DATE=8/11/1999
TYPE=BACKGROUND REPORT
TITLE=CHINA/TAIWAN ECONOMY
NUMBER=5-44038
BYLINE=AMY BICKERS
DATELINE=HONG KONG
INTERNET=YES
CONTENT=
VOICED AT:
INTRO: The rising tensions between Beijing and Taipei
are putting billions of dollars in cross-Strait trade
and investment at risk. As Amy Bickers reports from
Hong Kong, Taiwan's role as a financial lifeline for
China could result in economic fall-out from the
political conflict.
TEXT: In the two decades since Beijing began to
reform its economy, Tawainese businesses have invested
more than 30-billion dollars in China.
While political tensions between the two continue to
mount, economic analysts say their commercial ties
remain solid, at least for now.
A Hong Kong-based analyst with the investment bank
Morgan Stanley Dean Witter, Andy Xie (prono: SHAY),
says China has created a friendly business atmosphere
for Taiwanese companies, which are much more concerned
about profits than politics.) But while some China-
watchers say Beijing will go to great lengths to
protect these lucrative ties, Mr. Xie says they could
become a casualty of war.
/// Xie Act ///
China will encourage investment. China will go
out of its way to assure the safety and
protection of Taiwanese businesses in China just
like last time during the military exercises
(three-years ago). There is no point of
fighting away people who want to make an
investment in your economy. But in terms of
this assumption that China will not go to war
because of concern about the economy, that is
absolutely wrong. China has gone to war many
times before, despite catastrophic consequences
for the economy. The modern history of China is
based on national unification, and there is no
doubt that China will go all the way.
/// End Act ///
The potential for Chinese economic sanctions against
Taiwan or other actions that would deter Taiwanese
investment comes at a difficult time for China's
stalling economy. The country is in the grip of a
deflationary spiral due to a glut of goods and
reluctant consumers.
Mr. Xie says the ongoing deterioration of the Chinese
economy is a concern for Taiwan-based financiers, who
cut their investments in mainland China by more than
30-percent in the first six-months of the year.
Fredrick Poon, a China economist for the investment
house A-B-N Amro, says Beijing hopes to attract more
funds from Taiwan in the second half of the year. But
he also believes that if necessary, China will put the
issue of unification ahead of its financial interests.
/// Poon Act ///
Maintaining economic ties with Taiwan is an
important factor in the Chinese authorities'
consideration of the relationship with Taiwan,
but I do not think we can preclude the
possibility that if Taiwan declares
independence, China would not hesitate to go
into war, even at the expense of the economic
relationship.
/// End Act ///
The potential losses for China are undeniable.
Taiwanese investment in Southern China has financed an
unprecedented boom. Tawainese investors have built
countless factories across the provinces of Guangdong
and Fujian, providing thousands of jobs, job training,
and exposure to new technology. Taiwan is currently
China's fifth-biggest trading partner.
Business people on both sides of the Taiwan Strait are
anxiously watching to see how events develop. They
agree that if Taiwanese companies are forced to leave
China, the level and quality of economic growth on the
Mainland will take a turn for the worse. (Signed)
NEB/AB/FC/RAE
11-Aug-1999 07:20 AM EDT (11-Aug-1999 1120 UTC)
NNNN
Source: Voice of America
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