Chapter II Globalization in Taiwan and China
2.5 Economic Globalization and Cross-Strait Relations
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sustainable development as well as further development of the outward-oriented economy by implementing “come in” and “go out” strategies. Besides, the government is consolidating reform in State-owned Enterprises (SOEs) and government administration with a view to establish a governing mechanism in compliance with international rules and practices. These policies obviously facilitate China’s further integration into the global economy. ” 41 The Tenth Five-Year Plan was the expression of the China’s attitude towards economic globalization. China’s participation in the wave of globalization that drives the global supply of manpower is increasing, the cost of production is decreasing, and commodity prices have gone down. During the process of resource integration, international capital is moving towards China and promotes rapid economic growth.42
2.5 Economic Globalization and Cross-Strait Relations
Globalization promotes Taiwan’s competitive attributes, and in the future Taiwan and China will become more and more connected in interdisciplinary, trans-nation and inter-continent practices. The development of cross-strait relations will form some opportunities as well as some constraints for Taiwan, because of the transformation of the country’s role in the relationship and its concurrent re-structuring.43
Because China, India and other countries are rising that leads to global market changes that will bring opportunity and risk to Taiwanese economic development. But the cross-strait economic and trade development has both advantages and disadvantages. Taiwanese
41 Jian-Yong Yue, “What does Globalization Mean for China’s Economic Development?” op. cit.,
http://www.globalpolicyjournal.com/blog/24/05/2012/what-does-globalization-mean-china%E2%80%99s-ec onomic-development
42 Tain-Jy Chen, “Globalization and Cross-Strait Economic Relations,” Taiwan Economic review, Vol. 31, No. 3, 2003, p. 331.
43 Gwo-Hua Chu, “New Vision of China-Taiwan Relation under Globalization,” Mainland China Studies, Vol. 51, No. 4, 2008, p. 92.
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enterprises conduct the cross-strait industrial specialization that drives the investment boom in China and cross-strait trade development. This will bring contributions to Taiwanese economic development continuously. Conversely, though, cross-strait economics and trade lead Taiwan to rely on Chinese people (skill/talent), technology and capital, which are some of the effects that can’t be ignored.44
Globalization speeds up the integration of the Taiwanese and Chinese economies. The cooperation between Taiwan and China has become more smooth and effective, since both sides have opened direct flights, three-links and the Economic Cooperation Framework Agreement (ECFA).45 As it also deepens Taiwan’s economic dependence on China, Taiwan must respond to this situation and the associated challenges.46
In the year 2005, the percentage of Taiwanese enterprise investments in China accounted for 53.5% of Taiwanese total foreign investments. In the same year, the percentage of Taiwanese exports to China accounted for 28.4% of China’s total import.47
The implementation of the three-links helps the cross-strait relations and brings new circumstances and opportunities.48 The innovations of cross-strait cooperation by Taiwanese enterprises are to apply Chinese resources and to conduct joint research and development
44 Taiwan Chamber of Commerce, “Global Arrangement and Cross-Strait Economy and Trade,” 2006, p. 3, http://theme.cepd.gov.tw/tesg/reports/0728%E5%85%A9%E5%B2%B8%E7%B5%84%E5%88%86%E7%B 5%84%E5%A0%B1%E5%91%8A(final).pdf
45 Taiwan Chamber of Commerce, op. cit., “Global Arrangement and Cross-Strait Economy and Trade,” pp. 3-4, http://theme.cepd.gov.tw/tesg/reports/0728%E5%85%A9%E5%B2%B8%E7%B5%84%E5%88%86%E7%B 5%84%E5%A0%B1%E5%91%8A(final).pdf; Wong Wang, “Globalization of Taiwan’s R&D and Its Impact on Cross-Strait Innovative Cooperation,”
http://hk.crntt.com/doc/1026/3/7/7/102637753_2.html?coluid=63&kindid=0&docid=102637753&mdate=07 19101859
46 Taiwan Chamber of Commerce, op. cit., “Global Arrangement and Cross-Strait Economy and Trade,” pp. 3-4, http://theme.cepd.gov.tw/tesg/reports/0728%E5%85%A9%E5%B2%B8%E7%B5%84%E5%88%86%E7%B 5%84%E5%A0%B1%E5%91%8A(final).pdf
47 Ibid.
48 Ai Wei, op. cit., “The Strategic Choice of Cross-Strait Economic and Trade Relations under the Economic Globalization,” http://www.haixiainfo.com.tw/217-7409.html
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(R&D).49 The cross-strait compliments and dependencies are continually enhanced. The Taiwanese enterprises form many industrial clusters throughout China and the relationships with local industries are continually deepened. The cross-strait specialization model has changed the nature of R&D in both Taiwan and China. China has a large market and sufficient high quality of low-cost human resource which becomes a draw for Taiwanese enterprises. Companies such as ASUS, Inventec, Quanta, BenQ and the like have all been setting up R&D centers in China.50 The following characterize the cross-strait challenge and opportunity under the present situation.
1) The cross-strait interaction will be more and more close.51 2) The transformation through cross-strait industrial specialization
3)The shift of industrial structure from labor-intensive to capital-and technology- intensive.
Before 1996, Taiwanese enterprise investments in China were based on labor-intensive of downstream and low-level and technology industries. Recently, however, the top 5 industries investing in China are electronic parts and components manufacturing, appliances manufacturing, basic metal manufacturing, fabricated metal products manufacturing, chemical products manufacturing, accurate apparatus manufacturing and plastic products manufacturing. By the 11th Five-Year Plan (2006- 2010) that had been the main target for economic development and expansion of domestic demand to stimulate consumption.
4) Funding will move to the north of coastal area and towards second and third tier cities.
5)Industrial specialization is shifting from horizontal integration to vertical integration.
49 Wong Wang, “Globalization of Taiwan’s R&D and Its Impact on Cross-Strait Innovative Cooperation,”
op. cit.,
http://hk.crntt.com/doc/1026/3/7/7/102637753_2.html?coluid=63&kindid=0&docid=102637753&mdate=071 9101859
50 Ibid.
51
Min-Hsiung Huang, “Global Labor Market and Innovative Vocational Training Strategies,” City Development, Vol. 7, 2013, pp. 104-105.
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With this globalization trend, Taiwanese enterprise motivations for investing in China are dominated by developing the Chinese domestic market. The cross-strait industrial specialization has changed; R&D, marketing and financing occur in Taiwan and product manufacturing and vertical integration occurs in China.
6) Localization becomes the management strategy for Taiwanese enterprises: due to the competitive stresses, Taiwanese enterprises have been using China’s low cost of land, labor, and the cost and the convenient supply of raw materials to obtain benefits. Further, Chinese government provides policies to encourage foreign investment in China, but the desire for foreign investment is not the main motivating driver for China. Currently, as the Chinese market represent the potential to meet foreigner clients’ demand, Taiwanese enterprises invest in China and promote the competitive capability of export, which becomes the primary motivation of investing in China by Taiwan. China’s capabilities are expanding which leads Taiwanese enterprises to conduct more global integration. These reasons also lead to the phenomenon of local Chinese managers replacing Taiwanese manager in those Chinese manufacturing operations.52