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The business of reunification

By Willy Wo-Lap Lam
Senior China Analyst

(CNN) -- ONE of the few Marxist principles that still hold true today is that economics is driving much of politics.

In the difficult arena of national reunification, the Chinese Communist Party (CCP) leadership is hopeful that the country's growing economic clout will facilitate the re-absorption of Taiwan.

News on the cross-Strait front the past week has been dominated by the large-scale war game taking place in Dongshan Island, Fujian province, which is just off Taiwan.

Yet while 100,000 soldiers and state-of-the-art weapons have been deployed, Beijing is still relying mainly on the so-called business card to achieve reunification.

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This is evident from a recent internal briefing by a senior cadre in charge of Taiwan affairs.

According to Beijing sources, the cadre indicated Beijing's confidence had been buttressed by the success of the Hong Kong model.

New patriots

What the official had in mind, however, was not so much late patriarch Deng Xiaoping's famous "one country, two systems" dictum, which, after all, has been rejected by most Taiwanese.

The senior cadre was referring to how Beijing was able to win over Hong Kong's traditionally anti-Communist residents -- particularly the political and corporate elite -- by flashing business opportunities on the mainland and fostering the Special Administrative Region's (SAR) economic dependence on the motherland.

Beginning from the late 1980s, CCP elements in Hong Kong were largely successful in co-opting a wide range of newly patriotic elements in Hong Kong; and in isolating British politicians such as the territory's last governor Chris Patten.

The cadre said the Hong Kong experience was with some variations being replicated in Taiwan.

For example, Taiwan President Chen Shui-bian and his pro-independence Democratic Progressive Party (DPP) are being sidelined even as "patriotic" or pro-unification sentiments are rising among businessmen and opposition parties such as the Kuomintang (KMT) and the People's First Party (PCP).

Corporate loyalty

"In Hong Kong, the loyalty of corporate chiefs has been secured through offering them lucrative opportunities in the mainland -- and giving them top positions or big influence in the SAR government," the cadre reportedly said.

"In Taiwan, business support is being won through providing lucrative deals. And political and economic aid is being offered to the KMT and PCP in their bid to marginalize the DPP administration."

Much has been written about how Taiwan business moguls, including those in the hi-tech and IT sectors, have set up branches and factories along the mainland coast.

Latest statistics say more than 43 percent of companies listed on the Taiwan stock market have established footholds north of the Strait.

In the first quarter of 2001, Taiwan investments amounted to $640 million, a jump of 14 percent over the same period last year.

Less well known is what transpired when KMT leaders who visited the mainland held "informal" talks with top CCP cadres.

After the groundbreaking visit to Beijing by KMT Vice Chairman Wu Poh-hsiung late last year, luminaries such as former premier Vincent Siew and former foreign minister John Chang Hsiao-yen made it to the capital last month.

Target Taiwan

Among political circles in Beijing and Taipei, it is no secret that a key item in their tete-a-tetes with CCP cadres such as Vice Premier Qian Qichen is how to torpedo the DPP at parliamentary elections in December -- and presidential polls in early 2004.

Moreover, there is a close link between the Taiwan's opposition politicians and its captains of industry. Both Siew and Chang visited Beijing as heads of business delegations.

Siew is a keen advocate of the idea of a "cross-Strait common market." And Chang, the illegitimate son of late Taiwan president Chiang Ching-kuo, has expressed interest in Beijing's go-west economic development program.

Beijing-based diplomats familiar with the latest phase of the CCP's reunification policy say it is focussing on three strategies along the lines of "using economics to push politics."

Firstly, Beijing will pull out the stops to speed up the "hollowing out" of Taiwan industry.

In internal discussions among cadres specializing in Taiwan affairs, senior officials made much of the fact that in the 1980s, the bulk of Hong Kong industry re-located to Guangdong province in a mere three years or so.

Need for know-how

For Taiwan, of course, Beijing wants not just production capacity but know-how, capital and high-quality personnel.

Secondly, to sweeten the deal, Beijing is preparing a package of tax, market-access and other concessions for Taiwan investors billed as superior to that given to foreign corporations.

Beijing has been heartened by the fact that apart from capital outlay on new plants, Taiwanese have poured billions of dollars into the two stock markets in Shanghai and Shenzhen.

It is understood think-tank members in Beijing have proposed allowing Taiwan companies to be listed on the Shanghai bourse one or two years after China's accession to the World Trade Organization.

In any case, the northward movement of capital is partly responsible for the sorry state of the Taiwan bourse, which has shed at least 50% of its capitalization since Chen became president just over a year ago.

Thirdly, Beijing wants to ensure that the effect of the economics card will percolate down to ordinary Taiwanese.

This task has been made easier by the worst recession in the Taiwan economy in two decades.

Again an analogy has been drawn to the apparent rise of patriotism among SAR residents in the wake of the Asian financial crisis.

Bowing to the inevitable

Beijing has concluded that as more Hong Kong people realize that their income and jobs are dependent on the mainland economy -- even diehard anti-Communists and supporters of Western-style democracy would have to acquiesce in the inevitable.

Recently, the CCP's Taiwan watchers were pleasantly surprised that surveys of Taiwan college graduates showed a consistently rising percentage were inclined toward building their careers in hi-tech and related sectors in Shanghai and other Gold Coast cities.

From another perspective, the quasi-Marxist principle that economics underpins political systems and behavior is also illustrated by the phenomenon called dollar diplomacy.

The hard-hit Taiwan economy has made it more difficult for Taipei to use financial aid as a tool to maintain relations with 29 Third World countries.

During Chen's just-finished swing through Central America, the DPP president was criticized by the Taiwan media for lavishing the island's hard-earned foreign exchange on buying ties.

For example, prior to his visit, Chen reportedly pledged $343 million worth of support to a Central American development fund.

Again because of economic constraints, even pro-independence Taiwan residents have questioned the wisdom of Taipei joining Washington's multi-billion dollar missile defense system.

Hearts and minds

Some are saying Taipei cannot even afford the slate of weapons -- which carries a price-tag of at least US$6 billion -- that Washington agreed to sell the island last April.

At the same time, Beijing is resorting to means including money diplomacy to persuade several of the 29 states to switch recognition to the People's Republic.

Analysts say after Macedonia, a couple of the 20-odd countries in Central America and Africa that still say yes to Taipei may soon be singing Beijing's tones.

Anti-unification politicians and academics in Taiwan have, of course, insisted that despite the superficial success of Beijing's economics card, the hearts of the island's 23 million residents are not for sale.

For outside observers disturbed by the possibility of war in the Strait, however, Beijing's apparent reliance on the business card to lure back Taiwan is much better than using missiles and submarines to cow Taiwanese into subservience.

Sources in Fujian said People's Liberation Army officers planning the current war game had made it a point to reassure local Taiwan businessmen that the drills would not affect the investment climate of the "frontline province."

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