The only major economy that still seems to be on a roll is mainland China’s. Despite the already shrinking demands for its exports — many of which are made under license from or on behalf of foreign producers — Communist China is still booming. This is because its manufacturers still have an immense domestic market to satisfy. As foreign orders fall away, production can be redirected to locals. Payments may no longer be in foreign currencies but the firms are going to be able to pay their workers and have money besides to reinvest.
Taiwan is less fortunate. It does not have a substantial home market upon which its manufacturers can refocus, and in any event, Taiwan long ago passed through the stage where it is a subagent for overseas companies. It is now a technological giant in its own right, whose central bank still holds one of the largest stores of foreign currency and precious metal of any state in the world. However, all its technical dexterity is not going to help the high-tech Taiwanese economy now. It is not just that demand for memory chips has collapsed, but that even while the orders dry up, new chip producers, for instance in Malaysia, are still coming on line. The price is being driven down so low that it is hard to say how any chip manufacturer anywhere in the world will be able to sell at a profit in the medium future. Where Taiwanese companies have moved up the value chain, to produce sophisticated high-technology products, the recession in the United States is already a major threat. The big information technology spenders around the world, principally in North America, have put away their pocket books.
As a result, the steady growth in Taiwan’s gross domestic product has been slung into reverse. Official figures show that in the second quarter of this year, it actually contracted 2.35 percent, which is the worst drop in quarter of a century. Analysts are all predicting that the situation is likely to deteriorate further in the short term. Taiwan is not going to starve. It is rich enough to survive until the good times return. But Chang Chun-hsiung, the moderate advocate of reconciliation with the Communist mainland, who became prime minister last December, will be looking for ways to ease growing unemployment and protect his country’s generally robust financial system for serious harm.
This could be Beijing’s moment, not for saber rattling, but for quiet, economic diplomacy. Taiwan has never before needed the mainland, nor has it ever had a leader who imagined it ever would. But suitably managed, economic links between China and Taiwan could help the Taiwanese keep their economy ticking over by having access to mainland markets. In return, the mainlanders could perhaps start to take unthreatening positions in the Taiwanese economy, benefiting from Taiwanese management and know-how. Both sides would gain, not just in the short term but in the longer run, from the breaking down of 53 years of deep suspicion and distrust.
Nothing dramatic is needed, just calm, statesmanlike contacts between the two capitals, followed up by a businesslike exploration of where each side can assist the other. There has never been a better opening for eventual reconciliation.
