Economists blame Taiwan protests on fears of Beijing 'annexation'

Fear a bigger factor than the contents of contentious trade pact itself, they say

PUBLISHED : Monday, 24 March, 2014, 7:38pm
UPDATED : Tuesday, 25 March, 2014, 6:04am

The student protests in Taiwan were triggered largely by fears over a loss of jobs and national security when a contentious trade pact opens the floodgates to mainlanders - and to Beijing's control, observers say.

The hush-hush nature of the negotiations on the free-trade agreement also stoked the protests, they said.

"Most of their fears seem to be less directly related to the economics of the pact," said Christopher Balding, an economics professor at the Peking University HSBC School of Business in Shenzhen. "There is this fear in Taiwan that they are being quietly annexed by China."

Another Beijing-based economist, Professor Jiong Gong of the University of International Business and Economics, agreed, saying opposition to the pact reflected an ideological stance against the mainland more than opposition to free trade itself.

"Taiwan has to be global to survive in this age of global competition," he said.

"People with strong ideological viewpoints may think differently. It's an unstoppable trend," he added.

A spokesman for Taiwan's Ministry of Economic Affairs, Woody Duh Tyzz-jiun, was forced to defend the pact in a lengthy statement on Sunday, with rebuttals to the most widely circulated critiques.

Duh stressed the trade deal would not lead to an increased influx of mainland migrants, but only of approved investors. The overall labour market would remain closed to mainland workers, he said.

The mainland is the island's largest trading partner. The pact would widen access, allowing mainland firms to invest in 64 service sectors in Taiwan, including advertising, retail and medical services.

Mainland businesses with more than US$200,000 in capital would be able to send workers to Taiwan on renewable visas.

"The pact allows for Chinese investors to bring white-collar managers, that may take away jobs of some Taiwanese," Gong said.

"But this will lead to more employment overall."

Gong noted that the mainland had allowed Taiwanese investment in the same sectors for years. "There has to be reciprocity at some point."

The economic ministry argued on Sunday that mainland companies still faced restrictions when entering telecommunications and real estate. It cited foreign-owned beauty salons in Taiwan which had not wiped out local competition.

National security would not be affected by mainland investment, the ministry said.

Taiwan service industry representatives were not convinced.

"If the trade service pact takes effect, it will result in cutthroat competition from the mainland, which will result in a chain reaction to seriously hurt the local service sectors," said Chu Po-lin, the chairman of the Chinese Herbal Medicine Business Union Association.

Balding said the protest movement had caught many people by surprise, both in speed and vociferousness.

Shih Hui-tzu, a research fellow at the Chung-hua Institution for Economic Research in Taipei, said the protesters were opposed less to the concept of free trade with the mainland itself than to the Kuomintang government's lack of proper consultation on the issue.

However, Taiwan's economic ministry denied that negotiations with the mainland occurred "within a black box", saying more than 100 meetings with professional associations and public hearings were held.

The pact builds on the 2010 Economic Co-operation Framework Agreement, which reduced trade barriers.





Mainland commitments: Increase the shareholding limit of securities houses to as much as 51 per cent. Allow Taiwanese financial institutions to invest in the mainland's capital market as qualified foreign institutional investors.

Taiwan commitments: Mainland securities and futures institutions with two years' experience in overseas markets (including Hong Kong and Macau) can apply to establish local offices. Gradually relax the investment limit of mainland qualified domestic institutional investors, perhaps doubling the limit from US$500 million to US$1 billion.


Mainland: Taiwanese banks can apply to establish rural banks and set up branches in Fujian . Taiwanese banks with licences to provide RMB transaction services can serve Taiwan-funded companies that have reinvested through a third location.

Taiwan: Relax requirements for mainland banks, allowing them to open branches or invest in local banks.

Creative, Cultural and Entertainment

Mainland: Shorten censoring period of Taiwanese online games to two months. Simplify censoring of Taiwanese books. Allow mainland to move cinema post-production to Taiwan.

Taiwan: Allow mainland investors to put money into theatres and music halls with a shareholding of less than 50 per cent. Allow mainland people to independently invest in parks, sports and other entertainment facilities, except for golf courses. Up to 15 mainland films can be screened in Taiwan.

Medical and Health

Taiwan: Mainland operators can set up joint venture hospitals in Taiwan, as long as each operating board includes no more than one-third non-Taiwan residents.


Mainland: Taiwanese e-commerce firms in Fujian are given stakes of up to 55 per cent, beyond existing commitments made to other trade partners.

Source: Taiwan's Ministry of Economic Affairs