Taiwan Will Never Become China¡¦s 34th Province 2009-05-27 13:45:04
Gordon Chang ip: 59 .X.X.X/.net
Taiwan National Affairs Conference
Taipei, Taiwan
May 9, 2009

Taiwan Will Never Become China¡¦s 34th Province

Taiwan is not just about Taiwan. Taiwan is about you, it¡¦s about me, it¡¦s about every person who wants to live in a free society.

The free society of Taiwan, however, is now endangered. It is, of course, endangered by the People¡¦s Republic of China, the one-party state that sees the island

not as a vibrant democracy,

not as a peaceful neighbor,

not as Taiwan, but

as its 34th province.

The subjugation of Taiwan is Beijing¡¦s number one foreign policy objective. And it¡¦s not hard to see why. The Communist Party cannot claim final victory in the Chinese civil war until Beijing absorbs Taiwan.

But there is a more important reason. Taiwan, by its mere existence, bedevils China, the most important dictatorial state of our time. The nine old men who sit on the Politburo Standing Committee rule a nation of 1.5 billion souls, but they feel mortally threatened by Taiwan, a country of just 23 million. These 23 million prove that people, whom Beijing considers ¡§Chinese,¡¨ can govern themselves. By governing themselves, they make everything the Communist Party says about itself an obvious lie. Taiwan is important first and foremost because it is an inspiration to people everywhere, proving that a small democracy can stand up to a large authoritarian regime.

So the Communist Party is configuring its military, and especially its rapidly expanding navy, to take the island. Moreover, the Chinese threaten Taiwan with perhaps as many as 1,300 missiles placed directly across the Taiwan Strait. More than a decade of double-digit increases in the announced budget of the People¡¦s Liberation Army is rapidly changing the balance of military power across the Taiwan Strait. China is Taiwan¡¦s diplomatic foe, but more important, it is a military adversary.

But China is not the only threat to Taiwan. Taiwan is now threatened by its own government, which is

constricting the right to protest,

jailing its opposition,

pressuring the country¡¦s media, and

undermining Taiwanese identity.

All this¡Xthe first steps in the rollback of democracy¡Xhas occurred since Ma Ying-jeou assumed the presidency last May. The Kuomintang is undermining, as fast as it can, the essential freedoms that many Taiwanese fought¡Xand died for¡Xduring decades of heroic struggle.

And why is the ruling party attacking its own society? There are some in the Kuomintang who want to unify with China, to make Taiwan a minor part of the so-called Motherland. And today, many on the island say that will happen, that it¡¦s inevitable that a large China will swallow a small Taiwan.

That is what most everyone in the world thinks will happen.

That is what many assume will happen.

That is what some hope will happen.

And, yes, today the 23 million people of Taiwan face their most dangerous moment. Many wonder whether Taiwan¡¦s young democracy will survive. Taiwan looks weak and China appears mighty as Beijing goes from strength to strength and from victory to victory. Things are going so well for Beijing that we are told that this is ¡§China¡¦s Century.¡¨ What place does Taiwan have in a century belonging to China? Not much of one. If all the experts are right, then an independent Taiwan is doomed. If they have correctly analyzed historical trends, then you, free Taiwanese, have no future. You will be colonized by the People¡¦s Republic.

But

today I come to Taiwan to say to you,

I stand on this stage at this moment to declare,

the 23 million people on this island shall never surrender to the abhorrent regime in Beijing,

people here will continue to live in truth and freedom, and

Taiwan will never become China¡¦s 34th province.

Why will Taiwan prevail? To answer that question, we need to look first at the arguments of the defeatists. Many in the pro-China camp say that Taiwanese business cannot compete with Chinese industry and therefore Taiwan should integrate with China. From this point, they then say Taipei should reconcile with the Mainland¡¦s leaders so that the island¡¦s business community can participate in the booming economy across the Strait. Political integration with Beijing is Taipei¡¦s only option, and, should Taiwan fail to unite with the People¡¦s Republic, it will be left with nothing. According to this view, the people of Taiwan have no real choice.

Recent statistics, defeatists argue, prove their point. Taiwan¡¦s gross domestic product, the best measure of national economic performance, contracted a stunning 8.4 percent in the last quarter of 2008 and is thought to have fallen by 7.2 percent in the first quarter of this year. We know that first quarter results will be gloomy because this year, exports tumbled

44.1 percent in January,

28.6 percent in February, and

35.7 percent in March.

That¡¦s why there is pessimism in Taiwan business circles at this moment. And that¡¦s why in the business community there is so much hope about China. There was, for instance, the stock market rally last week due to the prospect of China Mobile¡¦s investment into a Taiwan telecom company. And there was the signing of three agreements with China on

financial cooperation,

regularly scheduled flights, and

judicial and law enforcement ties.

Moreover, we are told that, in view of the precipitous fall in the economy, Taiwan needs to sign an economic cooperation framework agreement, or ECFA, with China. In short, the prevailing belief is that Taiwan needs China.

But these experts have it wrong. In fact, China needs Taiwan more than Taiwan needs China. And tying Taiwan¡¦s economy to China¡¦s will create a disaster.

Forgive me if the following discussion of the Chinese economy seems too detailed, but this is the issue on which almost everything turns. The whole case of the defeatists rests on the notion that Taiwan¡¦s economy is not viable without integration with China¡¦s. If this notion is incorrect¡Xand it most certainly is¡Xthen the case for political integration unravels and falls apart.

Therefore, it¡¦s time to debunk the myth of a strong Chinese economy. As bad as the Taiwanese economy appears, China¡¦s is worse. China, at this moment, has the world¡¦s fastest slowing economy.

According to official statistics, gross domestic product skyrocketed 13.0 percent in 2007, and it was, in all probability, higher than that. Poor sampling procedures did not properly take into account the output of small manufacturers, then the most productive part of the economy. So, if you want a figure, China¡¦s economic growth in 2007 was about 15 percent.

Now, although Beijing doesn¡¦t admit it, economic output is getting smaller. The National Bureau of Statistics said the Chinese economy grew 6.1 percent in the first quarter of this year, but that cannot be true. Consider the following: At the same time the economy was supposedly going up in the first quarter,

exports were down,

consumer prices were down,

producer prices were down,

electricity consumption was down,

foreign direct investment was down, and

government revenue was down.

So what went up? From all indications, unemployment was way up.

Most telling of all, Chinese citizens and businesses were bailing out of their own country. In the last quarter of 2008, when Beijing announced growth of 6.8 percent, China¡¦s citizens and businesses evaded strict currency controls and smuggled out somewhere between $126 billion to $240 billion.

The illicit activity continued at about the same pace last quarter, judging from capital flows, such as a Chinese rush into the Hong Kong dollar, and from a surprising slowdown in the accumulation of Beijing¡¦s foreign currency reserves, best explained by hot money exiting China. Chinese tourists also participated in the dash out of their country by snapping up, among other things, real estate in America and gold in Hong Kong.

So why did China announce 6.1 growth for the first quarter of this year? Wen Jiabao, the country¡¦s always-affable-but-sometimes-less-than-capable premier, signaled that the Communist Party¡¦s line would be a sunny one. At Davos in January, he predicted eight percent growth this year, and since then Premier Wen repeated his unrealistic prediction. When he did so, almost everyone in China got the sense it was time to support the political leadership and fall in line.

Yet none of the forced optimism can hide the fact that no economy has fallen further or faster than China¡¦s. Not even Taiwan¡¦s.

The reason for the dramatic collapse in China is clear. China has an export-dominated economy, and its exports are in freefall. They have declined every month since November. In fact, China¡¦s exports are now falling precipitously,

down 17.5 percent in January,

down 25.7 percent in February, and

down 17.1 percent in March.

And it appears they were down in April as well. Moreover, the prospect for the coming months is bleak. Even during the beginning of the high season for the export sector, orders for Chinese factories appear to be down by somewhere between a fifth to a third, as we saw at the most recent session of the Canton Fair. That¡¦s not surprising because even the optimistic World Bank predicts

the global economy will contract this year for the first time since World War II and international trade will decline the most it has in eighty years.

The downturn is resulting in declining consumer demand not only in developed economies but also in emerging ones. That¡¦s especially bad news for a China that is extraordinarily dependent on foreign markets. An exceptionally high 38 percent of its economy is attributable to exports.

In good times, an export economy is a blessing. In bad ones, however, it is a curse. As we saw in the Great Depression, it was the current-account-surplus countries that had the hardest time adjusting to deteriorating economic conditions and, consequently, suffered the most. That is proving to be the case now as well. China¡¦s economic model, which delivered prosperity in a period of seemingly unending globalization, is particularly ill-suited to current conditions.

So Taiwan cannot rely on China to rescue it from this crisis. There is no realistic possibility of exporting more to China to feed China¡¦s export machine because China¡¦s export machine is itself faltering.

Some might argue that Taiwan can tap into the Chinese consumer market. That argument does not hold much water because Chinese consumers, reacting to negative news both from home and abroad, are pulling back at this time. We know that because China¡¦s imports are also falling. They were down

43.1 percent in January,

24.1 percent in February, and

25.1 percent in March.

These atrocious numbers are a warning of not only further export falls but also¡Xand more importantly¡Xfuture declines in consumer spending. Another sign of weak consumer sentiment is the 1.6 percent drop in the consumer price index for February. That was the first fall in more than six years. The index then went down 1.2 percent in March. Deflation could be on the way. Consumer spending will be flat at best.

How about the third leg of the Chinese economy, investment? Beijing in November announced a $586 billion spending program to stimulate investment. The plan, however, won¡¦t work to bring about sustainable prosperity. It will undoubtedly create a ¡§sugar high¡¨ in the next few months, but that will be temporary because the spending will result in a bigger state economy and a smaller private one. The state¡¦s stimulus plan is favoring large state enterprises over small and medium-sized private firms, and state financial institutions are diverting credit to state-sponsored infrastructure. Over the last 30 years, China¡¦s economy has expanded at an average annual rate of 9.9 percent because of the private sector, but now Beijing is renationalizing the economy with state cash. Renationalization will have disastrous consequences for Chinese growth next year and in later periods.

So China has the world¡¦s worst performing economy, and the prospects this year are not especially good. Further tying Taiwan¡¦s economy to China¡¦s is, quite simply, horrible strategy. It is absolutely the worst thing Taipei can do at this moment. For instance, why should Taiwan, pursuant to one of the new agreements signed late last month, invest in Chinese banks when those banks are in the process of making bad loans on Beijing¡¦s orders to stimulate the economy? Western businesses are selling their stakes in these same Chinese banks for a reason. In short, Beijing needs Taiwan money, but many in Taiwan believe¡Xincorrectly¡Xthat Beijing is doing them a big favor.

Considering everything, people in Taiwan need to ask a fundamental question: Why should Taiwan insist on integrating its economy with China¡¦s when the Chinese economy is falling fast?

There¡¦s no question that Taiwan will continue to suffer because, like China, it has an export-led economy. But, unlike China, Taiwan has a large consumer sector. And unlike China, it has a well-developed high-tech industry. So, Taiwan has an economy that is better suited to current global conditions than China¡¦s. Taiwan will do better on its own than as a stepchild of China.

Yet Taiwan is not the only country that is making a mistake by contemplating a closer relationship with China. So is the United States. There are those in Washington who, in the desire to establish an informal alliance with Beijing, would like to see China absorb Taiwan in order to remove a potential source of disagreement. As Dennis Blair, then an admiral and now director of national intelligence, said in 1999, Taiwan is ¡§the turd in the punchbowl.¡¨ Such a view, in addition to being morally repugnant, is also unrealistic.

Why? The Washington-New York axis may buy into the notion of a grand alliance with Beijing, but it will not happen. As an initial matter, it will not happen because such an arrangement would go against ingrained American values and would not survive popular opinion in the U.S.

Moreover, it is highly debatable that the U.S. can maintain stable relations with a communist superstate that believes it should push aside America and dominate the international system. Recent events confirm that Beijing, which thinks America is on the decline, would not be a reliable partner. In the last three years, Beijing has adopted a much more aggressive posture toward the United States and the international community, as evidenced by the following:


In August 2006, the Chinese fired a laser to blind an American satellite, a direct attack on the United States.

In the following October, a Chinese submarine for the first time surfaced in the middle of an American carrier group. This episode, which occurred in the Philippine Sea southeast of Okinawa, was an obvious warning to the U.S. Navy to stay away from Asian waters.

Then, in January 2007, the People¡¦s Liberation Army, in what was an unmistakable display of military power, destroyed one of China¡¦s old weather satellites with a ground-launched missile.

Beginning late 2007, the country¡¦s military leadership broke from past practice and began to boast about its new weapons and war-fighting capabilities.

Peace Mission 2007, cooperative military exercises in Central Asia, was China¡¦s first large-scale foreign military deployment.

At the end of 2007, military maneuvers, apparently rehearsals to take Taiwan and disputed islands in the South China Sea, were unprecedented in scope and sophistication for the People¡¦s Liberation Army.

And Beijing has recently stepped up its objections to the U.S. Navy sailing on the high seas. This was highlighted in early March as Chinese ships and planes harassed two unarmed information-gathering vessels, the Victorious and Impeccable, in international waters in the Yellow and South China Seas.

We can mark this new phase of assertiveness to a series of meetings in Beijing in the second half of 2006. Yet the important question is not ¡§When?¡¨ but ¡§Why?¡¨ Why is Chinese supremo Hu Jintao pushing his country down a path of high-profile force projection? There are two main reasons.

First, there is the inevitable change in outlook when a nation goes from poor and weak to rich and strong. So it is natural that the Chinese are thinking about how to exercise their new-found strength.

Although not everyone in Beijing believes the bloated claims aired in the West about China¡¦s future, most Chinese officials nonetheless feel they will profoundly change geopolitics in the coming years. In any event, more and more of them see this moment as the time for China to reassert itself.

Accordingly, there is a growing sense in the Chinese capital that other nations, especially neighbors, must now see things China¡¦s way. Beijing¡¦s treatment of neighboring countries betrays more than a trace of imperial attitude.

The second reason for China¡¦s new assertiveness is political. Hu Jintao, an insecure leader, has used and is continuing to use the more hawkish elements in the Communist Party and in the People¡¦s Liberation Army to consolidate his political position in his ongoing struggles with the leaders of other factions inside the ruling group. Moreover, the People¡¦s Liberation Army has gained political ground because the civilian leadership is increasingly dependent on the military¡¦s armed might to control an increasingly defiant and unstable society.

Hu Jintao¡¦s courting of senior generals has been especially evident since the middle of 2004. The price for General Secretary Hu has been even larger increases in military spending and promotions for favored flag officers, such as General Chen Bingde, who is now chief of general staff. All of this has created a dynamic where more nationalistic officers and civilians have gained influence on certain issues, such as Japan and Taiwan.

So, it is virtually inevitable that Beijing will do something that will make accommodation with China impossible. Hardline states always have a way of pushing their adversaries too far, and one day there will be one provocation too many. Then, Washington and other capitals will realize the importance of Taiwan.

But, apart from Beijing¡¦s aggressiveness, an accommodation with China would be strategically short-sighted for various reasons. First, because Taiwan has become an inspiring symbol of the success of representative governance and free markets, to help it fail means gutting America¡¦s own values and bolstering China¡¦s model of authoritarianism and rigged markets. Unfortunately, many in Washington don¡¦t believe in supporting democracy. They need to go back to school to relearn every crucial lesson of the 20th century.

Second, Taiwan is an important country in its own right. It is economically powerful, and it is embedded into global supply chains.

Third, America¡¦s Asian policy is anchored on defending Japan. As a quick glance of a map will reveal, the main island of Taiwan and its various outlying islands protect the southern approaches to the Japanese archipelago. It would, therefore, be difficult for America to defend Japan if Taiwan became part of the People¡¦s Republic. If the Pentagon is not able to defend Japan, South Korea would become surrounded and would surely fall into Beijing¡¦s lap as well. With its two formal alliances gone, the United States would be out of Asia. The only thing that holds the Chinese in check is America, and Taiwan is the key to keeping the United States in the game.

Fourth, ceding Taiwan would undoubtedly embolden a territorially hungry Beijing. China asserts sovereignty over, among other things,

large parts of other nations, such as India, and

the continental shelves of five southeast Asian countries.

Incredibly, Beijing appears to maintain that the entire South China Sea is an internal Chinese lake, thereby impinging on the right of free passage

on,

under, and

over

international waters.

The United States, even though far from Asia, is now becoming China¡¦s target as is every nation that uses the high seas.

Giving up Taiwan would only embolden China to press its claims with even more confidence and vigor¡Xand it would bolster Beijing¡¦s weak legal positions by inheriting Taipei¡¦s territorial rights. So the place to stop the Chinese from pursuing their aggressive ambitions is Taiwan.

Fifth, abandoning Taiwan would send a horrible message to American

allies,

friends, and

foes

in the region. If we Americans pushed Taiwan into the arms of China, no nation would ever want to help the United States in Asia¡Xor anywhere else for that matter¡Xin the future.

So, Taiwan must¡Xand will¡Xprevail because Taiwan is important. It is important to you and me, but it is also important to every person in every democracy¡Xand to every person living in a one-party state or under tyrannical rule. In a world where autocrats are gaining strength and banding together, Taiwan is the inspiration for all of us. Defending Taiwan is defending the aspirations of all people, especially those who suffer from despotic rule.

In light of all of this, America needs something it has not had in decades, a strong Taiwan policy. Instead, we have seen the uninspiring equivocation of the Bush administration, which has been continued by President Obama¡¦s. Washington¡¦s policy of ¡§strategic ambiguity¡¨¡Xthe policy where America keeps its options open¡Xhas just encouraged the Chinese to test American resolve.

Washington has not been able to develop a sound Taiwan policy, even though it is so important for the United States to do so, largely because of perceptions of China and hopes for China¡¦s future. Americans are trying to engage Beijing so that it becomes a ¡§responsible stakeholder¡¨ in the international system. Yet over time, the Chinese, as they have become more powerful, have become more aggressive. So in pursuit of an unattainable goal¡Xmaking the Chinese regime a friend¡XWashington is undermining its own strategic objectives.

It¡¦s time for Americans to demonstrate that they keep commitments to free peoples. They need to do that especially at this moment because hardline governments are on the march. So defending Taiwan is defending America, and that is defending all the world¡¦s democracies.

And I believe that, because of China¡¦s recent aggressiveness, America will begin to change its policy and support Taiwan more resolutely. The signs of change are already appearing in Washington. As Beijing becomes more unfriendly, as the Chinese economy falters, we will see a new approach to China¡¦s one-party state.

But Taiwan¡¦s first line of defense is not the United States, of course. It is the people of Taiwan.

The people of Taiwan are forging a common identity,

they are creating their own democracy, and

they are building a free society.

They have achieved many things these past years, and they have so much more to do.

So, let¡¦s do all we can for Taiwan so that it can meet its challenges. And I am confident that it will prevail. Why? Because of you, and you, and you.

For all that you have done in the past and for all that you will do in the days and years ahead,

I admire you,

I support you, and

I salute you.

Let freedom ring. Long live a free Taiwan!

 
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