Taiwan's Uneasy China Embrace

Lin Mei-li, 51, has been driving a taxi in Kaohsiung, Taiwan's second city, for 13 years but never carried a mainlander until this year. Now they are filling her taxi and her pockets, although she complains that they are impolite and they smell.

The start of direct daily flights from China to Taiwan last December has brought the largest influx of mainlanders since President Chiang Kai-shek arrived in 1949 with 1.5 million soldiers, civil servants and refugees.

On April 18 and 19, the number of Chinese tourists reached a record 4,000 per day. Tours are booked months in advance. By May, during the Labor Day holiday, the number could reach a daily 7,000. On April 26, the two sides will sign agreements to double the number of weekly flights from 108 to 216.

It is a Taiwan that is gingerly coming to terms with what seems like an inexorably tightening mainland grip. Sunday, the two signed three new agreements on financial services, direct flights and criminal control.

It is a country – or a province, if you prefer – that is increasingly the orphan of Asia. As the west courts China for its abundant capital to save it from the tsunami as well as access to its market and co-operation in many spheres, Taiwan is being marginalized as the major powers' economic interests take precedence over concerns about democracy and justice.

But unfortunately for the anti-unification Democratic Progressive Party, Mrs Lin the taxi driver and the Taiwanese who dislike the mainlanders, the economics are going all the other way, to the misgivings of a sizable percentage of the population. Even after eight years of largely disastrous rule by the disgraced president Chen Shui-bian, the DPP still won 41 per cent of the popular vote in the March 2008 presidential election.

Taiwan's dependence on China, already strong, has increased dramatically in the wake of the financial tsunami. Of countries in Asia, it is one of the worst hit.

Taiwan's gross domestic product fell by an annual 8.36 per cent in the fourth quarter of 2008 and is expected to shrink by an annual 2.97 per cent in all 2009, according to estimates from the Executive Yuan, the Cabinet.

In 2008, exports accounted for 74 per cent of Taiwan's GDP, up from 57 per cent in 1986 and 12 per cent in 1952. Its biggest export markets are the United States and China; of exports to China, half are parts and components that go into products later exported to the United States.

During the Asian financial storm of 1997, this reliance saved Taiwan from the worst effects of the crisis. But this time the reliance on the west is the main cause of the drop in its GDP since the last quarter of 2008. Its industry, concentrated in hi-tech and electronic products, is less diversified than that of South Korea, a major exporter of autos, ships and overseas construction projects.

In the first quarter, Taiwan's exports were US$40.5 billion, down 36.6 per cent from a year earlier, and imports US$32.6 billion, down 47.2 per cent. In March, exports to China accounted for 40 per cent of Taiwan's exports, compared to 30 per cent at the start of the year. This dependence will increase until the U.S., Japanese and European markets recover.

For Hu Jintao and the other leaders in Beijing, economics is the road to unification. They are happy to run a large deficit with Taiwan and extend trade privileges in order to draw the island into China's economic network and make it impossible to escape. They see no need to talk politics, following the adage of Karl Marx that it is economics that determines politics.

Taiwan firms are the biggest ‘foreign' investors in China, with US$50 billion invested according to official figures and double that according to unofficial ones. Last week, for example, President Foods announced income of Rmb9.24 billion and net profit of Rmb344 million for its China operations – drinks and instant noodles – in 2008; sales in Taiwan are a fraction of this figure.

Beijing has won over Taiwan's business leaders, who are eager advocates of closer ties, to protect and expand their operations in China, and bitter opponents of the DPP.

During a visit to Hong Kong in mid-April, Hu Chi-chiang, the Kuomintang mayor of Taichung, even proposed building a tunnel under the Taiwan Strait between his city and Xiamen; the 150-odd km tunnel would take 18 years to construct.

This rift between economic logic and popular sentiment has left President Ma Ying-jeou stuck uncomfortably in the middle. He has promised not to hold political talks with Beijing during his first four-year term. He has proposed signing an Economic Co-operation Framework Agreement, saying that this is vital since China is Taiwan's largest export market and that this has nothing to do with the issue of independence or unification.

But this too is bitterly opposed by the DPP, which sees it as the first step toward unification and insists that Beijing treat Taiwan as an equal partner. By adding a political element to the negotiations with Beijing for the agreement, it hopes to sabotage them.

In Kaohsiung, Taiwan's second city, the DPP is up against a flood of visitors that is being greeted with a mixture of elation and foreboding. Officials and retailers are delighted. The financial tsunami has badly hit the traditional sources of tourism – Japan, South Korea and the United States; the Chinese could not be arriving at a better time, filling hotels and restaurants and buying fruit, pearl, amber, high-quality tea and other local specialties.

"I am so happy to visit a part of the motherland closed to us for 60 years," said a middle-aged Shanghai woman over her breakfast in a Kaohsiung hotel. "Taiwan is very attractive to us. The tours in Shanghai are booked up for the next two months. We all want to come and see what the Kuomintang has done here."

But many poor people who are not direct beneficiaries of the visitors are fearful at this encounter, for the first time in 60 years, with their ‘brothers and sisters' from the other side of the straits.

"They are loud and uncouth, spit, like smoking and do not speak with the politeness of Taiwanese," said a staff member at a convenience shop. "China is the land of fakes. Its women marry our men and strip them of their money. They come on tours and work illegally, driving down wages.

"My uncle went to Gansu (west China) and set up a business exporting melon seeds. He was cheated and lost all his money." That is a common story among small Taiwan businesses.

This Sinophobia is a platform of the DPP, which is especially strong in south Taiwan, and the newspapers and television stations which support it. They seize on stories of mainland women smuggled into Taiwan who work as prostitutes, and of mainland food products whose noxious contents send children to hospital.

"We do not want to be part of China," the shopkeeper said. "We do not like the arrogance of the Chinese, who say Taiwan belongs to them. This makes us angry."