Beijing’s success may be bad for Taiwan’s economy

The China Post staff and agencies

Full of hopes, Taiwan’s businessmen have hailed Beijing’s success in gaining the hosting right of the 2008 Olympics, thinking bright prospects lay ahead. But government officials are worried, fearing that Taiwan’s reliance on the vast mainland market could grow further. Political analysts also warn Taiwan’s economy could be at stake when mainland China rises to a super economic power.

Local businessmen see the 2008 games in Beijing and the preparatory work as tremendous business opportunities and many companies are wasting no time exploring the Olympics-inspired market.

According to the Central News Agency, an analysis carried out by the China External Trade Development Council (CETRA) shows that companies that already have footholds in mainland China will benefit directly from the games in the next few years by participating in Beijing’s infrastructure projects and supplying products and services to sports-related industries.

Currently, there are at least 50,000 Taiwan companies with investment interests in mainland China, many of which are engaged in traditional labor intensive industries, such as footwear, garments, toys, souvenirs and construction materials. Citing the analysis, CNA said these industries can definitely find Olympics related business opportunities.

Taiwan’s computer giant Acer Group Chairman Stan Shih has said Acer would seek to provide information system services during the two-week event. Planning an investment amounting to US$60 million in these services, Acer sees the Olympic sponsorship as a most valuable campaign for its brand. Acer may cooperate with its mainland strategic partner, the Legend Group, to bid for the services, he added.

VIA Technologies,Inc., a leading manufacturer of highly integrated PC chipsets for motherboards in Taiwan, is hoping to provide electronic equipment for the information systems of the Olympic events in 2008, together with mainland China’s computer system manufacturers.

Beijing authorities are also expected to invest 180 billion renminbi (approximately NT$720 billion) in the next few years to improve Beijing’s infrastructure and build sports facilities.

Taiwan’s telecommunications, construction, and environmental protection industries are expected to benefit if they can beat competitors from around the globe, business leaders here said.

But Minister of Economic Affairs Lin Hsin-yi poured cold water on all those business prospects. It remains to be seen how big the market will be by that time, Lin told a news conference following his return from the Philippines, where he had taken part in an annual bilateral economic cooperation conference.

Responding to the question of whether Taiwan should adjust its “no haste, be patient” policy regulating mainland-bound investment by local businesses, Lin said the imminent entry by both Taiwan and mainland China into the World Trade Organization (WTO) will have a greater impact on the island than Beijing’s hosting of the games.

The government will stick to its planned path regarding bilateral exchanges with mainland China, he noted.

The economic affairs minister warned, however, that the huge surplus enjoyed by Taiwan in its trade with mainland China will be reduced after the two sides join the WTO, expected late this year or early next year.

According to Lin, many foreign businesses — not just those from Taiwan — will be allowed into the mainland Chinese market, creating stronger competition for Taiwan-based companies in the mainland.

In addition, he added, Taiwan exports to the mainland will also fall as a result of the mainland’s opening of its markets to other foreign competitors.

Meanwhile, trade officials here are worried that Taiwan might become overly reliant to the mainland market now that Beijing has been awarded the right to host the 2008 Games. They fear that the promising business opportunities may become a magnet to attract more Taiwan firms to the mainland, which could hollow out Taiwan’s industries.

Some analysts have also warned that mainland China is likely to become an economic power given the high technologies and multi-billion U.S. dollars worth of investments the country is set to attract in the next seven years. This would damage Taiwan’s own economic strength in the end, they warn.