Cross-Strait political dialogue: Something imminent?

l  Taiwan President Ma Ying-jeou recently reiterated that political relations between China and Taiwan are still distant. Once the economic and cultural relations have been built, moreover, it would be hard for Beijing to resort to "non-peaceful" means to resolve political differences across the Taiwan Strait.

l  Ma also stressed that "without a peaceful environment, prosperity would not be possible,” making sustained peace a precondition to continued exchanges between China and Taiwan.

l  Ma made the above statements as a way to silence critics who claimed that his cross-Strait policy was moving toward political integration with China.

l  Ma also wanted to emphasize the “1992 consensus” and the “Three nos” policy of “no independence, no unification, and no use of force” in managing cross-Strait relations.

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Promoting Taiwanese Products through Branding

l  Taiwan’s Ministry of Economic Affairs (MOEA) plans to launch a promotional program in November to facilitate the growth of the local handheld device industry by pushing for development of components like active-matrix organic light-emitting diode (AMOLED) and graphics processing units (GPUs).

l  The MOEA, in turn, hopes that Taiwan’s handheld device sector will generate about NT$1.28 trillion, or roughly US$43.8 billion, in production value in the next five years.

l  The MOEA's plan is to organize a partnership among the leaders of local high tech industries—including HTC (TaiEx 2498), Quanta Computers (2382), Compal Electronics (2324), Inventec (2356), Asustek Computers (2357), Acer Computers (2353), Chimei Innolux (3481), AU Optronics (2409), and MediaTek (2454)—to transform Taiwan into a handheld device innovation center and market locally made products globally through branding.

l  Faced with mounting pressure from South Korea, Taiwan needs to devote more resources into branding and marketing of products like smart handheld devices to stay competitive. Indeed, Taiwan should promote more branded products like HTC smartphone devices and Acer computers as the island makes the transition into an innovation center.

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China-Taiwan Investment Protection Agreement: Deal or no Deal?

l  Beijing and Taipei offered two different projections last week on when, and how, the mutual investment protection agreement will be signed.

l  While Wang Yi, director of China’s Taiwan Affairs Office (TAO), sounded confident when he declared that the signing was “imminent” by the end of September, Taipei was more conservative and expects, at least, another round of substantive negotiations.

l   An interesting angle on Wang’s optimistic projection can be perceived as a sign that Beijing now believes that Ma can win the January election and the ongoing cross-Strait rapprochement will continue.....

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Taiwan Hangs on to WEF’s Competitiveness Ranking

l  Although its ranking of 13th place remained unchanged from last year, Taiwan received its best score in five years in the Global Competitiveness Report (GCR) 2010-2011, released by the Geneva-based World Economic Forum (WEF) last week.

l  In fact, Taiwan got a score of 5.26 points in this year’s WEF competitiveness report, which was 0.05 points up from last year. Among Asia-Pacific economies, Taiwan was ranked fourth, which was also the same as last year and behind only Singapore, Japan, and Hong Kong.

l  Taiwan received the most recognition of its capacity to innovate, coming in at ninth place among all the economies surveyed. To some Taiwanese businesses, the most encouraging aspect of this year’s GCR was the island's ability to continue outperform South Korea—one of Taiwan's major competitors in trade, product marketing, and technological innovation—for three consecutive years in the annual WEF competitiveness report.

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Beijing’s “carrot and stick” approach

l  Cross-Strait military situation continued to be a hot issue in Taiwan following the recent release of an assessment report on the Chinese military by the US Department of Defense (DOD).

l  The report identified that Taiwan remained the “main strategic direction” for the People’s Liberation Army (PLA) as it continued its modernization programs. Moreover, the Pentagon believed that China still posed a security threat to Taiwan despite reduced tension and improved relations.

l  More importantly, the PLA has been developing capabilities intended to “deter, delay, or deny” any assistance by a third country, in the event of a Taiwan Strait contingency.

l  Maintaining a strong military force that is capable of: (1) withstand a first strike, and (2) keep the enemy engaged until allied forces arrive remains one of the few policies that enjoys cross-partisan support in Taiwan.

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Taiwan’s manufacturing stayed sluggish

l  Since many expect Taiwan’s exports to slow down in the second half of the year, the performance of the island’s manufacturing industry has become an important indicator of its economic vitality.

l  With fluctuating oil prices, waning consumer confidence, and volatile stock markets in many of the developed economies, there is increasing concern that the island’s manufacturing sector, and exports, will have to endure some tough times ahead. In fact, Taiwan's manufacturing sector remained sluggish in July for the fourth consecutive month.

l  In terms of individual sectors, the decline in economic vitality of the food sector was most worrisome. This could be attributed to the scandal surrounding the use of illegal plasticizers in food manufacturing during May and June.

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When cross-Strait tourism slows down

l  As cross-Strait relations enter a period of uncertainty roughly four months before Taiwan’s next presidential election, a number of recent developments clearly indicated that exchanges between the two sides, particularly tourism, are slowing down.

l  From Taipei to Kaohsiung, the economic impact from the drop in the number of Chinese tourists was both direct and immediate. In fact, a growing number of hotels around the island have received cancellations from Chinese tour groups, raising industry-wide concern that the decline—and the cancellation orders—will continue.

l  These cancellation orders have affected not only hotels around the island, but related industries—food, transportation, and retail—are also experiencing a marked decline in business.

l  The situation has been particularly serious in Taiwan's southern cities like Kaohsiung, where hotel occupancy rates started to drop since the beginning of August. The cancellation orders have reached nearly 10,000 rooms in recent weeks. Furthermore, reservations for September have dropped about 45 percent year-on-year.

l  These unexpected cancellations by Chinese tour groups have, in turn, forced many retail shops and restaurants to scale back on stock and hold off on hiring more workers.

l  Among the possible economic factors for the drop in the number of Chinese tourists, Taiwan's Tourism Bureau’s recent decision to lower the Chinese tour group fees per person—from US$80 to US$60 per day—had the biggest impact. The lowering of group fees has subsequently led to a decline in profit for many Chinese tour companies, which has made them less willing to operate tours to Taiwan.

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