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Problems on the
Horizon
As previously discussed, the growth of indirect trade with the
PRC has not persuaded the KMT to lift bans on direct trade. Other
than reasons relating to official overtones such trade would engender,
it is mainly because of the fear in Taiwan that should trade between
the two be too voluminous, the PRC could manipulate trade to suit
their own political motives. If the PRC abruptly reduced its imports
from Taiwan, a major blow could be struck to the Taiwanese economy.
Causing particular concern to the KMT is the belief that the PRC
is using trade as a bargaining chip for Taiwan to open direct channels
of communications with the mainland. The KMT contends that should
trade grow to 5% - which it has in 1991 - then a sudden disruption
by the PRC could seriously damage Taiwan's economy. It is therefore
in the shadow of such fears that the KMT government has recently
shown greater concern at the huge growth in trade between Taiwan
and the PRC.
The increase in Taiwan's trade with Hong Kong during 1991 is the
primary reason behind such fears, with about 40% of the goods traded
between Hong Kong and Taiwan eventually appearing in the PRC marketplace.
Considering Taiwan's trade with Hong Kong accounted for 88.3% of
Taiwan's total trade surplus for the first six months of 1991, this
figure takes on very real significance. In other words, it can be
estimated that Taiwan's indirect trade with the PRC accounted for
approximately 35% of its total trade surplus for the first six months
of 1991.
As an inference from this, the KMT government has been making it
known to Taiwanese businesses that they 'must be aware of the risks
in becoming over dependent on the mainland economy'. Suggestions
for ways in which Taiwan can prevent itself from relying on the
mainland too much have included placing a limit on the percentage
of Taiwan's exports there of between 10 and 15%. There have also
been misgivings within the KMT regarding Taiwanese investment in
the PRC, as the problems associated with investing in the PRC in
general have hit Taiwanese entrepreneurs as well as their foreign
counterparts.
Problems concerning investment are many, with the major problems
confronting Taiwanese investments in the PRC being: - cut throat
competition between Taiwanese investors, driving profit margins
below a manageable level; - corruption in the PRC, as investors
have to bribe officials to cut through red tape; and - low productivity
and attention to quality control. The phenomenal growth in Taiwan-PRC
relations during the past four to five years has not blinded the
KMT government to the ramifications of such a rapid pace. Whereas
Taiwanese entrepreneurs once viewed the PRC as a gold mine in which
to invest, the lack of planning and management of contacts is now
posing the same problems to Taiwan as they do to the West. Except
for Taiwan, the stakes are a lot higher.
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