No Missiles Required: How China is Buying Taiwan’s
Image Credit: J. Michael Cole

No Missiles Required: How China is Buying Taiwan’s "Re-Unification"

0 Likes
12 comments

While experts continue to look at the rapidly expanding military capabilities of the People’s Republic of China (PRC) as the greatest threat to Taiwan’s sovereignty, Beijing would much prefer bringing about “re-unification” without having to fire a single missile. Ongoing cross-strait investment liberalization could help make that possible.

The key to the strategy is two-fold. First, flooding Taiwan’s economy with Chinese investment and second, ensuring that a greater number of Chinese are in positions of authority on the island. Since June 2009, when limited Chinese investment was first allowed in Taiwan, Chinese citizens who invest as much as 15 million New Taiwan Dollars (US$490,000) in the economy have been entitled to a one-year, multiple-entry visa. As with other foreign investors, the permit can only be renewed if the company the investor has put capital into has an annual revenue that exceeds 10 million NTD.

While a number of core sectors, such as traditional industries, remain closed to Chinese investment, ongoing liberalization trends will gradually create a more permissive environment for Chinese investment. Under the Economic Cooperation Framework Agreement of June 2009, Taiwan opened 205 manufacturing, services, and finance sectors to Chinese investment, which was followed by a further opening up of 42 sectors — 25 in manufacturing, eight in services, and nine in public construction. On March 19, the Executive Yuan approved a “third stage” of investment liberalization in opening up an additional 161 categories in manufacturing, services, and infrastructure, as well as 43 items of public facilities, to Chinese capital. In the 115 areas in the manufacturing sector included in the new policy, in only two — LED and solar battery manufacturing — are Chinese investors not allowed to hold controlling power. And still, Chinese officials and academics complain that Taiwan remains too closed to Chinese investment.

The Cross-Strait Services Trade Agreement signed on June 21 contains provisions that, according to opposition lawmakers, lower the threshold for Chinese investors to obtain a multiple-entry permit to as little as 6 million NTD, or about US$200,000. Under current quotas, a Chinese professional is given a one-year, multiple-entry visa to Taiwan for every US$300,000 in investment, with a maximum of seven Chinese professionals eligible per project.

Chinese companies with offices in Taiwan that invest at least US$1 million annually, as well as firms operating in export processing zones, are also now able to apply as inviters for the granting of multiple-entry visas to Chinese professionals.

Although the various trade agreements signed since 2009 are ostensibly (albeit not fully) reciprocal and allow Taiwanese investors preferential access to China, the political ramifications of the growing investment between the two sides — especially Chinese investment in Taiwan — warrants much greater scrutiny. The reason is that while both countries are World Trade Organization members, the relationship is not a conventional one: Beijing does not recognize the existence of Taiwan and now increasingly relies on economic encirclement of the island to achieve eventual unification. When it comes to Taiwan, it would be foolhardy to assume that Chinese only think in profit terms: there almost always is a political component, and the price of Chinese money “helping” or “rescuing” Taiwan’s under-performing economy is Taiwan’s sovereignty, something that Beijing never made a secret of.

According to the Investment Commission under Taiwan’s Ministry of Economic Affairs, 11 investors from the U.S., Canada, and South Korea are currently in Taiwan on multiple-entry visas. Given the political pressure for Chinese investment in Taiwan and the preferential thresholds offered to Chinese investors, it won’t be long before Chinese transcend that number.

It’s worth noting that cross-strait investment liberalization occurs at a time when Taiwan has lost some of its luster as a Foreign Direct Investment destination, which adds pressure on the local sector to open up to China in times of economic stagnation. 2011 was the first time in four decades that Taiwan registered a negative inflow of FDI.

Beyond Taiwan’s oft-mentioned growing economic reliance on China is the recent phenomenon of Chinese investors acquiring stakes — including controlling ones — in Taiwanese firms. This raises the possibility that Chinese investors and managers will seek to use their positions to influence subordinates’ attitudes towards cross-Strait relations. Even if they did not, Taiwanese workers at Chinese companies might be hesitant to express their support for a political party that opposes unification for fear of hurting their career prospects. Like the 2 million or so Taiwanese working in China, over time such workers would also naturally tend to favor political parties that support closer relations with China as strained ties could hurt their economic livelihoods. 

In short, rather than fire missiles at Taiwan, Beijing could very well use its immense investment power to gain enough influence to achieve its “re-unification” dreams.

Comments
12
Taiwan as a de jure independent country
March 24, 2014 at 07:29

Now I am wondering if the US will continue to view China’s annexation attempt as its internal affair, or a threat to the stability in the Pacific region? Really hope your article will enlighten the lawmakers about the danger of China’s attempt to “swallow” Taiwan as it’s likened to how the Russians gained control of Crimea.

Anonymous
March 21, 2014 at 18:38

China’s phrase of “reunification” is basically their own twisted explanation behind their intentions of invasion, conquest, and ultimately cultural genocide.

Re-unify? Give me a break, none of these countries were ever part of the PRC in the first place.

YTY
August 31, 2013 at 13:06

And to what end would Taiwan want to become "the best small-states power (province) in the world" with "the latest military weapons" from China? The only reason Taiwan has to arm itself is to fend off an eventual Chinese attack.

Andao
August 28, 2013 at 18:37

But it is stupid for Taiwan to agree to unification for a number of reasons.  First and foremost: how much say is a province of 23 million going to have against the wishes of 1.3 billion?  So sooner or later, that mainland influence would crush any desires people in Taiwan would want.  Mainland businesses would crush all local business. Taiwan would just become one of the smallest provinces with no influence in any greater national affairs, just a colony.

You can see this happening in Hong Kong right now, where government approval and attitude towards mainlanders is at a new low since the 1997 handover.  Taiwanese are well aware of how the promise of one country two systems is being quickly eroded in Hong Kong.  For example, Hong Kongers will be allowed to directly elect their chief executive (mayor) in 2017…but only after Beijing approves the candidates.  Beijing would absolutely apply this rule to a unified Taiwan.  How could they tolerate the TSU calling for independence? The DPP would be outlawed as well, or the mainland investors could buy up all the media to ensure no one hears a thing about them (think Singapore-style system). It would be the total end to democracy, without a doubt. The Hong Kong story clearly proves this is their model.

Shih-hwang Chiang
August 27, 2013 at 05:28

The Republic of China (Taiwan) has a trade-oriented economy, with trade making up roughly 63.5% of GDP in 2012. It has been Taiwan’s continuous goal to be part of the global trade integration network. In addition to conclude the Economic Cooperation Framework Agreement (ECFA) with mainland China, which emerges as a major player in the global economy, Taiwan also signed an Investment Liberalization, Promotion and Protection Agreement with Japan in 2011 and concluded a free-trade agreement with New Zealand in July, the first such agreement Taiwan has signed with a nation that it does not have formal diplomatic relations with. All these agreements serve to diversify Taiwan’s trade market and as the foundation on which Taiwan hopes to pursue further global economic integration, including participation in the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership.

With regard to foreign investment in Taiwan, according to the Investment Commission of the Ministry of Economic Affairs in Taiwan, as of June 2013 mainland China has invested less than US$800 million in Taiwan. In comparison with the United States’ US$22.1 billion investment in Taiwan and Taiwan’s US$129 billion direct investment in mainland China, one has to wonder if it is even feasible for mainland China’s investment to be so great that it outweighs U.S. influence.

As for the 11 investors from the U.S., Canada, and South Korea, while they were initially granted multi-entry visas, those 11 in particular are currently official immigrant investors, a status that is withheld from any mainland Chinese investors with or without a multi-entry visa. Our government has also enacted a management and supervision review mechanism prior to and after an investment from mainland China.

After ROC President Ma took office in 2008, cross-Strait tension has been greatly reduced, and both Taiwan and mainland China have increasing economic and cultural exchanges and engagements. However, President Ma has made it clear that his cross-Strait policy is based on the “Three No’s”: No unification, no independence, and no use of force. Sovereignty is and will always be of the highest priority of the government and people of Taiwan, and to suggest Taiwan economic policymakers don’t recognize that with regard to the implications of various trade agreements is deliberately misleading.

Shih-hwang Chiang

Senior Advisor, Taipei Economic and Cultural Representative Office in the United States

MYK
August 23, 2013 at 23:13

China winning over the people of Taiwan will remain just that………………….a dream!

The PRC spends (wastes) millions every year trying to build those Confucius Institutes all over the world trying to build their 'ZERO' soft power status and where has it gotten Beijing today? Nowhere as usual!

With the way Beijing has pissed off virtually everyone of their neighbors in the East China seas and South China seas, you might as well argue Beijing could win over the hearts and minds of India, Japan, & Philippines by throwing more investments into building even more Confucius Institutes in each of those countries. Like that's going to actually convince India, Japan, and Philippines of China's great 'Soft Power' appeal and agree to China's outragious territorial claims!?

Considering the PLA has kept increasing its offensive missile force every single year to anywhere from 1600 to 2000 offensive missiles today, and have positioned over 2500 PLAAF fighters and bombers to strike Taiwan, I'd say the off-base arguement of this opinion piece showcases why mainland China is a true failure in winning over the people of Taiwan to re-unification with the mainland.

In another area, with the way the Hong Kongers have been ever demanding true autonomy and universal suffrage away from Beijing, I'd say that already proves what a failure the PRC has been the last 15 years of winning over the majority of the city state's population since taking over HK from British rule in 1997.

Need I go into why China has failed in winning over the people in Tibet, East Turkistan (Xinjiang), or Inner Mongolia for that matter towards Beijing rule?

Mainland China could never win over Taiwan by 'buying' re-unification because the CCP keeps increasing the numbers of offensive missiles pointed at the tiny island of Taiwan each and every single year! So, if you like the idea of re-unification by 'Looking Down the Barrel of A Gun' from mainland China, then by all means let re-unification begin!

 

 

 

cdk
August 23, 2013 at 17:57

You are correct. If and when Taiwan re-unified with China, it will be under the "One country, two systems" for the time being like HK/Macau, expcept Taiwan, as an autonamous region has a much stronger potential economically and militarily. In fact, when Taiwan re-unified, China can provide Taiwan with its latest military weapons and Taiwan would be the best small-states power (province) in the world.

ace
August 23, 2013 at 13:16

Under the ma regime, sentences for Chinese spying, if caught, is extremely lenient, as illustrated by the light fine of NT$200,000 (US$6,689) and mild 17-months sentence of Lai Kun-chieh, who attempted to acquire missile specs for his Chinese agents.

ace
August 23, 2013 at 12:58

The news of death by mutilation of Corporal Hung Chung-chiu on July 3, arrested for possession of cellular phone since 23 June, 2013, coincided with China Service Pact signed on 21 June, 2013, surreptitiously signed without the foreknowledge of even the head of 'legislature.' This 'pact' allows any Chinese Citizens in a batch of 3, with just US$100,000 each to reside Taiwan indefinitely, as well as access to Formosa's publishing, hair-wash, traditional medicine industries. This diversion of popular discontent, similar to the previous Filipino killing, is not so subtle; however, at least 110 minutes of imprisoned video were 'coincidentally' deleted, but later only just 80 minutes of blanks were recovered; this was blamed on 'faulty' equipment that has since been in perfect working order; those who swiftly approved the imprisonment of the said corporal on the same day, Shen Wei-chih, Yang Fang-han, leaders of the 542 brigade and 269 brigade guarding southern flank of the Taipeh capitol region, both confidants and students of the 'defense minister' Kao Hua-chu, who has his alibi visiting South America, were quickly transferred and were immune from any investigation for nearly a month; in conjunction, the timing of court hearing, field-investigation, and interrogation, notified to the public just a day before, were held nearly on the same hours on the same day, rendering no one able to attend all 3. In a carefully orchestrated crescendo, Hung's death certificate, originally stated 'death by accident,' was  changed to 'other causes' during the 1st wave of public protest against the military, culminating in  the insulting 'killed' 'at home,' during the 2nd wave of mass protest. 

 

On the same day of protest, rabies strain similar to those found in southern China, not seen in Taiwan since 1947, the date of the Chinese military influx, suddenly saw outbreak in area easily accessible by motor transports throughout the island, with the exception of the most pro-regime Taipeh region. Evading the protest, Ma fled to latest casualty of rabies outbreak in mountainous Ali region, facetiously comparing the protesters to rabies-infected dogs.

 

Head of the Clinical Toxicology Division Chang Gung Memorial Hospital Lin Chieh-liang, last known investigating the outbreak's rabies strain, on 2 August 2013, suddenly contracted an unknown strain of bacterial pneumonia, leading to oxygen-deprived Cerebral edema and septic shocks, with certain outcome of either death or permanent brain damage.

 

Note Ma often chooses in times of mass protest, whether over Ractopamine, capital gain taxes, electricity and natural gas price hike, 'luxury taxes' and murder of military conscript, to visit overseas, creating alibi in absentia at the crime scene. That is usually preceded by his wife departing for a foreign destination different from his own. As of 11 August, 2013, the height of rabies outbreak, resignations of 2 'defense ministers and announced energy price hike for October, for example, none of Ma's entire family were in Taiwan, but in New York, Hong Kong, and Edinburgh, second largest financial centre in the UK and the 4th in Europe by equity assets.

 

On 28 May, 2013, also, the regime's intellectual property office, under the pretext of protecting intellectual property, plans to block foreign websites was defeated by public outcry. But 3 days later, on 30 May, 2013, the government passed a National Security Act in lieu of previous efforts to monitor and block the internet, giving out monetary rewards for anyone reporting on any websites not amenable to 'national security.' Simultaneously, Ma's regime is negotiating with top Chinese officials to open 300,000 hair coiffeurs jobs to PRC nationals, attesting to Ma's 2008 remark, 'brainwash via  hair-wash.'

Kanes
August 23, 2013 at 12:41

Hong Kong is Chinese territory but is not quite China as we know it. Maintaining this window is good for China. Taiwan if or when unified with China will be a similar case. China will not stomp down on Taiwan. Instead Taiwan will be allowed to remain an autonomous region with wide powers. When looked from the other side of the same argument, Chin'a unification dreams will only be to the extent of leaving Taiwan as it is with more controlling and influencing power. This is all China is interested in when it comes to Taiwan reunification. To that extent, China's growing trade and investments in Taiwan work well. There is no need for violence. A compromise based on mutual economic needs would do the trick.

It has military advantages too. The opportunity cost of resisting Chinese military advances (if such a need arises) will be higher for Taiwan with large Chinese investments and cross strait trade links both ways. Will China share its prosperity in South China Sea with Taiwan? It makes things a lot easier for both.

Julian Baum
August 23, 2013 at 06:00

Nice update. Thanks! Unlike most other emerging markets, Taiwan has not relied on FDI for economic development for quite a few decades now, since it's a capital rich economy that has exported many times the capital that it has attracted. Rather than scrambling to lure Chinese investors, the government needs to do more to create an investment environment that is more attractive for its own domestic players and those who have gone abroad and are keeping their profits offshore. The benefits of Chinese investments are a double-edged sword, as you say, where the political risks almost certainly outweigh the meager economic benefits. 

Oro Invictus
August 23, 2013 at 05:58

It’s probably worth noting that the Services Pact has yet to be ratified by the Taiwanese government due to intense opposition and its future is far from certain; similarly, there have been calls to re-examine the ECFA from both the KMT and DPP.  Similarly, it is worth noting that these economic policies (as noted earlier) have done little to reverse (in fact, some may argue they are responsible for the acceleration of the trend) the growing antipathy towards the PRC.

What will be interesting to see is how these various economic agreements fare once Ma is out of office, particularly in the face of the growth in Taiwanese civil society.

http://www.taipeitimes.com/News/front/archives/2013/08/18/2003569957

http://www.taipeitimes.com/News/taiwan/archives/2013/08/21/2003570222

http://www.taipeitimes.com/News/taiwan/archives/2013/08/21/2003570222

Share your thoughts

Your Name
required
Your Email
required, but not published
Your Comment
required

Newsletter
Sign up for our weekly newsletter
The Diplomat Brief