By Li Zhenguang
CROSS-Straits relations have deteriorated since Tsai Ing-wen became Taiwan leader in 2016, as she and her ruling Democratic Progressive Party, as part of their pro-independence activities, have been trying to reduce trade between the two sides and coax Taiwan investors and enterprises to shift their operations from the Chinese mainland to Southeast Asian countries or back to the island. Yet trade and economic exchanges, which are a solid foundation for cross-Straits ties, are still going strong.
As the DPP will be in power for the next four years, the Taiwan authorities are likely to take more measures to weaken cross-Straits trade, economic and other exchanges, which means cross-Straits trade faces huge risks and uncertainties.
Although Tsai, who refuses to acknowledge the 1992 Consensus that there is only one China, played the key role in turning the amiable cross-Straits relationship up to 2016 into one of tense political confrontation during her first term, trade exchanges between the mainland and Taiwan have become more intertwined.
According to data released by the financial sector of Taiwan, the island’s trade volume with the mainland and the Hong Kong Special Administrative Region was about $190.6 billion in 2019, with the island enjoying a trade surplus of $73.8 billion. And since the island’s overall trade surplus was $43.5 billion in 2019, it will end up having a trade deficit if it stops exporting products and services to the mainland and Hong Kong. From January to September, the island’s exports to the mainland and the SAR reached a record high of $108.09 billion, and the mainland-Hong Kong continue to be the island’s largest export market.
The mainland has become the island’s main export market and trade partner thanks to years of economic integration. Little wonder then that, despite cross-Straits exchanges having been hit hard due to the activities of Tsai and the DPP over the past four years, economic exchanges between the two sides are still robust.
Taking advantage of the United States intensifying its strategic competition with the mainland to check its rise, the DPP is promoting the “new southbound policy” to boost trade with ASEAN member states so it can cut off all economic ties with the mainland. Also, the pro-independence DPP could intensify efforts in the near future to “decouple” with the mainland, while promoting economic integration with the US, Japan, the Republic of Korea, and European countries, in a bid to free itself of the economic constraints in its pursuit of “Taiwan independence”. The DPP’s “decoupling” strategy is bound to bring about some changes in cross-Straits ties. For example, if the DPP fails in its bid, the island’s economy risks being marginalized in the global supply chain and isolated from the global economy.
Besides, as the mainland is advancing its industrial upgrading, the products and services Taiwan exports across the Straits are becoming less competitive. As some Taiwan experts said, with the mainland making greater efforts to build a complete supply chain and develop substitutes for imports, cross-Straits trade is gradually changing from upstream-to-downstream cooperation to horizontal competition. In fact, for many Taiwan industries, their competitive edge in exports to the mainland has declined, including in the electronic components sector.
The decline in Taiwan’s export competitiveness could reshape cross-Straits trade, increasing polarization in the long run. And while industries with cutting-edge technology such as semiconductors and electronic components are expected to keep growing as the mainland’s demand rises, other industries could see a fall in their export volume and profitability. Beijing has issued a series of preferential policies for Taiwan companies and entrepreneurs with the aim of boosting cross-Straits trade and other exchanges. The mainland’s economic recovery after having effectively contained the COVID-19 pandemic at home has significantly boosted cross-Straits trade and further integrated the Taiwan economy with that of the mainland.
But if the Tsai administration still insists on economically “decoupling” the island from the mainland, it is the island that will have to bear the brunt of the broken supply chains and sour cross-Straits relations.
– The Daily Mail-China Daily news exchange item