can be sold to advanced nations.
4. Change
the product structure of importing into China's market. At present, our products exported
to China are mainly those that can be easily replaced by other nations, i.e., parts,
industrial raw material, etc. In the future, product sophistication should be
upgraded so that China would rely on us for upgrading their technology, and raise the cost
of a trade war between the two.
(II) Properly Respond
the Problem of Inbound Chinese Capital into Taiwan
1.
Expand market magnitude and reduce the influence of the single capital source
The reason why the market of Hong Kong
is easily controlled by Chinese capital is because of its small market magnitude. At
the end of 1995, the marketing value of underwriting securities in the Hong Kong Market
was about US$300 billion. This is similar to the magnitude of the securities market
in Taiwan at present where Chinese capital accounts for 20% therein. Taiwan should
make an effort to expand its market to avoid following the fate of Hong Kong. Under
diversification of capital source, a sufficient domestic capital can minimize the
influence of Chinese capital on Taiwan. In order to realize this goal, the following
measures should be adopted:
a. Lift the inbound
investment ratio restriction of foreign capital in Taiwan.
b. Accelerate
the offering of shares, speed up the pace of privatization of government enterprise,
provide more investment chances for private sectors and foreign capital, and avoid being
trapped in industries under political party operation or minority monopoly.
c.
Reduce the underwriting capital amount and business amount limit in order to help more
business entities in underwriting to expand securities market magnitude.
d. Reduce
cash capital increment terms of business entities and enable business entities to upgrade
private capital ratio through cash capital increment.
2.
Strengthen Auditing of Inbound Chinese Capital into Taiwan
At present, concerning the inbound
Chinese capital into Taiwan is under the control and management of government sectors such
as SEC, Mainland Affairs Council, MOEA (Investment Commission, Commerce Department, Board
of Foreign Trade), MOTC, and Foreign Exchange Department of the Central Bank of China. But
in fact, the coordination of various executive departments in advance warning, audit,
monitor and control are not comprehensive and have defects. These defects include:
First, each sector independently operates on its own, without joint reviews, monitor or
control action in the inbound investment from China into Taiwan. Second, execution
is passive. For example, for a foreign company applying to set up a branch in
Taiwan, the share holding ratio of Chinese capital should not exceed 20% and the Commerce
Department of MOEA will take action in accordance with this regulation. But the
problem is, after approval of establishing a branch company, the share holding ratio of
Chinese capital is increased to above 50%, then the Commerce Department provides no
monitor, control mechanism. Third, at present, the control of inbound Chinese
capital from Hong Kong and Macau into Taiwan is rather restricted. Yet for the
inbound capital from USA, Canada and Australia, the control is rather loose. It is
recommended to take the following measures in the future:
a.
Concerning the review of inbound capital into Taiwan, the present control manner of
"focusing on upper limit of capital ratio" should be changed into the control
modes of "focusing on capital property" and "focusing on investment
item." The so-called "focusing on upper limit of capital property"
control method is under the regulations related to security clause or special defense
clause of WTO, to restrict Chinese capital from intervening in the following several
industries:
¨ The
industries that easily form monopolies, such as telecommunications, power, railway, and
major infrastructure.
¨ The
sectors that influence public opinion, such as operation of media, TV, broadcasting,
newspapers, etc.
¨ The high
tech industries with key leading functions in the industrial structures of our nation,
such as semi-conductor industry.
¨ The
sectors which influence our economic stability or production fluctuation, such as finance
and securities.
b. Set
up 'capital ownership declarations' for inbound foreign capital into Taiwan, for such
related organizations as economy and trade, cross-strait investment such as SEC,
Mainland Affairs Council, MOEA (Investment Commission, Commerce Department, Board of
Foreign Trade), MOTC, the Central Bank of China, which should jointly formulate a
declaring, reviewing, monitoring and tracing system for the inbound or outbound capital
into or out of Taiwan. Besides regular monitoring on special cases, a periodical
random inspection system should also be set up, to avoid Chinese capital from evading
supervision by means of using a different name.
c.
Chinese businessmen coming to Taiwan should be permitted in general and restriction should
be for exceptional cases. However, such organizations such as Mainland Affairs
Council, Straits Exchange Foundation, Investigation Bureau, National Security Council,
etc. should strengthen auditing the background data of the inbound personnel into Taiwan,
requiring the personnel from China to periodically report their whereabouts to the related
organizations after arriving in Taiwan.
Conclusions
In the future, through the above
policies, promoting the normalization of cross-strait relations is anticipation.
However, the hostility from China toward Taiwan is a reality that influences national
security. How to cope with the challenge from China should be a major concern for various
political parties in Taiwan.
The Democratic Progressive Party
advocates four pillars for the security of Taiwan:
1.
Clear national status
2.
Normalization of across-strait relations
3.
Strong national defense force
4.
Stable economic development
The four pillars are all essential to
Taiwan. A clear national status defines our national interest and enables the
formation of our defense and diplomatic strategy. The strength of national defense
relies on economic power, and economic development requires the protection of national
defense. Taiwan's economy is significantly affected by cross-strait trade, yet the
trade relationship depends on a harmonious environment.
The Democratic Progressive Party
believes that a proper China policy should consider these four pillars and the
cause-and-effect relationship therein. Only though a comprehensive, diversified
strategy can the security of Taiwan be ensured, only then will Taiwan be able to fulfill
its obligations as a member of the global community in the next century.
Democratic
Progressive Party
DPP
Mission in the United States
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