September 26, 2000
The imminent entry of Taipei and Beijing into the World Trade Organization will help accelerate economic growth for both sides and reduce the likelihood of military confrontation, economists said on Tuesday. Lawrence Duke, vice-president and head of research at Citibank in Taipei, said he expected the WTO membership to add at least one percentage point to the gross domestic product (GDP) of Taiwan and China in the first year.
A 0.5 percentage point increase was projected for each year thereafter in the next four years. "WTO is a positive story just purely on the economic side," Duke told a news conference, citing lower inflationary pressure and double-digit export and import growth. Taiwan forecasts 2000 GDP to grow 6.57 percent. China is expected to record 7.5 to eight percent GDP growth in 2000, exceeding the government target of seven percent.
Huang Yiping, Salomon Smith Barney's vice-president of Asia-Pacific economic and market analysis, gave a similarly upbeat forecast, saying WTO membership would lift China's GDP by between 0.5 and two percentage points in the first five years. "From the perspective of emerging Asia, the top end of this range would be equivalent to adding an economy the size of Malaysia or Singapore to the region," Huang said.
Both analysts said Taiwan and rival China would need to break the current political impasse and engage in negotiations after they are admitted to the global trading club.
CHANCES OF WAR FADING
Taipei's recent initiative to allow mini links, or direct trade and shipping links between Taiwan-held offshore islands and a few selected mainland cities, from mid-December was seen as a positive step. The move still needs final approval from parliament. "We expect the mini links to be the start of a more rapid process of full integration - trade, investment, cultural and even political," said a Salomon Smith Barney research report.
"The deeper economic integration goes, the higher the cost of disruption and the lower the probability of conflict," it said. "Most likely, the possibility of war is already behind us." Taiwan has banned direct trade, transport and postal services with China since 1949 when the Nationalists were routed by the Communists in a civil war and fled into exile. President Chen Shui-bian, who swept to power in presidential elections in March, offered to ease the decades-old ban on direct trade and transport links with the island's giant neighbor before the end of the year if Beijing resumed fence-mending talks.
Beijing froze bilateral talks in July last year when then Taiwan president Lee Teng-hui sparked outrage over a demand for political parity by redefining bilateral ties as "special state-to-state". Taiwan entrepreneurs have poured about USD 40 billion into the mainland despite the direct investment ban and government worries that Taiwan's economy could become over-reliant on China and eventually be swamped by it.
Huang of Salomon Smith Barney nevertheless saw closer economic integration with China as a possible answer to the island's banking problems and traditional industries that are slowly losing their competitive edge. "The present banking problems, such as the rising non-performing loans, are largely related to the sunset industries, which should benefit hugely if they are able to tap into the mainland markets and competitive resources," Huang said.
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