3. The asymmetry of the economical connection between China
3.3 Industries
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In the following section, different sectors of economy will be compared, to make the comparison of the two economies easier and for a final conclusion to be drawn from the below described situations and stated facts.
3.2 Agriculture
Despite the fact that Taiwan’s agricultural sector played a major part in the territory’s economical miracle, it cannot be compared to China’s productivity in this sector. One of the understandable reasons for this is the above noted territorial size differences and the difference between the mountain dominated landscape of Taiwan and China’s various landscape structures, as the statistical yearbooks of the ROC and the PRC state. (Statistical Yearbook of the Republic of China 2011, China Statistics 2005)
The larger state ranks as the world’s greatest agricultural output, product producer.
Even until the second half of the twentieth century, great majority of the citizens, around 80 percent, worked in the agricultural sector and lived in the rural regions of China, which made the Chinese society a rural, agricultural one. Rice and other crops were grown, many families kept livestock and fishing was also a significant branch.
(CIA World Factbook 2014, Dillon 2009)
Taiwan’s agriculture was in the focus of development in the 1950s and 1960s. The growth in this branch eventually slowed, but by that time it had greatly contributed to the economic development of the island, pushing the industrialization forward. The slowing process never stopped, ending in a drastic drop of the contribution of the agricultural branch to the state’s gross national product (GDP) with 32 percent in 1952, 1.7 percent in 2000, compared to the 2010 rate of 0.16 percent. (Copper 2013)
In this sector it can be quickly concluded that China is the more powerful actor, not just compared to Taiwan, but also compared to the other states of the world. Here it can be clearly identified with the greater A power of the asymmetric connection theory.
3.3 Industries
Another sector that can be compared is the industries of the two territories. Here a situation similar to the one described in the agricultural sphere can be found. China is
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manufacturing, it is also strong in industries like mining and metal processing. China claimed a major role in the international labor division, as it became “a key link in the global industrial chain”. (Hauser 2009, 12; CIA World Factbook, Peoples’ Republic of China 2014)There is hardly a branch of the industrial sector that cannot be found on today’s PRC. Among other factors, this can explained by the large amount of natural resources that China possesses and the continuous inflow of direct investment that originate from abroad, which strengthens this branch of the economical sector. The variety of industries is enthralling, since, as mentioned before, until well into the twentieth century, China was an agricultural based state and society. In a short period of this, it was capable of such development. (Dillon 2009, Hauser 2009)
China achieved this even though the government’s policies and strategy for the industrial development are at times contradictory and do not focus at specific industries, which can be explained by variety of industries China is performing well in.
In several cases, this results in the policies being cancel out by each other or holding back and going against the other sections of the industry. Common features that can be discovered in the strategies and policies aimed at certain branches are the pretention for a maximum level and speed of growth and the promotion of investment that are expected to flow into the specific sector of the industry. (Naughton 2010)
Other problems that Beijing has to face considering the industrial sector are the difference of the stages of development among the various branches of the industry and geographical and regional spread of the industries, with certain regions of the PRC comprehending several types of industries, while others lag behind. Other than these, the challenge that is faced by the whole of the economy also has an effect on the industrial sector. As the Chinese economy is a mixed type of economy today and perhaps will be a fully market based economy in the near future, the presently discussed sector has to become a branch of the economy which is either privately owned or has mixed ownership, private and public alike. (Dillon 2009)
Presently the role of state-owned enterprises (SOEs) is still big in the industrial sector. In the past the SOEs bring security and stability of value into the Chinese economy. However system of the state-owned enterprises is obsolete and needs to be
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changed especially if this sector is to become one with purely private ownership or is to be owned by both the public and the state in mixed ownerships. These changes have taken place since the 1980s – as the process of reforming the SOE system - and by 2001, only major enterprises were in the obligate hands of the state. Those remaining under the control of the state tend to have a strategic role, for example in the defense, finance and telecommunications fields. (Dillon 2009)
Taiwan’s industry, on the other hand, is not performing as well as the greater country’s is. Furthermore, a declining tendency can be noticed in the size of its industrial sector, according to the Statistical Yearbook of the Republic of China 2011.
In sectors like mining and related metal processing, among others, Taiwan is either performing weak or that particular branch is missing from the territory’s list of industries.
A fundamental necessity of industrialization and the industrial branch as a whole is given in Taiwan: the population and the number of active workers. With the decline of the previously flourishing agricultural sector, even more people could be employed by the factories. The development of the industry started in the 1950s and constantly strengthened throughout the 1960s and 1970s. The growth was so intensive, even the other astonishingly performing Asian countries could not reach such level of advancement. Besides the above mentioned labor force advantages, other factors can be listed that pushed this development forward: economic aid from the US, privatization process, infrastructural improvement, successful planning and business decisions and perpetually inflowing foreign investment – mostly private investments coming from the US, Japan and from Overseas Chinese - augmented by the domestic savings. (Copper 2013)
Focusing on the individual industries themselves, some were only important in the decades of speedy development, but others are still important up until today.
The textile industry used to be one of the strongest in Taiwan. It is still significant today, but had to go through major changes and modernizations to keep this position to some extend. This branch of the industry is currently specializing on high-end products and specific kinds of fiber, like synthetic fibers. As for the magnitude of this branch, as of 2012, it accounted for 4 percent of all the export leaving Taiwan and it was the fourth largest industry of the island. (Copper 2013)
The advancement of the electronics branch is very similar to the textiles one. It had a successful start and is still performing well, as the products produced were changed
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and upgraded. Several kinds of household appliances and other smaller devices, besides parts and accessories for them were and are manufactured in Taiwan. (Copper 2013)
As for the industries that were stronger in the past, but were weakened since, petrochemical and ethylene production can be listed. Petrochemicals serve as the bases of plastics, rubbers and textiles among other, making it indispensable for different industries and contributing to this branch to flourish. This industry has not disappeared as a whole, but it lost its former importance. The same can be seen with Taiwan’s steel industry. Both branches were launched in the 1970s, started declining, especially after the companies moved to another location, mostly to China or shot down. As a third similar industry, vehicle – car and bicycle - production can be listed. It decayed as well, with only the car and motorcycle parts and bicycle manufacturing remaining.
The latter however became and still is a stark industry in Taiwan. Specialization and finding a niche in the given sector could and has saved branches and companies both in the above mentioned industries and in other ones, like the metal – aluminum and copper – industry and shipbuilding industry. Another industry that deserves a mentioning is the weaponry industry, which produces among others planes for the air force and missiles. This branch is not a big one and it only produces domestically used products. (Copper 2013)
There is one industrial sector that Taiwan is performing particularly outstanding in:
the electronics, information technology sphere. This was and still is the islands fastest growing economical sector, the one with the biggest growth. In specific branches of this sector, for example producing products like computer screens, notebook computers, semiconductors and integrated circuits (ICs), Taiwan is world leader.
These products were manufactured both for foreign companies and local, Taiwanese firms, like Asus and Acer. It is mostly thanks to this branch of the industrial sector that Taiwan can be an active participant and actor in the global chain, which economically connects the different states to each other. (Chang-Yu 2001, Copper 2013, Naughton 2010)
Specified branches of the industry have been developed and emphasized from the 1980s to make the island a high-tech hub. Taiwan’s economical success and it being less affected by the 1998 Asian financial crisis are all related to the rising and importance of this industrial sphere. Several other companies and countries showed interest in studying and copying Taiwan’s and Taiwanese business’ success to make it
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which Taiwan has been strong in the past and still is today and which was needed for the developments that the territory went through. The electronics industry’s development started in the 1960s and it evolved quickly with the help of the Taiwanese government, which aimed to make a high-technology center of Taiwan.(Chang-Yu 2001, Naughton 2010)
Of late, several companies in the information industry have moved their physical productions to countries with cheaper labor forces, especially China. This process of moving will continue with more and more firms planning to move. As a result of this process, only research, design spell and some limited steps of the production are left on Taiwan. (Copper 2013)
The above mentioned phenomenon of firms migrating to China or other, mostly Southeast Asia countries, is noticeable in other industrial sectors as well. As noted, cheaper labor costs are among the reasons that can be listed as forces driving Taiwanese companies to move. Additionally growing labor prices in the ROC affirm the migration decisions. However in the case of moving the mainland, another factor can be mentioned. The potentials of the consumption market of China are great and firms originating from Taiwan would like to penetrate this market, take their share of this currently evolving process. The ascension of the consumption and the economy structurally based on it, of which the Taiwanese companies want to take their share, has already been touched upon in this thesis. It is especially the particularly fast growing service sector that firms from the island would like to set their foot in. It has to be added that the profits and benefits for this process are likely to be so great that companies from Taiwan are willing to migrate despite possible discrimination that they may have to face on the mainland. (Chuang 201411)
As of today, six industries, named emerging industries are supported by the government. It is the government’s plan to slowly build up and strengthen these branches. The following can be listed under the label of emerging industries:
biotechnological industry, tourism, green energy, medical care, high-end agriculture, and cultural and creative industries. Most of these industries are interlinked, for example the biotechnological industry and the medical care sector, tourism and medical care and cultural and creative industries and tourism. These connections
11: Information gathered during the interview with Yih Chyi Chuang was included in this paragraph.
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contribute to the drive of development among them, so it is especially these specified industries that will evolve and strengthen. (Chuang 201412, Copper 2013)
In the industry sector, just like the agricultural one, China is performing better than Taiwan, for which reason asymmetry can be concluded. The PRC is successful in numberless branches – earning the title of “the factory of the world” - , while only several ones could be highlighted in the ROC’s case. However, it must be added that in these few sectors of industry, the island is performing outstandingly and is well known for them.