The Dalai Lama show

Far Eastern Economic Review, September 3, 2009

Taipei — Take an exiled spiritual leader seen by Beijing as a “splittist.” Add an island Beijing sees as a wayward province. Flavor with a strong dose of political posturing and grandstanding. The result? The perfect end-of-summer cocktail for Taiwan's sensational media.

Yes, it seems everyone here—and in Beijing—has something to say about the Dalai Lama's visit to Taiwan. One TV station even remarked that Taiwan is becoming a political "Superstar Boulevard" (a popular music competition show modeled on "Pop Idol"). Everyone wants their turn at the microphone—or megaphone, as the case may be.

The Dalai Lama arrived Sunday night for what he insists is a humanitarian mission to comfort and pray for victims of Typhoon Morakot. (See post here on the Taiwan government's apologies for its slow and disorganized response to the disaster). He was invited by a group of local government officials from the pro-independence, opposition Democratic Progressive Party (DPP).

China was the first to weigh in, even before His Holiness had set a sandaled foot on the island.

"The Dalai Lama is not a pure religious figure," said an unidentified spokesman for China's Taiwan Affairs Office, according to a Aug. 27 Xinhua report.

"Under the pretext of religion, he has all along been engaged in separatist activities. When people from all sectors on the mainland are lending a hand to help Taiwan reconstruct and overcome the typhoon disaster quickly, some DPP members have taken the chance to plot the Dalai Lama's visit to Taiwan. . . . Obviously this is not for the sake of disaster relief. It's an attempt to sabotage the hard-earned good situation in cross-Strait relations."

Just in case anyone wasn't listening, Beijing on Aug. 31—the first day of the Dalai Lama's visit—repeated its "resolute opposition" to the visit. (See statement here.)

At the airport late Sunday night, a small but vocal group of supporters of China-Taiwan unification raised a ruckus, shouting at the Dalai Lama "go home" when he arrived at the airport, and scuffling with security guards. From the loud protests shown on TV, you might never guess that only 9% of Taiwanese support unification, according to one recent poll. The quieter majority welcomed the Dalai Lama as a celebrity—sort of a spiritual version of a Hong Kong pop star.

The ruling Kuomintang basically took the same line as Beijing. It slammed the DPP for exploiting a tragedy for political ends. The KMT—now on friendly terms with the Chinese Communist Party—favors closer relations with China. It worries that President Ma Ying-jeou's efforts to cozy up to Beijing may be set back by the Dalai Lama's visit. One KMT bigwig publicly scolded the opposition to stop creating trouble in cross-strait relations.

The pro-KMT United Evening News went farther, engaging in fear-mongering about the potential backlash from China. On its front page Monday night, it said China “might” cancel group buying trips to Taiwan by Chinese businessmen, postpone an agreement on cross-strait financial exchanges and a cross-strait trade deal, and temporarily ban mainland tourists from visiting Taiwan.

Nervous pro-KMT commentators also noted that China had canceled an opening ceremony Monday marking the start of regular cross-strait flights, and canceled or postponed other events. And others have suggested that the Dalai Lama's visit was related to China's decision to boycott the Sept. 5 opening ceremony for the Deaflympics in Taipei.

The DPP dismissed such talk, saying China would have boycotted the Deaflympics opening ceremony regardless—just as it snubbed the World Games opening ceremony back in July. And the cross-strait flights ceremony would likely have been scotched anyway, with such a party deemed unseemly while Taiwan was still mourning typhoon victims.

The Dalai Lama, for his part, appeared to take all of the controversy in stride. He praised protests against him as a healthy mark of a free society, in an indirect jab at authoritarian China. And he insisted his trip to Taiwan had no political agenda.

More than 17,000 people who packed a hall in Kaohsiung Tuesday morning to see him lead a prayer ceremony seemed to agree. His message of compassion and spirituality resonated with many southerners still reeling from the effects of the typhoon.

So will the Dalai Lama's hurt cross-strait relations or not? China says it will have an "unfavorable" effect. But that's more likely rhetoric than reality. Chinese companies, too, benefit from more cross-strait commercial exchanges. And Beijing is for now aiming all its venom at the opposition, not at the KMT.

In fact, the KMT confirmed it had sent a representative to Beijing to exchange views on the Dalai Lama's visit, in an effort to contain the political fallout. That means the two governments likely have an understanding on where Beijing's "red lines" are regarding the visit.

So far, President Ma and officials in his government have declined to meet with the spiritual leader—unlike his visits here in 1997 and 2001, when he met two sitting presidents. As long as Taiwan's government keeps up that "good behavior," the current political storm will likely pass.

"In the short term the visit may be harmful, but not in the long-term," said Li Peng, a professor at Xiamen University's Taiwan Research Institute. "If nobody in Ma Ying-jeou's government meets the Dalai Lama, maybe the Chinese government will just make comments—nothing more."

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Ma's Apology Tour

Far Eastern Economic Review website, August 25, 2009

As satire, the YouTube video now circulating in Taiwan may be over the top. But for many here, the real-life spectacle of Taiwan's top government officials on an "apology tour" has been almost as ridiculous.

The YouTube video, which has logged more than 144,000 views, superimposes the heads of President Ma Ying-jeou, his vice president, premier and two Cabinet ministers onto Chippendales models, dancing to the South Korean boy band tune "Sorry, Sorry."

The video mocks Taiwan's government for their repeated, ritual apologies in recent days, for what critics across the political spectrum here say was a slow and disorganized response to Typhoon Morakot—the island's deadliest storm in at least 50 years.

As of Aug. 24, the death count from the storm stood at 292, with 385 more missing and presumed dead. Most were buried alive by mudslides or swept away by torrential rivers.

Critics say President Ma's government failed its people by waiting three days to fully mobilize the military, declining to declare a state of emergency, passing the buck in the first few days after the typhoon, and showing a cold attitude toward victims.

I got an earful of such sentiments while spending a few hours last week in Cishan, a small southern Taiwan town that's become a staging area for relief efforts.

"If the government's reaction had been more quick, not so many people would have been lost," said Li Hui-ming, 36, from Minzu Village, where about 25 people were killed in a mudslide.

Displaced villagers credit Taiwan's robust civil society for filling the gap left by the government's poor job mobilizing resources. Buddhist relief organizations took the lead by rapidly opening shelters, feeding, and tending to the displaced. Money and donations streamed in from private citizens all over Taiwan.

And thousands of volunteers—including many students on summer vacation—went to affected areas to help. I met a bar owner from Tainan city, for example, who donated his Jeep to drive supplies in and out of the disaster zone.

Chang Chiung-fang, who's studying for a Masters' in psychological counseling, came from Taipei to volunteer at a Taoist temple outside Cishan that's become a shelter for typhoon refugees. "Actually, the government hasn't done a lot for these people," said Mr. Chang, 29. "This temple and civic organizations have helped them."

Nearby, Dahu Balavi, 58, a representative of the Minzu villagers, was clear about who deserved gratitude. "This temple has given us shelter and food, we thank the temple a lot—but not the government."

Why the government's lackluster performance? The question has been hashed and re-hashed in recent days here.

Preventative measures fell short. A government project is mapping out landslide-prone areas, and the emergency center had the authority to force villagers to evacuate. That didn't happen. "The government should have done better, and I hope they take this as a hard lesson," said Sue Lin, a professor in the department of environment engineering at National Cheng Kung University.

Ms. Lin urged the government to focus on better educating citizens in vulnerable areas about flooding and landslide dangers, and holding regular evacuation drills.

Another problem was organization. The typhoon response was coordinated by an ad-hoc emergency center that's led by a rotating group of Cabinet members from various ministries. That meant fractured leadership at a time when Taiwan most needed unified command.

But many here say the fundamental problem was Mr. Ma's character. His cautious, lawyer-like demeanor may make him a good administrator. But it also makes him a weak, ineffectual leader in a crisis.

"People say he tends to do everything by the book, but doesn't know how to command," said George Tsai, a political scientist at Chinese Culture University who supports Mr. Ma's party. "They wanted to see a quick response, and for him to show his compassion."

Mr. Ma could have taken charge of the typhoon response by declaring a national emergency and fully flexing his authority as commander-in-chief. Instead, his school-marmish insistence that disaster laws should be followed to the letter left the Cabinet in charge.

But like Mr. Ma, his Cabinet is seen here as stocked with "goodie-goodie," Confucian-style scholars who are short on communication and leadership skills.

The president added insult to injury by appearing to blame some victims themselves for not heeding warnings to evacuate landslide-prone areas. "He said we didn't listen, but the problem was they didn't tell us anything—there wasn't any warning," said Minzu Village's Mr. Li.

For Mr. Li and others, President Ma's "apology tour" has been too little, too late—a transparent attempt at political damage control long after the real damage has already been done.

Many here can't help but wonder: Given his mismanagement of the typhoon response, how would Mr. Ma perform in an even more serious crisis—say, a showdown with China?

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Will red money tame Taiwan?

Taiwan throws open its doors to Chinese investment. Some are worried.

Far Eastern Economic Review, June 2009 issue

It’s a momentous change in East Asia’s financial landscape. For the first time, Taiwan is opening its doors to Chinese money—both portfolio investment by Chinese institutional investors, and equity investment by Chinese firms.

That’s one marker of how much cross-Strait relations have improved. Once on the brink of war, the two sides are now playing nice. China has softened toward the self-ruled island it views as a wayward province. Since 2000, economic ties have tightened; that process kicked into high gear when the China-friendly Ma Ying-jeou took power one year ago.

But with opening comes anxiety. Taiwan’s pro-independence opposition warns that Mr. Ma is moving too fast, paying too high a political price and giving up key leverage. Chinese money is just the latest example. By throwing the doors wide to Chinese investment, critics say, Mr. Ma is letting in a Trojan Horse. As China snaps up stakes in Taiwan firms, its sway over the island will grow apace.

The government dismisses such fears. In a talk with foreign reporters last month, Taiwan’s top China policymaker Lai Shin-yuan said the government was committed to safeguarding the island’s interests.

“Some protesters think our government will downgrade or sell out Taiwan’s sovereignty,” said Ms. Lai, head of the Mainland Affairs Council. “We don’t agree—and we think this is political labeling. The accusations are baseless.”

To illustrate its vigilance, the government has borrowed an image from Chinese folk religion: the “door gods,” or menshen. These are a pair of tough-looking protector deities, whose images can still be found on the doors of older Taipei homes. The government insists that like the door gods, it is keeping a watchful eye on all that enters and won’t let harm befall Taiwan.

But try telling that to retired sports teacher Wu You-hong. “He [Mr. Ma] is hurting Taiwan’s sovereignty and human rights,” said Mr. Wu, standing with a group of protesters outside the legislature. “All of his policies are self-belittling. Taiwan is a country, but he’s turning it into a local area [of China].”

So is President Ma’s government guarding the doors, or dancing with the devil?

The answer, of course, depends on your political stance. But behind that charged debate lies a real challenge for the island. China makes no secret that its ultimate goal is to absorb the island politically. So how will Taiwan preserve its democracy, amid the charm offensives, enticements and what’s likely to be a flood of investment from the economic giant next door?

Opening the Door

By opening to Chinese money, Taiwan seeks to give its flagging economy a jolt. The export-dependent island has been hard-hit by the downturn, and the government sees China as a big part of the cure. The new policies will also correct a sharp imbalance in investment flows. Since the 1980s, Taiwanese have pumped $100 billion to $150 billion into China, according to Taiwan’s Mainland Affairs Council. Meanwhile, aside from one special case (Lenovo’s purchase of the Taiwan unit of IBM), nary a yuan has come into Taiwan directly.

That’s about to change. In late April, at the third round of cross-Strait talks in a year, the two sides inked a statement on financial cooperation. That was quickly followed by more concrete steps. Taiwan opened its capital markets to Chinese money in late April; China said it would let qualified domestic institutional investors invest in Taiwan from May 1.

Taiwan then announced it was drafting a list of around 100 sectors to be opened to direct investment by Chinese firms. The list is still under review by Taiwan’s Cabinet; economics officials hope to release it by late June and start taking applications in July. Taiwan officials say the first sectors to be opened will include automobiles and auto parts, textiles, plastics, computers, cell-phones, hotels, shipping, airways, herbal medicine, rubber and wholesale firms. The investment hype went into high gear on April 29, when news broke of a landmark deal: an agreement by China Mobile, the world’s largest carrier, to buy a 12% stake in Taiwan’s Far EasTone Telecommunications for $544 million.

Limits on indirect Chinese investment—for instance, through Hong Kong or Cayman-Island subsidiaries of Chinese firms—are also easing. Just a year ago, Taiwan demanded a time-consuming review process for any deal involving Chinese shareholders and often nixed such plans. Now, if a firm has less than 30% mainland Chinese investment, it will be treated like any other foreign firm, according to Emile Chang, an official with the Taiwan Ministry of Economics’ Investment Commission.

One example is Hong Kong’s Bank of East Asia, which wants to buy the Taiwan securities unit of American International Group. “Last year, we probably would have said no—we would disallow this case,” said Mr. Chang. “But this year we are reviewing it.”

All of these changes are ringing alarm bells for Taiwan’s opposition Democratic Progressive Party. International Affairs Director Hsiao Bi-khim insisted her party also wanted more economic ties with China. Their problem is with the current pace of the opening, and the government’s opaque decision-making process.

“We support opening, but with greater caution,” said Ms. Hsiao. “The current government is moving too fast, and losing leverage in the process.”

Ms. Hsiao said her party doubts that the Taiwan government will be able to counter Beijing’s “strategic manipulation” of Chinese money. She said the government is naively brushing aside security concerns and isn’t looking out for Taiwan businesses’ interests. For example, the government should conduct an industrial impact assessment on all the sectors that are set to be open to Chinese money to ensure such opening will benefit Taiwan.

President Ma’s decision-making process comes in for especially cutting criticism. The DPP calls cross-Strait talks “black-box negotiations,” because the participants and locations are well-kept secrets. The public meetings, such as the one in Nanjing in April, only formalize deals that were already struck before, under mysterious circumstances. So far, agreements with China have not been subject to legislative review, Ms. Hsiao pointed out, despite efforts by the legislative speaker, from Mr. Ma’s own party, to set up a cross-Strait affairs working group.

Technically, cross-Strait agreements don’t require legislative approval—they become law within 30 days of being inked, unless rejected by the legislature. (Some related changes to regulations do require legislative approval, however, such as opening public construction projects to Chinese money). Therefore, Mr. Ma says, no oversight is needed. He insists all deals so far are strictly economic, and have not touched on politics.

But the DPP points out that the deals Mr. Ma’s government is inking, such as opening Taiwan to Chinese money, have security implications.

“Here we are at the front line, with 1,000 [Chinese] missiles pointed at us, and yet the government is doing nothing to protect our strategic sectors,” said Ms. Hsiao. “There are a lot of potential problems we can foresee, especially in sectors like telecoms and energy. Essentially we’re handing over our lifeline to China.”

Obstacles Remain

Yet the opening to Chinese investment isn’t quite as far-reaching as it might appear. Interviews with officials here show that Chinese money will still face a gauntlet of regulations and red tape—particularly when it comes to sensitive sectors like those Ms. Hsiao mentioned.

Take portfolio investment. Officials from the Financial Supervisory Commission pointed out that China still sharply limits QDII investment in Taiwan. Taiwan’s government estimated that the cap was around $220 million in early May, or 3% of the total assets of the 10 qdiis that can invest in Taiwan. That cap could be lifted once a memorandum of understanding for securities investment is signed, but there’s no timeline for that.

Meanwhile, Taiwan rules bar Chinese from holding top management jobs or sitting on the board of directors of Taiwan firms. Officials said they would be sensitive to public reaction to proposed Chinese investments. “If our people say it’s not a suitable investment, we’ll ask the investors more about what their objectives are,” said one official, who did not want to be named. “If [Chinese investors] want to control the company, that would violate our regulations.”

Direct investment by Chinese firms will also face limits. One example is telecoms. The Mainland Affairs Council’s Ms. Lai said that it would not be included in the first round of sectors to be opened to Chinese money, meaning the China Mobile and Far EasTone deal is likely to be delayed indefinitely.

“Mainland investment coming to Taiwan is a new thing, so we have to proceed in a measured and orderly fashion,” said Ms. Lai. “We also have to look at our domestic industries—if they involve key technologies or are related to national security, then that would not be open to mainland investment.”

The Investment Commission’s Mr. Chang seconded Ms. Lai on telecoms. “The sector touches on national security concerns,” said Mr. Chang. “In telecoms, almost everything is now running over the Internet. So if you can control telecoms, you can control the Web.” Will the sector open down the road? “The President makes the decision,” he said.

For his part, Mr. Chang sees Chinese investment plans quickly running into political headwinds. He compared it to the outcry in the United States in the 1980s, when Japanese investors snapped up property in New York City and elsewhere. In Taiwan, where the pro-independence camp is strongly anti-China, emotions can be expected to run much higher.

“Should we encourage mainland Chinese companies to buy our publicly listed companies?” asked Mr. Chang. “That may raise a political issue, especially if it involves our leading companies, which are ‘the pride of Taiwanese.’ A lot of people won’t want to see this kind of [investment] project happen.”

As the comments above make clear, fears about Chinese investment are probably exaggerated. Many limits will remain, and should prevent Chinese from exerting substantive control over Taiwan’s key industries.

Meanwhile, opening to Chinese investment has the potential to raise Taiwan’s profile on East Asia’s financial map. Financial Supervisory Commission officials noted that opening to Chinese money has knock-on effects.

“If we have good relations with mainland China, foreign investors will have confidence in Taiwan, and we’ll attract funds from them,” said one official. That’s already begun to happen—the cross-Strait news in late April and early May sent Taiwan’s stock market surging, which analysts credited in part to buying by foreign institutions.

Moreover, the latest Mainland Affairs Council poll (which the opposition dismisses as biased) showed that 64.5% of Taiwanese were “satisfied” with the cross-Strait consensus on two-way investment inked in late April; 30.9% were “unsatisfied.”

Yet the opposition has legitimate concerns. Mr. Ma’s insistence that the current opening is purely economic is unconvincing. Given China’s grand strategy of unification, all interactions between the two sides are inescapably political. All the more reason for close oversight.

Second, Mr. Ma hasn’t done enough to inform the Taiwanese public and other stakeholders of his government’s plans and to build consensus. He’s thereby fueling fears at a time when people need reassurance.

The government acts as though Taiwanese should simply trust them to protect their interests, as they would trust in door gods, or other hidden deities working in mysterious ways on their behalf. But 21st-century, modern democracies do not run on faith. They run on clear communication, transparent decision-making and submission to oversight by the legislature, the opposition, the media and the public.

It’s encouraging, then, that Ms. Lai at least seems to acknowledge such shortcomings. “We have to strengthen our communication with the public, and our discussions with the opposition,” she said. That will be especially important for the Ma government’s next major agenda item in cross-Strait opening: a trade agreement with China, the so-called “Economic Cooperation Framework Agreement.”

The details of the pact remain unclear, but it would likely lower tariffs on a range of goods, including petrochemicals. Mr. Ma wants to ink the ECFA by the end of 2010. But the Taiwan public will be watching closely to see how it is structured, and how the decisions on it are made.

For the sake of his economic agenda, and the health of Taiwan’s democracy, Mr. Ma would do well to heed their concerns.

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'A Universal Idea'

Charter 08 — A 'Universal Idea'

by Jonathan Adams, FEER.com, February 6, 2009

Published online in early December 2008, "Charter 08" is a blistering indictment of Chinese Communist Party rule. It lays out a bold, detailed vision of a new China: one with the rule of law, multiparty elections, and the separation of powers.

One of the drafters, Liu Xiaobo, remains in Chinese police custody, facing charges of "inciting subversion" or worse. The police have questioned and warned at least dozens of Charter signers, muzzled state media, and blocked Web sites mentioning the Charter.

By now, the initial buzz about Charter 08 has died down, but some commentary continues. In two recent entries, Roland Soong at the widely-read EastSouthWestNorth blog (read here and here) dismissed the charter as holding little interest for most Chinese. (He quoted from an article I wrote for the Christian Science Monitor.) Rebecca MacKinnon also had a long essay on Charter 08 at her Web site.

I talked to Zhang Zuhua, one of the drafters of Charter 08, in Beijing last Dec. 26. In that interview, he made clear that Charter 08 was intended only as a political blueprint, and that reform could take decades, even generations. "We don't expect this change overnight," he said.

Mr. Zhang himself is a lesson in the rapid reversals possible within one lifetime in China. A 53-year-old Beijing native, he was "sent down" with other privileged youth to the countryside for "re-education" during the Cultural Revolution. He ended up making missile parts in a cave in Sichuan Province for eight years.

With the end of the Cultural Revolution's madness, he was part of the first generation to return to school. He studied at Sichuan Normal University, where he focused on Western constitutionalism. Later he rose through the ranks in the Communist Party Youth League, where he worked in the 1980s with Li Keqiang—now vice premier.

Mr. Zhang's own political career ended when he spoke out in support of the Tiananmen Square protests. He's been under off-and-on surveillance ever since. Most recently, police interrogated him for 12 hours on Dec. 8, 2008, over his involvement in Charter 08.

Here, in his own words, are his thoughts on Charter 08 and China's future. (The transcript has been edited and rearranged for readability.)

Jonathan Adams: Some critics say the ideas in Charter 08 are "Western" ideas, that China is in a special situation and so these ideas don't apply.

Zhang Zuhua: First of all, we have a very moderate attitude to such comments and critics. We welcome people to comment on this Charter, and we can learn from them.

I'm one of the charter's main drafters. When the police questioned me, I acknowledged that most of the ideas are Western ideas. The ideas of the charter come not only from the U.S. Bill of Rights, but also from the 1215 reforms in England [the Magna Carta], from the French Declaration of the Rights of Man, and from the Czech Charter 77 [a 1977 call for political reform by Czech activists during the days of Communist rule].

But we also have a "native" (bentu) inspiration: that is, Taiwan. Before 1986, there were also many activists, people fighting for democracy and human rights in Taiwan, and publishing calls for those things. [Taiwan began democratizing in the late 1980s].

JA: Many Chinese say that China needs stability most of all, that it must focus on economic growth, and political reform can wait.

ZZ: Personally, I agree with this. China should take time to develop. [This] year will be the 20th anniversary of the 1989 Tiananmen Square incident. And so we hope China can move toward democracy and the rule of law with a very low cost. I hope China can accomplish this transition in a peaceful and nonviolent way.

JA: What will be needed for China to change?

ZZ: In my writings, I use a method of analyzing called "three plus one" analysis. Looking at all of the factors affecting China's future, I came up with three political elements and one economic. The political ones are the ruling party, civil society and international society.

The CCP is the ruling party and its choices about the future are obviously very important to Chinese society. However, the efforts of the ruling party are not enough. Without the participation of civil society and international society, it will be difficult to lead China down the right path.

JA: How soon do you think change can happen?

ZZ: I think it wouldn't be so difficult to accomplish a change in the [political] system, if the four factors that I mentioned are all ready. So I think in the next decade or two, this kind of change can be accomplished. However, consolidating and perfecting democracy—that will take a long time. Maybe it will require the efforts of several generations. So we don't expect to achieve this change overnight.

JA: Analysts I've spoken to say the Chinese government worries foreign influence is behind Charter 08—that foreign elements want to destabilize China from within.

ZZ: Personally, I don't agree with the opinion which rejects interference from other countries. I think this runs against the global trend of civil society. In Charter 08, we adopt a universal idea shared with the entire human race. It's not American, it's not European, it's not African. It works for all human beings. However, the CCP disagrees with this universal idea and criticizes it. That's our difference with them.

JA: What kind of response have you personally received to Charter 08?

ZZ: When we drafted Charter 08 we were concerned that it was only for elites, that it wouldn't be accepted by the common people. However, according to the response on the Internet, that's not the case. A lot of people, including peasants and workers, agree with Charter 08, and it's popular among more and more people.

Charter 08 calls for an independent judiciary and abolishing inequality. Ordinary people approve of all of these suggestions.

Actually, one of the most important suggestions in Charter 08 is to abolish the unfair principle of discrimination against peasants—or to abolish the difference between urban and rural residents, because many peasants are treated unfairly. I've received a lot of phone calls from peasants who advocate this proposal.

JA: What else explains the Charter's broad appeal?

ZZ: I think this Charter articulated what many Chinese people want to say. It's very rational and very constructive. First, a lot of people don't dare to speak out. Second, there's no place for them to speak out, because no media will publish them. And third, the first 303 people who signed the charter were very famous scholars.

For example, the first one to sign was Yu Haocheng [a prominent advocate of constitutional change]. Second was Zhang Sizhi [one of China's most famous lawyers]. And third was Mao Yushi [a very respected economist], and then He Weifang [a prominent advocate of legal reform in China].

And of course, they [the government] put people in jail—that attracts more attention.

JA: To what extent was the government's reaction to Charter 08 related to the upcoming anniversary of the Tiananmen Square crackdown?

ZZ: The government has acknowledged that publicly. They have two concerns. One is the 1989 anniversary. The other is that the economy is very bad now—they're afraid of the chaos and problems caused by unemployment. … Actually, when the police interrogated me, they mentioned that high levels of the central government are really concerned about [this] year, because the situation may become quite serious.

JA: How important was the role of technology in distributing Charter 08?

ZZ: Thirty-one years ago, in the era of Charter 77, there was no Internet, so it was difficult to spread the document. Yesterday, I "Googled" Charter 08. Right now there are already more than 300,000 links about Charter 08. A lot of young people use blogs or QQ [referring to popular instant message software in China] groups to make friends, and they've also spread this new Charter. The English version of Charter 08 was spread rapidly. So thanks to the Internet, it's impossible to block information from society now.

JA: What is your situation now? Are you under surveillance, have you been questioned recently by police?

ZZ: Since Dec. 9, they haven't harassed me directly. However they [Chinese police] have people guarding our [his family's] building, and they've bugged my home phone and cell phone. They cut the home line from 11 p.m. to 9 a.m. I was joking that I will protest, because that means they aren't very professional—they don't work very hard at night, because they want to rest.

JA: How worried are you that you'll be sent to jail?

ZZ: I'm not concerned, but my family and wife are. When I started to work on this project, I predicted that the government would react like this, that I might be detained. So I was mentally prepared. When the police questioned me, they also said that this wasn't over, that they would investigate further and maybe talk to me again. So I'm facing the risk of being detained again.

JA: Why are you willing to speak out?

ZZ: When I was in the police station, I told the police, "In every country, the situation is the same. The people who stand up and fight for human rights and freedom—they're the ones who lose those things first. They have to pay the price for other people's democracy and freedom."

I really don't want to be jailed, but I may have no choice. The system [of CCP rule] is like this—it doesn't allow people to oppose them, to disagree with the system. So we have to stand up and fight for democracy—it's our responsibility.

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Made for China

Dispatch from China's 'Puppet Capital'

by Jonathan Adams
FEER.com
December 23, 2008

QUANZHOU, China -- On a factory floor in this city on China's southeast coast, 15 women huddle over sewing machines, stitching the clothes of the gods.

They're skilled laborers, embroidering detailed, brightly colored dieties' outfits, banners and wall hangings for Buddhist, Taoist and folk temples. They also make clothes for the hand puppets and marionettes that have earned Quanzhou fame as China's "puppet capital."

The factory used to make products for export, particularly to neighboring Taiwan. Now, it's increasingly selling to domestic Chinese buyers. Take puppets. Fifteen years ago, this factory sold all of its puppets to Taiwan, said factory manager David Zeng. These days, he says, they only ship 20% of their puppets across the Taiwan Strait; most of the rest are sold in China.

"Taiwan buyers are still purchasing the higher-end products," Mr. Zeng said. "But now we have a bigger demand in the Chinese mainland."

Mr. Zeng's factory reflects a dramatic shift in Chinese manufacturing. The export model that made it rich—becoming the world's cut-rate factory floor—is becoming obsolete. China's exports just aren't as cheap anymore, thanks to rising labor costs and a slew of new laws and tax policies. The current global downturn is sapping demand in key export markets like the U.S. and Europe, making a tough climate worse.

In response, China's exporters are either shutting down or adapting to the new economic reality. Media attention has focused mostly on hard-hit, low-end manufacturers. More than half of China's toy companies went out of business this year, according to the Chinese government.

But the shift also applies to skilled and higher-end manufacturing, such as Quanzhou's many craft workshops. In addition to embroidery and puppet-making, these include wood and stone carving, porcelain, and bamboo weaving. Like China's other exporters, many of these firms have downsized sharply, and now look to the domestic market to take up the slack in falling export orders.

Mr. Zengs' factory is typical. In the 1990s his factory began taking orders from Taiwan, which shares a common "Minnan" culture with southern Fujian province. They began doing a brisk business supplying Taiwan temples and puppet troupes, seizing a cost advantage. "Ten or 15 years ago, it was about 1/3 the cost to make these supplies in China versus making them in Taiwan," said Mr. Zeng. "But now it's not so cheap."

Mr. Zeng says their production costs are now only about 80% to 90% that of Taiwan—still less expensive, but not by much. One reason is salaries. Fifteen years ago a typical skilled embroiderer made about 800 renminbi per month, now the average is 2,000. As their exports have become pricier, they've begun targeting their home markets downsized sharply. From 600 workers five years ago, they now have only 60.

Not everyone can make the switch from exporting to the domestic market so easily, of course. Orders are drying up, and China’s exports fell in November for the first time in more than seven years. In addition to fewer export orders, many factories are finding it difficult to find enough staff. "Every factory now in China is finding difficulties in recruiting new workers—not to mention factories that require specialized skills which take time and patience," Mr. Zeng said.

He expects they may shrink again by half in the next five years, to just 30 workers. And they may move their factories further inland where costs are cheaper. But he worries that he may not find workers there with the special skills that have made Quanzhou a crafts exporter.

"It's difficult," said Mr. Zeng. "There may be nowhere else to go."

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Street justice in Fujian

Street Justice in Fujian

by Jonathan Adams
Far Eastern Economic Review, "Author's Corner"
November 14, 2008

XIAMEN, CHINA — The timing was impeccable. I had just walked out of my hotel to Zhongshan Road, in the waterfront tourist district, to find lunch.

In front of me, a crowd—maybe 30 people—had gathered around an irate couple on the pedestrian shopping boulevard. The middle-aged couple were holding signs and ranting. I couldn’t make out everything on the signs, but gathered they were railing against the government and the police.

This can’t end well, I thought.

I asked one of the bystanders what the couple was so mad about. “They say the police took their daughter, and won’t release her,” the woman said. “The man says his mother killed herself because of the situation, and he blames the police.”

The couple was clutching several papers, which they showed to the crowd while keeping up a steady patter of complaint. “They say the police promised to give their daughter back, but they haven’t,” the woman explained. The crowd got bigger.

A man appeared, telling the bystanders to disperse. Black polo shirt with striped collar, nice pants, crew cut, hard beady stare: plainclothes cop. One of millions across China who come out of the woodwork at the first sign of any public disturbance. This agitated the couple even more.

“Ni shi shei? Ni shi shei?” [“Who are you?”], they screamed at him, demanding identification.

The cop ignored them.

I loitered, talking to the hotel worker, like everyone else curious to see how this would end.

A police car sped to the scene, screeched to a halt. A tall, bespectacled man in camouflage got out of the passenger side, a uniformed cop out the other. They joined the plainclothes cop in urging the crowd—about 50 by now—to disperse. To no avail.

Onlookers would shrink back when approached, then flood back in as soon as the cops turned their back. The couple began yelling at the other cops too, and shoving papers in their faces.

Bystanders inspected the papers, like an impromptu jury evaluating the evidence. None of the cops engaged the couple.

This went on for quite some time. More cops came. They put up a red-band partition—like one you’d see in an airport waiting line—to keep space between the angry couple and the crowd. Another cop began filming the crowd, myself likely included, with a hand-cam.

Like others, I began to get bored. “Why don’t the cops just take the couple away?” I asked the hotel worker. “They don’t dare do that. There’s too many people here,” she said. At one point, the couple spotted a young man with a television camera. The wife ran after him, trying to get him to come back and film the scene. The young man wasn’t interested.

Back turned, carrying his camera, he walked down Zhongshan Road away from the scene. As did I, not long after.

When I came back after lunch about 30 minutes later, everyone—the couple, the cops and the crowd—was gone. It was an everyday occurrence in China, where cops and local officials enjoy immunity, courts are in the Chinese Communist Party’s pocket, and the media’s too afraid to roll film.

And so, in sleek, modern Xiamen of 2008 -- as in a Chinese village hundreds of years ago, I imagined -- a desperate couple with little left to lose takes their appeal directly to the people. There was no-one else for them to turn to.

Of course, there was no way for me, or the crowd, to evaluate this particular couple’s claims.

Regardless, there’s a larger point. The biggest -- and perhaps fatal -- flaw with Chinese Communist Party rule is not a lack of electoral democracy. Rather, it’s the absence of the rule of law. More specifically, it’s the systemic injustice of a nation whose government wields the “law” like a club, to stifle dissent and silence its critics.

The crowd I saw in Xiamen was relatively mild-mannered. They dispersed quickly. But across China, crowds like this are pouncing on some injustice or another, and often turning violent. What such crowds usually demand is not elections, but justice. And since China’s sham courts provide little help, the result is often mob justice.

Sometimes mob justice is effective -— as in Xiamen itself last year, where street protests organized by text message forced local officials to scotch plans for a chemical plant near a residential area. But surely this isn’t a sustainable way for China’s leaders to address grievances.

Does this mean China must embrace democracy, or collapse?

No. China can and likely will remain undemocratic; perhaps, over the next few decades, becoming something akin to a Singapore of 1.4 billion people.

The real question is, how long will the Chinese people tolerate a government that’s above the law?

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Where are the protests?

The Key to Cross-Strait Détente

by Jonathan Adams
Far Eastern Economic Review, Posted July 6, 2007

Given the dramatic extent of the KMT’s current opening to China under Taiwan’s new President Ma Ying-jeou, you might expect Taiwan’s scrappy pro-independence party to take to the streets in protest.

After all, the Ma government’s measures look like a unificationist’s to-do list. These include: cross-Strait weekend charter flights, which began on July 4; an expansion of Chinese tourists allowed in to 3,000 per day (that’s one million per year); renminbi-Taiwan dollar exchange in Taiwan; a relaxation of restrictions on China-bound investment by Taiwan firms; a relaxation on restrictions on Chinese investment in Taiwanese banks, funds and real estate; a welcome to Xinhua and People’s Daily reporters banned from Taiwan by the previous DPP government; and a welcome mat for mainland pop stars and performers, previously tightly restricted.

All this amounts to a dramatic step toward normalization of economic and cultural relations.

Many believe, of course, that’s also the first step toward Beijing’s long-term goal: political unification.

But rather than strongly oppose all of this, the DPP is laying low. It’s raising quibbles (Mr. Ma’s giving up too much too soon at the negotiating table) while agreeing in principle with the normalization process.

In fact, in some cases the DPP is actually complaining the new links don’t go far enough. The DPP mayor of Kaohsiung has griped that too few cross-Strait charter flights will be coming to her city. And party headquarters is peeved that the flights deal doesn’t yet include cross-Strait cargo flights, something high on Taiwan businesses’ wish list.

The DPP’s stance suggests two points worth raising:

First, it’s evidence of the broad consensus in Taiwan supporting closer economic links—but not political unification—with the mainland. Despite the supposed polarization between the independence-leaning DPP and unification-leaning KMT, moderates in both parties are in fundamental agreement on this direction.

That consensus isn’t recent. In fact, it has been apparent since the DPP’s Chen Shui-bian took power in 2000. Far from being a protectionist hardliner determined to throttle business opportunities, Mr. Chen actually began a process of economic normalization with the mainland that Mr. Ma is only continuing.

Cross-Strait trade and investment boomed dramatically under Mr. Chen, and his government in 2001 launched the “three mini-links” between Taiwan’s Kinmen and Matsu islands and the mainland as a first step toward broader transport links. And the Chen government spent years negotiating a deal on cross-Strait charter flights and tourists—the deal Beijing only inked when Mr. Ma came into office.

In his heart of hearts, Mr. Chen may indeed cherish the long-term goal of independence and Mr. Ma of unification—only they know for sure. But as a matter of official government policy, their stands are identical: No independence, no unification, preserve the political status quo, but expand cross-Strait economic ties.

The only difference between the two governments is on the pace and scope of normalization—Mr. Ma is willing to move more quickly (the DPP says too quickly) on a raft of issues. But a more significant difference is Beijing’s attitude.

That brings us to the second point. Despite the similarity in Messrs. Chen and Ma’s official policy positions, from Beijing’s standpoint there are large symbolic differences. Exhibit A is Ma’s embrace of the “1992 Consensus”—a flimsy formula, never written down or formalized, to agree on “one China” while fudging its meaning. Mr. Chen’s DPP rejects that formula as a downgrade of Taiwan’s sovereignty.

Exhibit B is Mr. Ma’s stress on Taiwan’s essential “Chinese-ness”—such as his description of Taiwan and China as parts of the “zhonghua minzu” (the Chinese peoples or nation). Mr. Chen never rejected that cultural link outright, but instead stressed Taiwan’s distinct culture and history in order to bolster a budding sense of Taiwan identity and pride.

To China, Mr. Ma’s shift in emphasis is critical. It suggests cross-Strait solidarity rather than separation. Here, Beijing and the KMT are allied in a culture war against the DPP—one waged through language and symbols—about what it means to be Taiwanese.

That, and not any dramatic policy shift by Mr. Ma’s government, is why cross-Strait economic relations are advancing so quickly under a KMT government.

But this, of course, could put China in a very difficult position in the future. What happens when the DPP inevitably retakes power in four, eight or 12 years? Presumably, it will continue to back economic normalization, while rejecting the “1992 consensus” and downplaying cultural and historical cross-Strait ties.

Will Beijing call back its tourists, withdraw its investment, and cancel the cross-Strait flights?

China is responding to the symbols and language used by specific politicians and parties in Taiwan, rather than engaging the official policy produced by Taiwan’s democratic government. For now, that’s producing results acceptable to all parties.

But as the basis for long-term cross-Strait stability, it’s a shaky foundation indeed.

Mr. Adams is a freelance journalist in Taiwan.

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DPP supporter actively protests former KMT chairman Lien Chan's 2005 trip to China

Much ado about Ms. Lai

Ma's pick for the Mainland Affairs Council may be trouble -- but not because of her supposed independence bent

by Jonathan Adams
Posted May 8, 2007

Taipei—Last week saw an uproar here over incoming President Ma Ying-jeou’s pick of a “pro-independence” figure to head Taiwan’s Mainland Affairs Council.

One Kuomintang legislator likened Mr. Ma’s pick to offering “pork to Muslims,” saying China would be outraged. The stock market tumbled. And the airwaves and headlines screamed that Mr. Ma, who will take office on May 20, may have written a “bad check”—in other words, that he’d made promises on cross-Strait improvements that he now can’t deliver on.

All this was an over-reaction, to say the least.

Certainly, Mr. Ma’s pick—Ms. Lai Shin-yuan, a former legislator from what used to be a hard-line pro-independence party—was surprising. He could have chosen a more China-friendly figure to head Mainland Affairs.

But one person alone can’t derail Mr. Ma’s plans for cross-Strait progress. If Ms. Lai tries to, she’ll quickly be shown the door. Cross-Strait policy will be formulated by Mr. Ma and his National Security Council (led by Su Chi); Ms. Lai’s job will be to implement it.

As for China, its interest in stabilizing the cross-Strait situation should outweigh small “speed bumps” like this one. With its opaque decision-making process, observers are constantly ascribing prickly emotions to the leadership in Beijing, as if it were a hypersensitive teenager.

In fact, by all indications, Beijing is now taking a far more rational, cool-headed approach to Taiwan than ever before. More evidence of that came with the extremely low-key response to Ms. Lai’s appointment from China’s Taiwan Affairs Office.

Mr. Ma’s pick is also a good sign for those worried he’ll move too close to China. It shows he’s willing to defy and take flak from the hardliners in his own party, in order to seek domestic consensus on his cross-Strait policies. That’s a demonstration of his commitment to Taiwan’s democracy.

Meanwhile, Ms. Lai’s presumed fire-breathing, pro-independence ideology is exaggerated. She has now said repeatedly she fully agrees with Mr. Ma’s cross-Strait stance. That policy, in essence, is to shelve the independence-unification debate and make progress with China on practical economic issues.

Here’s what she wrote in a February 2007 Taipei Times editorial: “The blue-green struggle over the moot point of ‘unification versus independence’ obscures the real problems concerning people’s daily lives. Taiwan is a sovereign and independent nation. There is nothing to argue about. It’s time to move on and leave this false debate behind.”

There are some legitimate reasons for concern about the pick, but not the ones that have gotten the most airtime. It’s another line from Ms. Lai’s editorial that suggests an incompatibility with Mr. Ma’s agenda: “Our historic mission at present should be to speak up for all the working people who have been oppressed . . . and fight for their interests.”

Ms. Lai’s social justice and protectionist bent is abundantly evident in her legislative track record. By contrast, many of Mr. Ma’s cross-Strait policies are decidedly pro-business and pro-investor. This may be the real, irreconcilable difference between her and Mr. Ma—not the exaggerated independence issue.

One key test: Will Ms. Lai go along with Mr. Ma’s proposal to lift caps on China-bound investment when her party has adamantly opposed doing so in the past?

Last week’s furor also raises troubling questions about how Mr. Ma will govern. He reportedly consulted only a few people before making the decision to appoint Ms. Lai, so that some top KMT officials first heard the news through media reports. If that’s true, it’s a worrisome replay of President Chen Shui-bian’s brand of top-down, unpredictable decision-making.

Lastly, the media firestorm illustrates a key challenge. Everything President Ma does will be scrutinized under the harsh glare of Asia’s freest media (according to the latest Freedom House poll). He’ll need a smart media strategy to keep everyone in his government on the same page—and not talking to each other via the sensationalist media.

That, again, would repeat the same mistakes made by Mr. Chen’s outgoing government.

Mr. Adams is a freelance journalist in Taiwan.

Original site

Missile malarkey

Missile talk more symbolism than substance

by Jonathan Adams
Far East Economic Review, April 16, 2008

Taipei — A rumor that recently made the rounds here was that China may withdraw half of its missiles aimed at Taiwan before Ma Ying-jeou’s May 20 inauguration, as a goodwill gesture to the incoming administration. President-elect Ma himself has mentioned the missiles repeatedly, saying that a condition for cross-Strait peace talks is that Beijing must first withdraw them.

That seems at first glance like raising a deliberately high bar, possibly with the aim of ensuring that peace talks—which would be highly controversial in Taiwan—never happen at all. After all, it’s hard to imagine Beijing removing what it sees as a major part of its deterrent against Taiwan independence.

But according to analysts I spoke to last week, the whole missile issue is misleading. If the much-hyped coming cross-Strait detente doesn’t break down before then, we can expect a lot of symbolism, but little substance, in negotiations over the missiles.

First, the numbers. According to the Taiwan government’s latest count, Beijing has 1,400 tactical ballistic missiles pointed at Taiwan from the southern Chinese coast, as well as cruise missiles. That’s up from just about 200 missiles when pro-independence Chen Shui-bian took office in 2000.

Security expert and former Taiwan defense official Lin Chong-Pin explains that the missiles’ purpose is fourfold. The first is psychological: they are what he calls a “dangling sword over independence advocates in Taiwan.” China itself has insisted the missiles are aimed only at diehard separatists, not the vast majority of peace-loving Taiwan “compatriots.”

Of course, this raises the question of how Chinese missiles will distinguish between friend and foe as they tear through the sky above the Strait.

The separatist-seeking missiles have other uses, says Mr. Lin. They’re a bargaining chip in cross-Strait negotiations, like the ones Mr. Ma could start with Beijing. Third, they’re an investment—if peace comes to the Strait they can be resold to other countries.

Finally, there’s another, tactical purpose: to halt the advance of incoming U.S. aircraft carrier groups that would presumably rush to Taiwan’s aid in a crisis. Mr. Lin cites Chinese military strategists on how the increasingly accurate and longer-range missiles could fly over the island and create a “wall of fire” east of Taiwan to force carrier groups to withdraw.

Fortunately, such scenarios are extremely unlikely. In the next few years, it’s the missiles’ role as a bargaining chip that could be the most important.

Mr. Lin says Mr. Ma’s demand that China withdraw its missiles before peace talks can begin was just an opening negotiating position. The missile issue is not necessarily that big an obstacle, he said. “Ma had good reason to up the ante—you never start at a low point, you start as high as you can go,” said Mr. Lin. “I don’t think the high demand by Ma will be an obstacle to Beijing and Taipei talking.”

One key is that Mr. Ma is talking about “withdrawing” missiles, not dismantling them. As Taiwan’s defense minister has emphasized, the missiles are on mobile launch vehicles that can easily be moved. Even if they were rolled inland, they could be moved back in a crisis. A "withdrawal" would therefore be mostly symbolic, with China displaying a less aggressive military posture and winning public-relations points in the process.

Still, there’s another hurdle. Chu Shulong, of Beijing’s Tsinghua University, says he thinks Beijing will likely raise the issue of U.S. arms sales to the island if Mr. Ma pushes for a missile rollback.

"The mainland side will link Ma’s demand for a withdrawal of missiles targeted at Taiwan to Taiwan's purchase of arms,” said Mr. Chu. Beijing could demand, for example, that Taiwan halt at least some arms purchases in return for a partial missile pullback.

The U.S. is now Taiwan’s sole supplier of major weapons systems. There are four major U.S. systems currently in the pipeline: advanced Patriot missile defense batteries, sub-hunting and patrol aircraft, submarines, and F-16 fighter jets. Taiwan has agreed to buy the sub-hunting planes, and Ma supports the F-16s purchase (Washington is currently mulling Taiwan's request for the planes.)

Mr. Ma doesn’t seem likely to use the F-16s as a bargaining chip—he’s said himself that they’re more urgent than the submarine purchase. Analysts agree. "Ma’s military advisers will tell him we clearly need F-16s to maintain our qualitative edge over the PRC,” said Mr. Lin in Taipei. As China’s military buildup accelerates, qualitative air superiority is one of Taiwan’s few remaining advantages.

But Mr. Ma is noncommittal on the submarines, which are more controversial in Taiwan because many believe they’re too expensive. Here, there could be an opening for a symbolic agreement with Beijing. Steve Tsang, head of Oxford University’s Taiwan Studies Program, described one possibility.

"If it happens, the linking of the withdrawal of missiles and arms sales [by the U.S. to Taiwan] will be a much more imaginative formula,” said Mr. Tsang. "Both will be purely symbolic. Taiwan will give up purchases of certain weapon systems from the U.S. that Taiwan can’t afford anyway. And China’s withdrawal of missiles from coastal regions means pulling them back a few hundred miles. It doesn't mean they’ll be destroyed. Whether they're located in Fujian or Sichuan makes very little difference—they can be moved back to Fujian in a matter of days.”

Of course, Mr. Tsang and others note that even if the two sides reach that or a similar agreement, it would only get them to the negotiating table. “Real negotiations for a peace treaty will prove to be much more difficult,” said Mr. Tsang.

So difficult, in fact, that most observers see a peace deal as pie in the sky. Political peace talks will likely be postponed, as China and Taiwan instead focus on practical economic issues. And if Mr. Ma decides, for whatever reason, to avoid peace talks altogether, the missiles are a convenient excuse.

Original site

Bad eggs and pretty fruit

March 21st, 2008
Far Eastern Economic Review
Taiwan Election Notebook

I went to Taichung to see candidate Ma Ying-jeou “sao jie” (literally, “sweep the streets” - i.e. stump for Saturday’s election). But I got there late and never caught up with him.

Hsieh may be feeling the same come Saturday night - if all the analysts I spoke to today are right, that is. They say Tibet, Wen Jiabao’s remarks Tuesday and the “one China market” scare campaign have all helped Hsieh - but it won’t be enough for him to catch Ma.

Having missed Ma, I made the best of it and got some “man on the street” quotes from Taichung residents. I was especially keen to take the city’s temperature, as central Taiwan is up for grabs in the island’s elections. Northern Taiwan is KMT-held, southern Taiwan is pro-DPP. But Taichung - along with Chiayi, Changhua and Yunlin counties - are more evenly split.

I can hardly say I got a scientific sample, but it was an entertaining visit nonetheless.

First there was the obligatory cab driver chat, on the way into town from the high-speed rail. The cab driver quote is so cliched that it should be banned from journalism. But this guy, Huang Ching-fu, was straight out of DPP central casting.

“The KMT came to Taiwan and killed many people,” said Huang. “They stole lots of money from the Taiwanese people.”

But wasn’t that all a long time ago? Isn’t today’s KMT different?

“No, everything they say is dishonest. They’re bad eggs ("huai dan”),” said Huang firmly.

“Taiwan wants to buy weapons from the US, but the KMT doesn’t want to buy them.”

But wouldn’t there be some good things about a Ma presidency?

“If Ma becomes president, there’s no bright side,” scoffs Huang. “Nothing good can come from doing business with the communists.”

He petered off into a rant on poor-quality Chinese products, then the kicker: “I don’t want Taiwan to be a part of China.”

Next time you want to know why the DPP gets so many votes, talk to Huang. The flip side of the DPP’s patriotic love of Taiwan is deeply rooted anti-KMT hatred; I’ve often thought the second may be more important to the party’s support.

Others were more charitable to Ma. “The DPP just turns everything around during elections,” said fruit seller Chung Rui-sen, 47. “They cheat uneducated people.” He’s not moved, for example, by Hsieh’s scare tactic that Ma would let in a flood of cheap Chinese fruit and vegetables.

“This is impossible,” said Chung. Even if that did happen, he says, the quality of Chinese fruit is poor. “Look around, Taiwan’s fruit is so pretty,” said Chung, pointing at his bananas, apples and grapes. “If mainland fruit comes here, no one would dare eat it.”

What about Hsieh’s claim that Ma will let Chinese workers flood into Taiwan, stealing jobs? “That won’t happen,” said a betel-nut seller down the street, as his three-month old baby slept next to him. “I’m not worried.”

Flower-shop owner Chen Kai-lun, 44, also supports Ma. “He’s cleaner,” said Chen, referring to corruption scandals that have dogged the DPP.

The tally: vendors for Ma (3); taxi-drivers for Hsieh (1).

Original site

When bozos attack

Slagging reaches new low in Taiwan campaigns

Jonathan Adams

Taiwan Election Notebook, March 18, 2008

Far Eastern Economic Review

Last week it was a group of loose-cannon Kuomintang legislators, who barged into the campaign office of Frank Hsieh, the Democratic Progressive Party candidate. An embarrassed KMT candidate Ma Ying-jeou apologized for the intrusion, as did the legislators. Their ringleader even said tearfully he would “consider killing himself” if his actions led to Mr. Ma losing the election.

Today, the media went crazy over comments at a pro-Hsieh rally yesterday by a DPP education official. The official used unprintable slang to insult Mr. Ma’s deceased father. As one newscaster put it, “both blue and green [referring to KMT and DPP camps] agreed he went too far.”

Frank Hsieh apologized to Mr. Ma for the comments, while trying to distance his campaign from the official, Chuang Kuo-jung. Mr. Chuang resigned over the remarks late Sunday, according to local media. But all day, TV stations continued to replay the offensive footage, as analysts picked apart the impact on the election.

It wasn’t the first time the official in question had slagged Mr. Ma. In fact, Mr. Chuang became notorious in December for his off-color remarks while defending the government’s decision to change the signage on the former “Chiang Kai-shek Memorial Hall,” a Taipei landmark, to “Taiwan Democracy Memorial Hall.”

While verbally jousting with the KMT over the change, he called Ma “sissy” (niang) and a “wimp” (xiao nao nao). He said that another KMT official so tightly “embraced” Chiang Kai-shek that he seemed gay.

Many Taiwanese criticized him for his intemperance; some even blamed him for contributing to the DPP’s thumping defeat in January’s legislative election. But he became an overnight hero for hardline KMT-haters; his fans in the DPP legislative caucus even brought him flowers. It remains to be seen how much Mr. Chuang’s comments will hurt Mr. Hsieh — they may serve to remind many fatigued voters of their disgust with DPP rule.

But the flap highlighted two points on this election. One is that both parties continue to have trouble reining in hardline elements in their own camps, a worrisome sign as Taiwan attempts to move toward a more stable two-party system.

The second point is more encouraging: Both candidates immediately disowned the remarks, highlighting their insistence on taking a more moderate road and themselves resisting extremism. That, at least, is an encouraging sign for Taiwan’s young democracy.

Original site

Closing the gap

Fear-mongering on the campaign trail

Taiwan Election Notebook, March 17

Far Eastern Economic Review

After a long buildup, Taiwan’s presidential race is finally heating up.

For weeks the KMT’s Ma Ying-jeou has been far ahead of rival Frank Hsieh in media polls, in what looked like a highly lopsided race. Now, with one week to go before the election, it appears Hsieh is catching up.

Two Taiwanese media friends of mine said Hsieh’s ads and negative campaign were making a difference. Hsieh’s camp appears to have found a chink in Ma’s armor, by hammering away at what it calls Ma’s “one China market” policy. The proposal, long championed by Ma’s running mate Vincent Siew, would create a cross-Strait common market, binding the two sides’ economies closer together in a trade pact.

But Hsieh’s pro-independence Democratic Progressive Party is using the “one China market” theme to raise fears of Chinese competition. Namely, he’s raising the specter of a flood of Chinese agricultural imports and Chinese competition for jobs. The scare tactics seem to be having an effect–one of my media friends said she was shocked to overhear two Taipei roadworkers discussing the “one China market” as she passed by.

Meanwhile, Ma’s camp has been distracted by the fallout from an incident last Wednesday night. Four KMT lawmakers barged into Hsieh’s campaign headquarters with the finance minister in tow, accusing Hsieh of getting a sweetheart deal on his office rent. The scene spiraled out of control as scores of outraged Hsieh supporters protested, had shoving matches with police and smashed a police car outside Hsieh’s campaign office.

For the last two days, the KMT legislators have been apologizing for sparking the incident; Ma has apologized to the public on behalf of his party.

The Hsieh camp has pounced on this as well. It’s cast the KMT lawmakers’ barge-in as a taste of what’s in store if the KMT controlled both the legislature (where it now has a large majority, as of January) and the presidency. The subtext: voting for Ma would give the KMT so much power it would be akin to a return to the bad old days of KMT authoritarian rule.

In short, Hsieh’s campaign has seized on fear-mongering in a last-ditch bid to come back. That’s a time-honored DPP tool that’s especially potent when combined with positive emotional appeals to Taiwan-first patriotism.

The question, of course, is will it work? The March 22 vote has been hyped as one in which economic concerns may finally trump Taiwan identity. Ma’s promise of more economic engagement with China holds broad appeal–indeed, Hsieh’s platform is actual quite similar in substance (more cross-Strait flights; more Chinese tourists allowed in Taiwan; a relaxation of cross-Strait investment going both ways).

But now, Hsieh is cleverly trying to turn Ma’s strength (a vision of economic openness) into a weakness. The line of attack is straight from the protectionist playbook familiar in many other democracies. Most Taiwanese think more economic openness would boost incomes and livelihoods; but now Hsieh wants them to believe that too much openness–which Ma would promote–could actually have the opposite effect.

There’s no way to know what impact all this is having. The TV media reported last Tuesday a DPP poll showing Ma at 45.8% and Hsieh at 39.7%, but the Hsieh campaign would not confirm that.

In an email to me, it noted only that it’s illegal to release polls numbers in the 10 days before election day.

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Judgment Day

China's new labor law is sealing the end of its heyday as a cut-rate production platform

by Jonathan Adams and Ko Shu-ling
Far Eastern Economic Review, March 2008

At a Taiwanese-owned stainless-steel factory in Dongguan, China, the ax just fell.

Interviewed by phone, the firm’s president—who did not want him or his company to be identified by name—says he just laid off 10 workers from his 100-strong workforce, and wouldn’t rule out more layoffs. The cuts are a bid to soften the impact of a new Chinese labor law that took effect Jan. 1. “The law is hurting business owners a lot, and many are worried,” explains the businessman. “Taiwanese firms must seriously consider lowering personnel costs if they want to stay in business.”

The new law has sent shock waves through the Taiwan business community in mainland China. Downsizing is one survival strategy. The law mandates contracts for all employees, open-ended contracts for long-term employees, and health insurance and other benefits. Unlike past labor laws, it provides more channels for workers to bring complaints against employers.

The net effect, according to businesses, analysts and government officials, is a fundamental shift in China’s production landscape. “The end of rock-bottom Chinese labor is near,” says Cheng Tun-jen, an expert on cross-strait economics at the College of William and Mary. With that comes the end of China as the world’s cut-rate factory.

But if Judgment Day is nigh, not all firms will get bad news. The damned, say observers, are smaller, labor-intensive Taiwan-and Hong Kong-owned manufacturers in southern cities like Dongguan, and their South Korean peers clustered in cities like Qingdao. Such firms were pioneers in establishing coastal China as a cheap production platform for export. But the new labor law is the latest in a series of blows that have pummeled razor-thin margins.

Labor shortages became a problem several years ago in some coastal areas, driving up market wages. Material costs have soared. The yuan has appreciated by some 15% against the dollar since July 2005, making exports more dear. Last summer the Chinese government scrapped or reduced a rebate on a 17% value-added tax for some exports. And as of January this year, China raised taxes on foreign firms’ earnings to the new, uniform rate of 25% for both domestic and foreign firms.

Can’t firms simply raise prices to cope? After all, they’ve done so since 2003 in response to rising wages, as UBS economist Jonathan Anderson recently noted. But he says the days of resorting to price hikes are “coming to a close” because of slowing demand for Chinese products, and the appreciation of the yuan.

Facing that dreary picture, some firms are throwing in the towel. The most dramatic example may be South Korean firms. Some owners of failed companies have fled China in the night to avoid paying debts and back wages, a practice the South Korean media calls “night flights.” A South Korean business association official in Qingdao told the Chosun Ilbo that an estimated 20% of the 5,000 South Korean firms in that city will close down by August due to the harsh new business climate.

The Federation of Hong Kong Industries estimates that 10% of the 60,000 to 70,000 Hong Hong-owned factories in the Pearl River Delta will close this year, and some 1,000 shoe companies in the area have already closed, according to a recent Wall Street Journal report. Numbers for Taiwan firms are also bleak. Chang Hen-won, honorary chairman of the Taiwan Merchant Association in Dongguan, estimates that at least 200 Dongguan-based Taiwanese business owners have left. More are expected to leave as the effects of the labor law and other changes sink in later this year.

The End of an Era

Taiwan firms are typical of low-end manufacturers who rushed into China but are now eyeing the exits. They started moving across the Taiwan Strait in the late 1980s to make shoes, textiles, toys and cheap electronics; that flight turned into an exodus after Taiwan’s government officially allowed China-bound investment in 1991 as cross-Strait relations eased. For such firms, setting up shop in the mainland was a far easier business option than expensive upgrades or paying rising wages at home.

The effect was a hollowing out of the island’s manufacturing sector. Annual employment in Taiwan’s fabled export processing zones dipped sharply to 50,000 in 1994 from 90,000 in 1987. Politicians bemoaned the flight of Taiwanese industry to the mainland, and warned it was making the island too economically dependent on its bitter political rival across the Strait.

Now, economic forces and policy choices in the mainland have begun to blunt that political threat. “There’s no need for the government to have a policy of stopping Taiwan businesses from going to China, because industrial policy is changing there,” says Gordon Sun of the Taiwan Institute of Economic Research in an interview last year. “Labor and land costs are bigger, so naturally [Taiwan businesses] will go somewhere else. Dependency won’t be an issue because now China is changing.”

Many Taiwan firms are seeking greener pastures, moving production to places like Vietnam, the new low-cost platform of choice. They’re also eyeing western China, where Beijing has left some incentives in place to lure foreign money to the poorer hinterland. A Chinese Commerce Ministry official recently announced that China would help Taiwanese firms struggling with higher costs by offering loans and other incentives if they expand inland.

Some have already done so: Contract electronics giant Hon Hai, for example, has opened two “mega sites” for production in inland areas in the past three months. And inland industrial hubs like Chongqing have already attracted investment from Taiwanese firms like chemicals giant Formosa Plastics and memory chip maker Promos.

Meanwhile, the Taiwan government has actively touted alternatives to China. The latest candidate: India. The economics ministry recently announced a public-private partnership to develop a 1,200-hectare industrial zone in Andhra Pradesh state. They are specifically targeting investment from Taiwan firms hit by rising costs in China.

Still, India has far to go in becoming an investment target on par with China: Taiwan statistics showed $400 million invested by Taiwan manufacturers as of last July, compared to cumulative Taiwanese investment in China that by one government estimate has reached $150 billion.

Taiwan’s government is pushing another option: come home. A decade or two after first moving into mainland, some Taiwan businessmen are responding to that call. They’re taking advantage of free or slashed rent at Taiwan’s industrial parks and other incentives.

Berton Chiu, director general of the Department of Investment Services under Taiwan’s Ministry of Economic Affairs, says that the Taiwan government in September 2006 launched a program to welcome back Taiwanese firms, after hearing complaints about the mainland’s harsher business climate. Since then, 70 mainland-based firms have moved back to Taiwan or plan to. “Compared with 15 or 20 years ago, mainland China isn’t so good for some industries.” says Mr. Chiu. “They feel they’re not as welcome there as before.”

Steven Tsai is one Taiwanese businessman who has come back. Ten years ago he moved to Dongguan, where he started export businesses in porcelain, hardware, souvenirs, computer parts and cell-phone panels. His businesses now employ some 1,000 workers in China. But for Mr. Tsai, the mainland has lost its investment allure. He estimates his costs rose 10% from the new labor law alone and also cites the rising yuan, higher taxes and new environmental regulations as burdens.

While China was getting increasingly forbidding, Taiwan’s government offered him incentives to return. So in September last year, he moved back to Taiwan with his wife and family. He’s not getting rid of his mainland factories, but he has decided there’s very little room for expansion. Instead, he’s invested $90,000 in an “Ocean World” development back in Ilan County on Taiwan’s northeast coast. He’s bullish on the “Ocean World” project because it’s near a new tunnel that opened in 2006, sharply reducing travel time from the capital Taipei, and he’s mulling more investments nearby in hotels or electronics.

Uneven impact

But not all business owners are feeling as much pain in China as Mr. Tsai. Taipei-based ABN AMRO analyst Steven Tseng says in a phone interview that the big Taiwanese contract electronics manufacturers he covers already offer competitive wages and benefits similar to those now mandated. Such firms are clustered in places like the Kunshan special zone outside Shanghai. In the long term, he says, the law could even benefit big firms like Hon Hai and Wistron as smaller competitors get “shaken out.”

Meanwhile, such firms are more likely to pursue a hedging strategy rather than leave. “They may not necessarily move out of China, but clearly they’ll diversify their concentration of risk,” says Mr. Tseng. “They’ll rely a lot on China, but they’re also looking elsewhere—Vietnam, Brazil, Mexico and Eastern Europe.”

Take Quanta Computer, the world’s biggest contract laptop maker. For Quanta, labor costs represent only some 2% of total production costs, according to a company spokesperson, who asks not to be identified by name. The company’s factories are near Shanghai, where wages are the highest in China.

The new law mandates about 840 yuan per month wages in the Shanghai area; Quanta was already paying roughly 800 yuan per month for such workers, according to a company spokesperson. (wages of 500 to 600 yuan are more typical in southern China.) That’s greatly lessened the impact of the new labor law, though Quanta’s suppliers are feeling the pinch.

Quanta said in January that it too is considering increasing production in Vietnam and other locations (Hon Hai started production in Vietnam this summer and has said it will boost investment to $5 billion). “We’ll still expand in China, but we’re keeping our eye on other alternatives,” the Quanta spokesperson says. Vietnam has one major sweetener for Quanta and others: its tax policy. While China has now hiked taxes on corporate earnings for foreign firms to 25%, Vietnam is sharply reducing taxes.

What the Future Holds

The uneven effects of higher China costs point to a longer-term trend. China’s new labor law will likely foreshadow a structural shift in China-bound investment. Flows to low-end manufacturing will dwindle, while investment in high-end manufacturing like Quanta Computer’s, and in services, will rise. In fact, that’s China’s aim, observers say: Beijing is encouraging foreign investment in value-added industries that bring China expertise, technology and better jobs, while slowing inflows of investment into low-end sectors.

National Chengchi University economist Lin Chu-chia says labor-intensive Taiwanese manufacturers who are forced out will likely be replaced by a new wave of investment by Taiwanese retail chains, pharmaceutical firms and high-tech services. “China could change from the world’s factory to the world’s market,” says Mr. Lin.

That won’t happen overnight, of course. And it’s still not clear whether the departure of low-end Taiwanese firms will be a trickle or a stampede. “It will take six months to a year to see how much impact the law will really have,” says Andrew Yeh, chairman of the Taiwan Merchant Association in Dongguan. In the meantime, Taiwanese managers are waiting nervously to see just how bad business will get.

Wu Chin-ching is one. His firms, including Lung Tai Chemical, have exported processed chemical products from the mainland since 1993. He says in a phone interview that he’s had to hike his 600 workers’ wages an average of 70% because of the new law. But the real pain has come from the yuan’s appreciation and higher taxes. Altogether, he estimates production costs have gone up 30%, some of which he’s had to pass on to customers.

As a result, he’s set to shut down any of his factories still bleeding money by July. He doesn’t think he’ll move to Vietnam or inland China, because he would have difficulty finding the materials he needs there, including calcium carbonate and clay. For Mr. Wu, there’s nothing to do but dig in.

“I can grit my teeth and keep my business alive,” says Mr. Wu. “But I’m more worried about my clients, who may find it difficult to cope with rising prices.”

Original site

Taiwan: the next Kosovo?

Lesson from Kosovo: recognition is the key

by Jonathan Adams

FEER Forum, Feb. 20, 2008

Kosovo’s declaration of independence has opened up a new front in the long-running diplomatic battle between China and Taiwan. It also underscores how Taiwan’s key problem is one of recognition, not whether it should formalize its de facto independence.

China opposes Kosovo’s independence, fearing it could set a dangerous precedent for separatist movements world-wide, but especially in Tibet, Xinjiang and Taiwan. That left Taiwan an opening to cozy up to a possible new diplomatic ally. On Wednesday, Taipei announced it had formally recognized the new European state. China’s Foreign Ministry quickly responded with predictable pique: “It is known to all that as a part of China, Taiwan has no right or eligibility to give the so-called ‘recognition’ (to Kosovo).”

So goes the latest cross-strait war of words. For decades Taiwan and China have engaged in a global diplomatic game of “go” to woo allies to their side with generous aid. Taiwan has only 23 left, mostly obscure, poor countries—down from 30 allies in 2000. Now, outspent by China, Taipei hopes to pick up a new ally in the heart of Europe. And with China refusing to recognize Kosovo, this time it can’t fight back.

But Antonio Chiang, a former member of Taiwan’s National Security Council, told me that Taiwan may not be willing to shell out big bucks to win Kosovo’s heart. That’s because last time it played that game in Eastern Europe it got burned. After Macedonia became independent in 1991 in the break-up of the former Yugoslavia, Taiwan wooed it steadily with aid. The campaign appeared to pay off in 1999, when Macedonia recognized Taiwan—only to backfire two years later when a new government ditched Taiwan and switched ties back to Beijing.

“That was a lesson for us,” said Mr. Chiang. “At that time, we were encouraged by the Americans to give aid [to Macedonia], because it was a stepping stone for us into the EU market. European banks were also involved, and it seemed reasonable. But then it failed badly.”

Still, Kosovo’s move has set a long-term precedent for Taiwan. The pro-independence party’s vice presidential candidate said on Monday the island hopes to one day follow Kosovo’s example.

Actually, Kosovo and Taiwan’s situation is already comparable. Both style themselves as sovereign and independent states. Taiwan may have stopped short of a Kosovo-style formal declaration ratified by its legislature. But it is already formally independent of the People’s Republic of China in the sense that the island governs itself under a separate Republic of China constitution that’s the foundation for a 97-year-old government structure. As the island’s pro-independence party has said time and again, there is no need to declare independence, because Taiwan is already independent.

The key difference between the two “renegade” states is recognition. In Kosovo’s case the world is more evenly divided over recognizing the self-declared state, with the U.S. and some major European powers supporting it and Russia, China and others opposed. But Taiwan lacks recognition from any major powers. Taiwan’s isolation is borne of that lack of global political support—not from a failure to formalize its independence. In fact, a formal Taiwanese declaration of independence would be unlikely to win it more recognition, though it could well spark a war with China.

The confusion is compounded by the way Taiwanese themselves talk about independence. Actually, what most Taiwanese mean by independence is the creation of a new “Republic of Taiwan,” complete with a new constitution, that would replace the current system imported from mainland China in the late 1940s. This is a dream long cherished by anti-Kuomintang democracy activists—but one that has very little public support.

If the self-governed island can’t win recognition under its current formal name, there’s no reason to think a “Republic of Taiwan” would have any more success.

Mr. Adams is a free-lance journalist based in Taipei.

Original site