DATE=8/20/1999
TYPE=BACKGROUND REPORT
TITLE=TAIWAN-CHINA BUSINESS CONFIDENCE
NUMBER=5-44105
BYLINE=STEPHANIE MANN
DATELINE=WASHINGTON
CONTENT=
VOICED AT:
INTRO: The military muscle flexing by China and
Taiwan in recent weeks has caused the Taiwan
stock exchange to take a roller coaster-style
ride of losses and gains. V-O-A Correspondent
Stephanie Mann reports on how international
business confidence has been affected by the
heightened tensions across the Taiwan Straits.
TEXT: Taiwan President Lee Teng-hui's
announcement in July that Taiwan and mainland
China should treat each other as equal states
provoked reactions on both sides of the Taiwan
Straits and also around the world. China, Taiwan,
and the United States have each conducted
separate military exercises in recent weeks, and
news reports have speculated on whether China
might be preparing for further military action.
Business analysts are watching the situation
closely, but most don't expect actual hostilities
to erupt. The analysts say so far they have not
noticed international companies making changes in
their Taiwan operations, but some firms are
reviewing contingency plans.
Prompted by fears that China might attack the
island, Taiwan's stock exchange lost about 15
percent of its value from July into August, but
then regained much of that in mid-August.
Joseph Quinlan, senior international economist
with the New York investment firm Morgan Stanley
Dean Witter, says foreign investors are still
attracted by Taiwan's relatively strong economy.
// QUINLAN ACT ONE //
A lot of investors are making the bet that
China and Taiwan will pull back from the
brink, and (they) are taking the dip in the
Taiwan market as a buying opportunity,
because the fundamentals of the Taiwanese
stock market, particularly in the
technology sector, are very good.
// END ACT //
// OPT // Mr. Quinlan says the timing of the
Taiwan-China tension is not good, especially
coming in the aftermath of the Asian financial
crisis.
// QUINLAN ACT TWO //
Just when it seemed like Asia was settling
down and the currencies were stabilizing,
and we're seeing growth out of places like
South Korea and Singapore and even Taiwan
for that matter, you have a major flare-up
across the straits. It not only involves
China and Taiwan, but implicitly the U-S.
So, it is a concern here on Wall Street,
how this all plays out.
// END ACT //
Mr. Quinlan says many international companies
still want to invest in Taiwan. But he says
those afraid of the political risks hanging over
the island may look instead to Singapore or South
Korea as a safe place for their investments. //
END OPT //
Mr. Quinlan does not expect China to launch
military action against Taiwan, but he says as
long as the heated rhetoric and saber rattling
continue, the possibility of a miscalculation -
some kind of mistake - is high. And that
concerns investors.
// QUINLAN ACT THREE //
So, the key issue here, if there is an
escalation, would be: would Beijing prevent
or prohibit or expropriate any of Taiwan's
assets on the mainland? And then you've
got a whole new ballgame to deal with and
you do significantly raise the investment
risk of owning Taiwanese stock. We're far
from that, but that is an overhanging risk.
// END ACT //
The United States has put pressure on China and
Taiwan to ease the tension. Mr. Quinlan says if
the problem escalates, Japan may also press
Taipei and Beijing to defuse the issue for the
sake of commercial interests. He notes that
Taiwan's economy receives a significant amount of
international investment from the United States,
Japan and Europe. And he says any military
action would affect investment flows from
multinational corporations.
However, the president of the U-S-Taiwan Business
Council, David Laux (pron: LOX), says most
American companies with business in Taiwan are
not too worried. He says some of his
organization's 250 member companies have asked
for his assessment of the issue. And Mr. Laux
says he believes the tensions will abate.
// LAUX ACT //
The media has greatly exaggerated what is
going on here, and that has contributed to
a kind of feeding frenzy over this thing,
which in itself has raised a lot of
eyebrows and caught attention and caused
more importance and more worry to be
associated with it than it really deserves.
// END ACT //
// OPT // Some observers compare the current
situation to 1996, when the United States sent
aircraft carrier battle groups to the Taiwan
Straits in response to China's firing of missiles
off Taiwan. They say President Lee's declaration
of state-to-state relations takes the issue
beyond where it was then and is an implicit call
for Taiwan's independence -- something Beijing
has consistently said will provoke a response.
Mr. Laux disagrees saying the current situation
is not as tense as it was in 1996. // END OPT //
And Mr. Laux says now is a good time for
companies to invest in Taiwan and to be active in
the Taiwan Stock market.
// REST OPT //
He says Taiwan survived the Asian financial
crisis better than most other countries, and it
is contributing to the rest of Asia's resurgence.
He points out that Taiwan is the United States'
seventh largest trading partner, with total trade
of about 50 billion dollars. He says Taiwan buys
almost twice as much from the United States as
China buys. In addition, he says Taiwan's high-
technology industry is the world's third largest
producer of computers and offers great
opportunities for investors.
NEB/SMN/ENE/kl
20-Aug-1999 13:37 PM EDT (20-Aug-1999 1737 UTC)
NNNN
Source: Voice of America
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