中國大陸對台觀光政策與兩岸關係 - 政大學術集成

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(1)國立政治大學亞太研究英語碩士學位學程. International Master’s Program in Asia-Pacific Studies National Chengchi University. 碩士論文. Master’s Thesis. 中國大陸對台觀光政策與兩岸關係. ‧. ‧ 國. 學. 政治大 Mainland Chinese Tourism in 立 Taiwan and Cross-Strait Relations. Adam Hatch. n. Ch. er. io. sit. y. Nat. al. i Un. v. i g c hMei-chuan Advisor: Dr.e nWei. 中華民國106年7月19日. July 19, 2017.

(2) 2. Table of Contents Abstract ............................................................................................................................ 3 Notes, acronyms, and abbreviations ................................................................................ 4 Notes on Chinese-to-Latin Transliteration ..................................................................................... 4 Acronyms and Abbreviations ......................................................................................................... 4 Notes on use of “China,” “Chinese,” Mainland,” and “Mainland Chinese” ................................... 4 Acknowledgements ........................................................................................................... 6 Chapter 1 - Introduction .................................................................................................. 7 Research Background ............................................................................................................... 7 Research Purpose and Question .............................................................................................. 10 Research Method ..................................................................................................................... 11 Limitations .............................................................................................................................. 13 Chapter Structure ................................................................................................................... 15 Chapter 2 - Literature Review ....................................................................................... 17 Cross-Strait Relations ............................................................................................................. 17 政治大 Cross-Strait Economic Relations ............................................................................................. 20. 立 Mainland Tourism in Taiwan ................................................................................................. 34. Nat. y. ‧. ‧ 國. 學. Chapter 3 - Mainland Tourism in Taiwan: Past and Present ........................................ 37 Setting the stage ....................................................................................................................... 37 Pros and Cons ......................................................................................................................... 42 Current Status ......................................................................................................................... 46. n. sit. er. io. Chapter 4 - Tourism and Cross-Strait Economic Relations .......................................... 51 As goes tourism, so goes trade (at least with China) ............................................................... 51 al iv Further effects ......................................................................................................................... 56. n Ch U i e h ngc Future possibilities .................................................................................................................. 60. Chapter 5 - Conclusion .................................................................................................. 64 Policy suggestion: Diversification ............................................................................................ 67 Western tourists as an example ............................................................................................... 71 Appendix: Expert interviews - questions and responses ................................................ 75 Sammy Carolus - 2017/05/09 - General Manager of the Grand Hyatt Taipei ......................... 75 Ringo Lee - 2017/05/17 - Director, Taiwan Travel Agency Association (Lee Jian Ting interpreter) .............................................................................................................................. 77 Chen Jih-Chung - 2017/05/23 - Director General, Taiwan Tour Bus Association (Lee Jian Ting interpreter) ..................................................................................................................... 79 Kwei-Bo Huang - 2017/06/12 - Director of Center for Foreign Policy Studies, Professor, former MOFA Official ............................................................................................................ 80 Elias Ek - 2017/06/14 - Founder and CEO of Enspyre ............................................................ 83. References ...................................................................................................................... 85.

(3) 3. Abstract With the 2016 election of Tsai Ing-wen and the Democratic People’s Party, the number of Mainland Chinese visitors in Taiwan has fallen precipitously. There is much debate as to whether or not this will prove to be a catastrophe for Taiwan’s tourism sector or whether it will even be felt. The purpose of this thesis is to ascertain the impact of the reduction in Mainland Chinese tourist numbers on the economy, and what it may mean for China-Taiwan economic and political relations. Due to the large amount Mainland Chinese tourists spend relative to other visitors, their length of stay, and their propensity for traveling to locations rarely visited by other types of tourists, the decrease in Mainland Chinese visitor numbers. 政治. will have negative consequences for some parts of the Taiwanese economy. Furthermore, 大. 立. ‧ 國. 學. Chinese tourism trends in Taiwan correlate with larger Cross-Strait economic concerns, implying that what happens with tourism may be mirrored in trade. Should this prove to be. ‧. sit. y. Nat. the case, a cooling of China-Taiwan economic relations may be an indicator of difficult times. er. io. for the China-Taiwan relationship as a whole. However, there is certainly opportunity for. n. a. v. Taiwan’s tourism sector, and there is levidence that by refocusing on a more diverse array of ni C. hengchi U. visitors, Taiwan is capable managing without such heavy, and coercive, Chinese influence.. Keywords: Mainland Chinese tourism, Taiwan, Cross-Strait relations, economic statecraft.

(4) 4. Notes, acronyms, and abbreviations Notes on Chinese-to-Latin Transliteration For Chinese names, I have used the personally preferred or written spelling of the name in question. For example, for President Tsai Ing-wen, I use the Wade–Giles system spelling preferred by newspapers and media, as opposed to the Hanyu Pinyin system (which would transliterate to Cai Ying-wen). In instances where the individual in question uses the Hanyu system, I have also used that.. Acronyms and Abbreviations. 政治大. 立 KMT - 國民黨 - Kuomintang (Guomindang) ‧ 國. 學. DPP - 民進黨 - Democratic People’s Party (Minjindang). ‧. ROC - 中華民國 - Republic of China. sit. y. Nat. n. al. er. io. PRC - 中華人民共和國 - People’s Republic of China CCP - 中國共產黨 - Chinese Communist C hParty. engchi. i Un. v. ARATS - 海峽兩岸關係協會 - Association for Relations Across the Taiwan Straits SEF - 海峽交流基金會 - Straits Exchange Foundation FTA - Free Trade Agreement ECFA - Economic Cooperation Framework Agreement CSSTA - Cross-Strait Service Trade Agreement. Notes on use of “China,” “Chinese,” Mainland,” and “Mainland Chinese” Considering the politically charged nature of even the terminology regarding the name “China” and “Mainland China” I felt it appropriate to address its usage in this thesis. I have,.

(5) 5. when addressing tourists traveling to Taiwan from the Chinese Mainland, used the term “Mainland Chinese” tourist(s) or visitor(s). In some instances, simply for brevity, I have simply used the term “Chinese” to refer to people from the Chinese Mainland. Furthermore, I also occasionally use the name Beijing when referring especially to the government of the PRC, but sometimes for the PRC as a whole. I also use this same stylistic selection when referring to the government of Taiwan or the ROC in general by using “Taipei” as a stand in. I usually do so in conjunction with Beijing (e.g. Beijing vs. Taipei). When referring to people from the Republic of China, AKA Taiwan, I simply use the term “Taiwanese.” In using “Mainland Chinese” I am in no way implying that citizens of Taiwan or any other areas not controlled by the PRC constitute what some may call “overseas Chinese.” I am simply. 政治. 大 of PRC Special Administrative differentiating those from Mainland China and other citizens. 立. ‧. ‧ 國. 學. Regions (SARs), meaning Hong Kong and Macao.. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v.

(6) 6. Acknowledgements I would like to first thank the experts I interviewed for this thesis, including Mr. Sammy Carolus of the Grand Hyatt Taipei, Professor Ringo Lee of the Taiwan Travel Agency Association, Mr. Jih-cheng Chen of the Taiwan Tour Bus Association, Professor Kwei-bo Huang of NCCU’s Center for Foreign Policy Studies, and Elias Ek of Enspyre for their time and patience in answering my questions. I would also like to thank David and Vanessa Reynier for putting me in touch with Mr. Carolus. Professor Ian Rowen deserves acknowledgement for pointing me to his invaluable research and for taking the time to discuss tourism in Taiwan with me. I would further like to acknowledge Lee Jian Ting for his. 政治. help interpreting two of the expert interviews. My student, 大assistant, and friend Tina Hsu was. 立. ‧ 國. 學. indispensable in helping me examine Chinese language sources and assisting with communication and translation. Professor Hans Tung and Professor Chia-chen Chou also. ‧. sit. y. Nat. deserve recognition for sitting on the examination committee and providing important. er. io. guidance and feedback for this project. Finally, I need to acknowledge my advisor, Professor. n. a. v. Mei-chuan Wei, who helped establishl my n i my research, assisted in C framework, guided. hengchi U. contacting experts for interviews, and was patient in my moments of frustration. Thank you all for your help, guidance, and contribution..

(7) 7. Chapter 1 - Introduction Research Background Since Tsai Ing-wen and her Democratic Progressive Party (DPP) were swept into office in 2016, Taipei’s relations with Beijing have cooled (Grossman, 2016). A common trope in the media is that due to increasing tensions, there has been a decrease in the number of visitors to Taiwan from the Mainland, reversing a nearly decade-long trend of increasing amounts of Mainland Chinese tourists traveling across the Strait (Tourism Bureau - Table 1).. 政治. 大 Table 1 立 Mainland Chinese Visitor Arrivals to Taiwan - 2007-2016 ‧ 國. y. sit. er. al. n. 2010. io. 2009. 0. 329,204. Nat. 2008. Number of Visitors. ‧. 2007. 學. Year. Ch. engchi U. v ni. 972,123. 1,630,735. 2011. 1,784,185. 2012. 2,586,428. 2013. 2,874,702. 2014. 3,987,152. 2015. 4,184,102. 2016. 3,511,734. Source: Tourism Bureau, 2016 http://admin.taiwan.net.tw/statistics/release_en.aspx?no=7. In 2008, the ROC and PRC governments met to discuss the “Three Links” - policies that worked to bring Taiwan and China closer in terms of trade and travel. Part of the.

(8) 8. discussion was that of tourism; for the first time since 1949 it became possible for Mainland Chinese to visit Taiwan for the simple purpose of travel. In the first year alone, more than a quarter million Mainlanders crossed the Strait, with numbers growing each subsequent year, peaking at over 4 million in 2015 (Tourism Bureau, 2016). The administration of ROC President Ma Yingjeou (2008-2016) had been largely conciliatory towards Beijing but, at least towards the end of his second term, widely unpopular in Taiwan, partly due to his administration’s China-friendly posture. Tsai and her DPP was subsequently elected on a wave of discontent regarding closer China ties, thus her administration and the DPP-run government were handed a mandate to step back relative to Beijing (Bush, 2016).. 政治. 大 was a drop in the number of Almost immediately after Tsai’s inauguration, there. 立. ‧ 國. 學. Chinese visitors. The implication is that tourist numbers have begun to fall due to Beijing’s. ‧. disapproval of Taiwan’s new political direction (Jennings, 2016). Regardless of the. sit. y. Nat. underlying reasons (and those will be discussed), there is some fear in Taiwan that a. er. io. significant drop in tourist revenue could spell profound difficulty for the island’s tourism. n. a. iv. l C industry (Smith, 2016). A range of businesses U n engage in Taiwan’s tourism h and workers. engchi. industry, and with Chinese tourists being the most significant group, these businesses and workers stand to lose. Businesses include hotels, transportation and bus companies, restaurants, gift shops, larger retailers like department stores, and through them local governments due to tax revenue. And while these businesses will lose money, the workers who keep these businesses running will be the first and perhaps most significantly affected drivers, food servers, store clerks, housekeepers, a huge range of skilled and unskilled professionals will feel the squeeze. Mainland Chinese visitors spend the second most of any national group, with only Japan spending more (Tourism Bureau, 2016). Calling Chinese tourists the “second highest” spenders is almost misleading - they, on average, only spend.

(9) 9. one cent USD per day less than their Japanese counterparts. This fact is incredibly significant as Mainland Chinese visitors made up more than 47% of all tourists to Taiwan (Tourism Bureau Data, 2016). Clearly, a significant drop in visitors from China could mean serious trouble for tourism in Taiwan.. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v. However, the underlying fear of what comes next is perhaps more significant than the decimation of Taiwan’s tourism industry. Tourism is a drop in the bucket in terms of Taiwan’s total economy, and should it fall apart, Taiwan at large would hardly notice. The underlying fear of Beijing limiting the amount of tourists allowed to visit Taiwan is that it could be a sign of a willingness to hit Taipei economically when the ROC acts against Beijing’s interests. Tourism may be a small part of Taiwan’s economy, but Taiwan’s economy has become profoundly intertwined with China’s, and if Beijing is willing to “punish” Taipei through tourism, perhaps they are increasingly willing to do so through other economic means. Furthermore, Taiwan’s economy is much smaller and much more.

(10) 10. dependent on the Mainland than China is on Taiwan. Since the opening up of relations between China and Taiwan, Taiwan has become increasingly reliant on Chinese labor, resources, investment, and legal structures. If Beijing were to punish Taipei economically, it could be potentially catastrophic for an already slow Taiwanese economy. In other words, Taiwan rightly worries that a slowing of tourism could be the first sign of greater economic pressure on behalf of Beijing, a pressure that could cause serious damage in Taiwan. As such, this study will analyze the state of economic relations between Beijing and Taipei, as well as the interplay with the political situation across the Strait.. Research Purpose and Question. 政治大 Tourism may not be a centerpiece 立 of Taiwan’s economy, but that does not mean it ‧ 國. 學. should be ignored. $14 billion in income (Tourism Bureau, 2016) is a large amount of money. ‧. and the people who make a living in tourism could find themselves in a difficult position. sit. y. Nat. should Chinese tourist money dry up. To illustrate its importance, in September 2016 workers. al. er. io. in Taiwan’s tourism industry held a protest in Taipei demanding the Tsai Administration. n. iv n C U change its tune so as to ensure the arrival h ofeever visitors (Cheng & Wu, n g more c h i Mainland 2016).. However, the money might not be the most important factor. Tourism is an important form of contact between peoples. If Taiwan loses 47% of its tourists, which would mean more than half of its tourism income, its travel-related industries, including restaurants, hotels, transportation companies, and gift shops, would close en masse. In turn Taiwan would become a less desirable travel destination for other types of tourists. Taiwan would miss out on informal people-to-people exchanges, first with Chinese, then with people from everywhere else. This would be a problem - Taiwan already lacks international visibility, and if it wants to chart its own course, whether by getting closer to China or by moving towards.

(11) 11. independence, that visibility is critical, as it ensures other nations are both aware of Taiwan’s plight and empathetic to Taiwan’s ends. Without a robust tourism sector, who will bother to visit Taiwan? Understanding the importance of tourism and its dynamics is a central theme of this work. Another purpose behind the research is that the issue is topical and it opens the door to a more important conversation: how China could harm Taiwan economically. As mentioned, the issue of Chinese tourism is common in Taiwanese media, and strikingly frequent in Western news. Furthermore, and as mentioned, Chinese tourism in Taiwan is related to the larger and more significant issue of China-Taiwan economic relations, and how those relations may come into play especially during a time of rising tensions. Having a clear. 政治. and accessible understanding of a relatively complicated大 issue can only help in both the. 立. ‧ 國. 學. academic and informal discourse surrounding the circumstances.. ‧. For these reasons, this thesis seeks to understand the following: what is the impact of. sit. y. Nat. changing levels of tourists from China on Taiwan’s economy, and what does it mean for. er. io. China-Taiwan relations? Encompassed in this line of inquiry are a few other minor questions. n. a. iv. that will be explored, like what is the lcontribution of Mainland Ch U n tourism to Taiwan, and how. engchi. much of money spent by Mainland tourists stays in Taiwan, rather than going to Mainland or Hong Kong owned businesses? Also, what will be the impact of a reduction in Chinese visitors to Taiwan, and is Beijing behind that reduction, or is it caused by other factors? Finally, this analysis will address how Taiwan should respond to a reduction in Mainland visitors.. Research Method The methods used to collect information and analyze it are essentially twofold. This thesis is qualitative research done through review of available literature regarding Taiwan and.

(12) 12. China’s economic relationship and interdependence, in conjunction with examination of government data and other academic, government, and journalistic sources for information specifically regarding tourism. A qualitative approach is particularly useful for this study, as I am seeking to establish the effects of Chinese tourism in Taiwan and why it functions the way it does. This means examining the question from a political and human perspective rather than a data driven one. Furthermore, a useful quantitative analysis of my research question would mean a tremendous amount of research that in the end could only reveal trends, and controlling for separate factors would be nigh impossible. A literature review and qualitative analysis can produce similarly efficacious results much more efficiently. For the literature review, I began with a number of academic texts and reviewed them. 政治. 大will find, the preliminary literature for similar themes and contrasting conclusions. As readers. 立. ‧ 國. 學. review revealed that much thinking on the economic relationship between Beijing and Taipei. ‧. is in agreement, especially in terms of the motivations underpinning that relationship and the. sit. y. Nat. degree to which it has had an effect on the economies and societies on both sides of the Strait.. er. io. There was, however, little prediction regarding what the effects of the economic relationship,. n. a. iv. l C relations and how especially regarding the future of political U n trade and economic interaction h. engchi. will affect them. In regards to other sources of information, these are used to extrapolate information specifically regarding tourism to examine whether or not tourism fits the same political and economic patterns as Cross-Strait trade in general. This information, including data from the Taiwan Tourism Bureau, analyses from international think-tanks, and news articles, will determine firm numbers regarding Mainland tourism in Taiwan, what the possible impacts of a decrease in visitors could mean, and how Taiwan might possibly address this decline in tourism revenue. These sources come from a range of media and perspectives, and work to illuminate specifics that the academic literature on China-Taiwan economic relations simply.

(13) 13. has not addressed. I also cite a number of web databases and articles from sources that include the CIA World Factbook and Center for Foreign Policy. This information is useful in establishing foundational arguments, e.g., the dollar amount of trade across the Strait, as well as basic analysis of short-term trends. Moving further, news sources are also referenced. These will help in supporting the analysis of this thesis and act as a source of data as well. In addition to the aforementioned sources of information, expert interviews help to firmly establish the state of Mainland Chinese tourism in Taiwan. I spoke with five experts, ranging from trade association directors to hotel managers to politicians. These individuals shared their deep expertise and opinion’s regarding the state of Taiwan’s tourism industry, as well as their concerns and predictions for the future and why they hold the views they do.. 政治. Their input is included throughout this thesis, especially大 in Chapters three and four, but. 立. ‧ 國. al. er. io. sit. y. Nat. Limitations. ‧. near the end of this paper.. 學. specific notes about what was asked and their responses are contained in the appendix section. n. iv n C Every effort to produce an illuminating h e n and i U work has been taken in researching g c huseful and writing this thesis. However, there are certainly some limitations to this examination. As stated in the introduction, it is a qualitative review, largely compiled through literature and expert opinion and drawing conclusions from these sources. This is not necessarily a limitation, as expert opinion and the literature available are in many ways more reliable than an amateur effort at quantification. Still, quantitative analysis, especially of survey information and official tourism figures would be a tremendous addition to the conversation. The problem is, such a project would be at the very least a multi-year, team-led project, and at most simply impossible. In other words, it would be a difficult project even for a.

(14) 14. government-funded group of social science professors to tackle, much less as a Master’s thesis project. Another limitation is a relative lack of information. While literature regarding CrossStrait relations, economics, and trade is abundant, information about Mainland Chinese tourism in Taiwan is rather limited. First, there is information that no one knows, including the details regarding the exact decision-making process in the PRC to clamp down on tourist numbers to Taiwan. No one I spoke to had any definite information, and none of the news sources I examined had anything more than rumors and secondhand accounts. Also, as mentioned previously, there is a lack of quantitative data beyond what the Tourism Bureau is willing to provide. The Tourism Bureau was unwilling to respond to my inquiries, as were. 政治. local tourism boards. Another reason is that information大 available, especially English. 立. ‧ 國. 學. language articles and literature, are clearly politicized and show an intent to persuade readers. ‧. to agree with a given position. This implies a degree of cherry-picking and necessitates. y. sit. Nat. healthy skepticism in at least a few sources.. er. io. The degree of politicization of the tourism issue deserves special attention, as it is. n. a. iv. l CBureau and othernbodies are reluctant to provide probably at the core of why the Tourism U h. engchi. information beyond official data and basic analyses released on their website. As mentioned in Chapter 4, how individuals regard Mainland Chinese tourists is related to their positions on the China-Taiwan political relationship, specifically whether or not Taiwan is, is not, or should be a part of China. Most sources, including interviewees and newspapers, deny having a political bend, but their perspectives at least slightly betray their leanings. This is not to say that having an opinion towards Mainland Chinese tourists and tourism precludes anyone from offering good information, it just increases the likelihood of cherry-picked information. Finally, there is a stark lack of quality English information available regarding Mainland Chinese tourism in Taiwan. There are a few quality researchers out there, including.

(15) 15. Professor Rowan at Academia Sinica, and there have been strong articles written about it. However, there is a torrent of relatively low-quality speculation and rehashed ideas that make sifting through and finding quality information difficult. There is, obviously, much more Chinese language information, but, sadly, my Mandarin skills are not up to the task of translating from and analyzing Chinese language sources. Still, this is part of why I selected this topic - there needs to be more information available to the international community considering the pertinence of the Chinese tourism issue. Beyond these limitations, a final issue with this work is its relatively small scale. This study was undertaken during a relatively brief period, with initial research beginning in the spring of 2016 and seeing completion summer of 2017 - a time period in which there was. 政治. tremendous flux in tourism trends and probably only just大 the beginning of a transition away. 立. ‧ 國. 學. from Mainland tourists. Furthermore, I did not select the specific topic of this thesis until. ‧. early 2017. With more time, more support, and more resources, this study could be expanded. sit. y. Nat. and honed. And while the research includes four expert interviews, a literature review, and an. er. io. analysis of relevant media, there is room for more interviews and the contribution of Chinese. n. a. iv. sources. However, I am also confidentl that C h should the study U n be refined and extended, the. engchi. conclusions will not change and its findings will be very similar to those seen here.. Chapter Structure The structure of this thesis is as follows: Chapter 1 opens with an introduction to the topic of Mainland Chinese tourism in Taiwan, as well as an explanation of the project’s rationale and research questions. Research methods are also explained, followed by potential limitations of the study. Chapter 2 is a review of available literature, especially regarding Cross-Strait economic relations. The first section explores economic relations between China and Taiwan,.

(16) 16. followed by the more specific economic issues relevant to China-Taiwan trade and investment. This is the framework on which the project is based. Finally, literature regarding Mainland Chinese Tourism in Taiwan is discussed, with further discussion of expert interviews used to further explore the nature of the changes occurring. Chapter 3 delves into the history and background of Mainland Chinese tourism in Taiwan, with a brief recollection of China-Taiwan relations especially since the late 1980s, followed by progress towards the goal of direct flights filled with tourists to Taiwan. The next section discusses the “pros and cons” of Mainland Chinese tourism in Taiwan, including the economic benefits and the social costs of the structure of the market. Chapter 3 ends with an assessment of the current state of Mainland Chinese tourism in Taiwan, and what these trends may mean for the tourism sector.. 立. 政治大. ‧ 國. 學. Chapter 4 relates Mainland Chinese tourism back to the larger economic issues, and. ‧. establishes the possibility of a correlational link between tourism trends and trade and. sit. y. Nat. investment across the Strait. The chapter ends with some predictions as to the state of tourism. er. io. Taiwan’s tourism sector in the near- to mid-term, along with some extrapolations about what. n. a. iv. l C it could mean for the overall economic relationship between U n Beijing and Taipei. h. engchi. Chapter 5 concludes this thesis with a summary of the work and findings, followed by a policy recommendation of greater diversification, especially in Taiwan’s tourism sector. This section is supported by a brief case study of how Taiwan could engage the relatively untapped Western market as an example of actions the government and businesses need to undertake to keep Taiwan’s tourism afloat. The appendix is simply a notated summary of the expert interviews conducted, followed by the references section..

(17) 17. Chapter 2 - Literature Review Cross-Strait Relations This thesis analyses tourism under the paradigm of China-Taiwan economic relations and interdependence. Since the late 1980s, trade and economic exchange has exploded across the Strait (Kastner 2009, Tanner 2007). During the 80s, Taiwan found itself under martial law and the one-party rule of the Kuomintang (KMT), the erstwhile Chinese Nationalist Party that had fled Mainland for Taiwan in 1949. Taiwan’s economy had grown profoundly in the interim, becoming one of the “Asian Tigers” and establishing strong economic and political. 治. 政 of the ROC ties with the West. However, the official stance 大 with regards to Beijing was that 立. ‧ 國. 學. of the “three no’s” - no contact, no negotiation, and no compromise (Kastner, 2009). However, the policy was softened slightly in 1985, allowing indirect trade, but more. ‧. sit. y. Nat. importantly, martial law was lifted in 1987. In 1989 the ROC government announced new. al. n. one (ibid).. er. io. regulations governing trade, and ever since, the economic relationship has been a growing. Ch. engchi. i Un. v. While the economic relationship has proven beneficial for both sides, there are strong indicators that it has posed difficulties for Taipei. Even before China’s and Taiwan’s entrance into the WTO regime, Taiwan had developed a large trade deficit with the Mainland, and a degree of economic dependence was evident (Chang & Goldstein, 2007). Economic dependence, or rather interdependence slanted in favor of the Mainland, has grown even further since. This creates a large problem for Taipei; if Taiwan is economically dependent on its political adversary in the PRC, that adversary could potentially hold leverage over Taiwan. In case there were any doubt, the PRC has explicitly claimed that gaining leverage and influence in Taipei is the most important factor for advancing Cross-Strait economic ties.

(18) 18. (Tanner, 2007). In other words, while the economic relationship has proven fruitful, it seems to work to undermine Taiwan’s political aspirations relative to Beijing, and for many Taiwanese this is a real cause for concern. The economic relationship between Beijing and Taipei, while generally on the rise, has seen peaks and troughs in terms of growth. Recognizing the security risks of closer economic ties with Beijing, President Lee Tenghui established multiple policies meant to stem the flow of Chinese money and influence, including the “Go South Policy,” encouraging Taiwan businesses to invest in Southeast Asia rather than the Mainland, and the “Go Slow, Be Patient Policy” limiting the types of technology and services that could be transferred to and conducted in China (Kastner, 2009). However, and rather counterintuitively, first DPP. 政治. 大interests in his first term, and as President Chen Shuibian heavily courted Taiwan business. 立. ‧ 國. 學. such liberalized many of Lee’s policies. He changed tack after 2002, however, again slowing,. ‧. but not stopping, the growth in Cross-Strait Commerce. Under Ma Yingjeou of the KMT,. sit. y. Nat. Taiwan again heavily liberalized trade with China, with President Ma’s administration. n. al. er. io. signing 20+ agreements, including the Economic Cooperation Framework Agreement (ECFA) (Albert, 2016).. Ch. engchi. i Un. v. ECFA is an important watershed in China-Taiwan economic relations for a number of reasons. It was perhaps the most significant agreement signed with Beijing during the Ma Administration and worked to liberalize Taiwan’s trade policies with China. It also ensured Beijing no longer pre-empted Taiwan signing trade agreements with other Asian nations. However, and perhaps most importantly, it was largely unpopular in Taiwan and began a steady downturn in KMT approval ratings, ultimately spawning the Sunflower Movement1. 1. The Sunflower Movement was a student movement that occupied the ROC Legislative Yuan in April 2014. The movement received global attention and was aimed at preventing the passage of Cross-Strait Service Trade Agreement, an economic agreement that the then-majority Kuomintang (KMT) was attempting to force through the legislature without promised oversight. The occupation lasted for weeks and ultimately resulted in promises from the KMT-led government that the agreement would be reviewed by the public. The popularity of the.

(19) 19. and culminating in the massive defeat of the KMT in 2016 elections. Taiwanese voters have shown they are largely dissatisfied with closer economic ties, in part because agreements like the ECFA were largely beneficial to large conglomerates with very little tangible benefit for ordinary citizens (Albert, 2016). With the security concerns related to Chinese leverage over Taiwan and anemic economic growth for most citizens, especially young people, the KMT was largely disposed in 2014 and 2016, and Tsai elected president. Considering the mutual distrust between Tsai’s DPP and Beijing, the economic activity across the Strait looks due to take a significant hit, one that seems to already be playing out with tourism. There is dispute between those who presume Taiwan can offset China-Taiwan commerce with trade elsewhere, and those who are convinced the only hope for Taiwan’s. 政治. 大Tsai Administration is ostensibly economy is through further engagement with Beijing. The. 立. ‧ 國. 學. in the first camp, promoting policies that hearken back to the Lee Administration. The “New. ‧. Go South Policy” literally takes the name of one of Lee’s most significant efforts to stem the. sit. y. Nat. tide of greater economic interaction (Hsu, 2016). There is some evidence that the New Go. er. io. South Policy may be working in tourism already, with the decrease in the number of Chinese. n. a. iv. l C other countries (Chen, visitors having been offset by those from 2017). However, most of the Un h. engchi. buzz around this early success has been generated by DPP-friendly sources, implying that reporting may be cherry-picked and overly exuberant before confident results can be declared. The other side of the argument, that Taiwan should embrace closer economic ties, is predicated on the reasoning that without normalization of trade across the Strait and greater economic cooperation, Taiwan’s economy is doomed to stagnate. Tourism to Taiwan was tiny until Mainland visitors made it a viable sector, with over a million visitors arriving in 2009 - the first time that many tourists from one source had ever deigned to vacation on the Sunflower Movement and its goals continue to resonate and were an indication of widespread dissatisfaction with closer economic ties with China (Harrison, 2015)..

(20) 20. island (Chen, 2017). Furthermore, beyond tourism, Taiwan is, according to these analysts, unable to make up for the potential gains that could be seen with greater cooperation with China (ibid). The reasons for this are manifold, but the biggest factors are the ease of integration with the Mainland vs. the relative difficulty of working with Southeast Asia, and Beijing’s maneuvers to isolate Taiwan in the Asia-Pacific should it not cooperate economically. And while some see trading with nations that are unafraid of Beijing’s dictates as the answer (e.g., the West), the problem is that the trade regimes between Taiwan and these nations are already mature; in other words, there is not much more to squeeze out of them (ibid).. 政 Cross-Strait Economic Relations 立. 治. 大. ‧ 國. 學. Cross-Strait economic relations is a huge and well-researched topic, in both the. ‧. Sinosphere and the English-speaking world. There is a wealth of literature available, from the. al. er. io. Strait relations are generally agreed upon.. sit. y. Nat. sweeping to the minute-detail oriented. In this body of literature, the core aspects of Cross-. n. iv n C First, analysts agree that a pillar ofhBeijing’s i U relative to Taiwan is an attempt e n g c hstrategy. to draw Taipei into its sphere of influence through greater economic integration. This is hardly an opinion - both Chinese and Taiwanese leaders both recognize and acknowledge the reality that Chinese economic policy towards Taiwan is meant to bring its erstwhile province under the political influence of the PRC (Kastner, 2009). Second, academics and policymakers agree across the board that trade and economic cooperation between Beijing and Taipei has exploded since the end of the 80s. This does not mean the relationship has been free of trouble. Certainly there have been troughs and spikes in the economic relationship, but even a glancing familiarity with the data proves the general trend has been one of meteoric growth. Cross-Strait trade in 1986 was less than $1billion.

(21) 21. USD (Kastner, 2009), but by 2014 trade across the Strait had exploded to almost $200 billion (“China-Taiwan Relations,” n.d.). Finally, analysts are generally in agreement that economic threats and coercion towards Taiwan has had very little effect thus far. The fact is, in order for the trade relationship to be as deep and significant as it has become, Beijing has had to convince Taiwanese investors, the Taiwanese people, and Mainland interests that economic relations across the Strait would be fruitful and stable. Beijing has largely succeeded in this endeavor, and no further evidence is necessary than the tremendous growth in trade. However, the tiny effect of economic coercion against Taiwan deserves some qualification. One of the most significant disagreements in the literature on the topic is. 政治. whether Beijing has been unsuccessful in its attempts at 大 coercion through economic policy, or. 立. ‧ 國. 學. if Beijing has simply never tried to use it in any meaningful way. There are strong arguments. ‧. both ways, but the assertion that China has yet to actually use its economic weight against. y. sit. Nat. Taiwan seems to be the more likely scenario.. er. io. Other differences between various analyses and assessments of the situation lie in. n. a. iv. l C Taishang, has been whether economic coercion, like hassling U n fruitful for China or has a h. engchi. negative impact on Taiwan. Also important to examine is the degree to which economic coercion, both large and small scale (e.g., tariffs) is useful for Beijing in the long term, and whether or not closer economic ties portend political rapprochement or possible conflict. This literature review attempts to examine various academic works, and from them build a hypothesis that Beijing is increasingly impatient with Taipei, especially following the landslide electoral victories of the DPP in 2016. As such, CCP leaders seem to be more willing to signal resolve on their attitudes towards Taiwan through costly measures, including punitive economic initiatives. While there is evidence that Beijing undermining the economic relationship between itself and Taipei is ultimately self-defeating, this review will use its.

(22) 22. findings to support the hypothesis that China is in fact increasingly willing to wield the economic bludgeon to bring Taiwan to heel, and tourism is an early and visible example of this strategy. I selected four texts that act as a foundation for the theoretical framework of this thesis, that being Cross-Strait economic policy and the deepening economic ties between Beijing and Taipei. They are Political Conflict and Economic Interdependence Across the Taiwan Strait and Beyond by Scott Kastner, Chinese Economic Coercion Against Taiwan: A Tricky Weapon to Use by Murray Scot Tanner, The Implications of China-Taiwan Economic Liberalization by Daniel H. Rosen and Zhi Wang, and Economic Reform and Cross-Strait Relations: Taiwan and China in the WTO, edited by Julian Chang and Steven M. Goldstein.. 政治. 大 Economic relationship, These books delve into the inner workings of the Cross-Strait. 立. ‧ 國. 學. including individual trade agreements, economic history, and the relationship’s effects on. ‧. specific industries. While all of these are pertinent in their own right, for this examination. sit. y. Nat. viewing the relationship on the large scale is more useful. However, all of these works also. n. al. er. io. examine overarching policy analysis and its possible effects on China-Taiwan relations, both economic and political.. Ch. engchi. i Un. v. I will also briefly examine other sources for research, including books, government data, news articles, journal articles, and websites / reports that are cited here and elsewhere in this thesis. These sources are used to fill out the argument that Beijing may use economic leverage against Taipei to further political ends, and that tourism is an early form of that strategy. The most obvious and ubiquitous claim in the literature regarding China-Taiwan trade is the degree to which it has exploded since the 80s (Chang & Goldstein, 2007). This is a simple matter of fact, but it underpins a tremendous amount information regarding CrossStrait Commerce. This fact attaches itself to every conversation regarding the political.

(23) 23. relationship between Taipei and Beijing, the economic development of Mainland China, and the health of Taiwan’s economy. Furthermore, it’s an issue relevant globally, including regarding US-China relations, stability in the Asia-Pacific, and in terms of geopolitics at large. Obvious, yes, but difficult to understate its importance. Some scholars, specifically Daniel H. Rosen and Zhi Wang, have found that not only has cross-Strait commerce been imperative to Taiwan’s recent economic growth, but without it, Taiwan’s economy is sure to flounder in the future. Their work, The Implications of ChinaTaiwan Economic Liberalization is in agreement that economic engagement between Taipei and Beijing has clearly skyrocketed, that Taiwan is increasingly dependent on China economically, and that the economies are also increasingly integrated (Rosen & Wang,. 政治. 大to make predictions, Implications 2011). However, where other texts have been less willing. 立. ‧ 國. ‧. circumstances.. 學. does offer some strong analysis regarding the future of Taiwan’s economy in various. sit. y. Nat. Taiwan has made growth in the service sector a linchpin of continued economic. er. io. growth, and in order for this sector to grow, Taiwan businesses need access to both Chinese. n. a. iv. markets and investors. As tourism is al service C h industry, Uit nis potentially illustrative of what. engchi. could happen with a reduction in Mainland investment. While anyone can see how much trade has grown across the Strait, Rosen and Wang make the case that it is in Taiwan’s best economic interests to continue to work with Beijing. Tourism clearly plays a role in this discussion, and China seems to be imposing “indirect economic punishments” including limiting travel on the part of Mainland visitors (Stratfor, 2016). A common refrain in international relations theory is that greater economic interaction between two parties, like states, ultimately means peaceful political interaction (Ho, 2006). On the surface, this seems self-evident - trade between politically friendly nations is usually.

(24) 24. robust, while states experiencing degrees of conflict tend to limit economic interaction. However, there are exceptions, and one of these is, possibly, China-Taiwan trade. WTO membership of China and Taiwan is an interesting aside in discussing ChinaTaiwan economic relations. Joining less than a month apart, many analysts have come to assume that equal membership in the body would lead to better relations in the Strait. However, “very little induced harmony has seemingly occurred,” and China has put pressure on the organization to limit Taiwan’s apparent independence in the body with what could be seen as petty protests. So, rather than being a de facto bilateral trade agreement, parallel WTO membership has caused some tension between Taipei and Beijing while direct agreements between Taipei and Beijing like ECFA continue to be the most significant. 政治大. paradigms of economic interaction (Charnovitz, 2006).. 立. ‧ 國. 學. On one side of the discussion are the theorists who believe greater economic. ‧. exchange can help create peace; war is bad for business after all. Political Conflict and. sit. y. Nat. Economic Interdependence Across the Taiwan Strait and Beyond by Scott Kastner uses the. er. io. China-Taiwan economic relationship as a case study for the author’s hypothesis that the. n. a. iv. l C economic interests” stronger the influence of “internationalist U n within two competing nations, h. engchi. the more limited the effects of political conflict on economic interaction. While Kastner shows his hypothesis to be correct, he is extremely conservative in drawing conclusions from it (Kastner, 2009). Kastner points out that both sides of the Taiwan Strait have large coalitions of “internationalist economic interests” with high degrees of political clout. He notes that the CCP seems to be increasingly dominated by these voices, while in Taiwan these groups are often courted by both major parties. This includes the “Taishang” and other Taiwanese business interests. Because of the robust influence of the internationalist economic narrative.

(25) 25. on both sides of the Strait, the economic relationship between Taipei and Beijing remains strong, even in the face of sometimes intense political confrontation. Furthermore, according to Chang and Goldstein, ascension to the WTO was promoted most heavily on both sides of the Strait by what Scott Kastner would call “international economic interests” who see liberalization as beneficial both in economic terms, but perhaps also politically. As the introduction makes clear, both sides have reasons to play by the rules of normal international exchange when dealing with each other. And as liberalization across the Strait has occurred, economic interaction has increased at an ever greater clip than previously (Chang & Goldstein, 2007). One shortfall of their work however, at least as it applies to this examination, is that it. 政治. almost completely decouples the economic implications 大 of WTO membership and greater. 立. ‧ 國. 學. Cross-Strait commerce with the political implications. This is probably the responsible course. ‧. for the authors - as Kastner points out, the political implications of economic interaction are. sit. y. Nat. difficult to predict and can be influenced by circumstances beyond economic jurisdiction.. er. io. Still, hoping for a “smoking gun” as to the political implications of economic. n. a. iv. n interdependence would make it easierl toCprove this text provides h a thesis. URegardless,. engchi. valuable information that will assist in determining whether decreasing tourism from China implies economic coercion. However, Kastner points out that the effects of trade on peace and Taiwan’s sovereignty are unclear. Many analysts take it for granted that greater economic exchange implies a decrease in political conflict, but that is hardly a causal relationship. Analysts on the other side of the argument have noted that it could be the other way around - a cooling of political conflict could be the cause of more bilateral economic activity. Furthermore, there is very little evidence that nations with starkly different systems of government will necessarily.

(26) 26. be peaceful with each other, regardless of economic activity. Thus, Kastner is reluctant to predict that greater economic engagement on both sides of the Strait will guarantee peace. Kastner states that, with the right conditions, Beijing and Taipei are more likely to avoid military conflict if there are more economic links, but again, that is largely dependent on those conditions. If Beijing relies too heavily on “stick” as opposed to “carrot” diplomacy, they are liable to empower nativist Taiwanese constituencies and undermine the clout of Taishang (Taiwanese business owners in China) and other internationalist economic interests in Taiwan. Other factors include continued agreement between internationalist economic interests and PLA in Beijing, as well as the strength of the respective economies and relations with other players in the region, especially the United States.. 政治. Another consideration is that if Beijing finds that大 economic channels are counter-. 立. ‧ 國. 學. productive in drawing Taipei closer politically to the Mainland, much of CCP policy towards. ‧. Taiwan is rendered ineffective. These policies have been crafted by PRC leaders who are. sit. y. Nat. convinced Taiwan can be brought into the fold peacefully, and have argued against harsher. er. io. methods proposed by the PLA and other, more hawkish voices. Should economic avenues not. n. a. iv. l C gain the upper hand pan out for Beijing, these “hawks” could U n in policy decision-making. h. engchi. Rosen and Wang also chime in regarding future China-Taiwan relations as it relates to Taiwan’s economy. They conclude Taiwan would suffer should it try to abandon its economic relationship with the Mainland. Their claim is that even if Taiwan were able to untangle its economy from the Mainland, and were able to enter trade deals with other nations to replace them, it would ultimately still lose. In other words, Taiwan has much more to gain, economically, by engaging China, than by remaining protectionist. The ultimate conclusion of their work is that the implications of China-Taiwan economic liberalization are positive, and that with greater liberalization on the part of Taipei, economic growth will follow..

(27) 27. Again however, this says not enough about the political implications. Glaringly clear is the fact that the Rosen and Wang prioritize the macroeconomic over local concerns, and are very much pro-globalization. All predictions, while meticulously researched, are based on the assumption that growing trade with China will have a positive effect on Taiwan’s economy with no mention of who might be the losers in that calculation. Furthermore, while their text is very much in favor of closer economic ties with China, noticeably absent from discussion are the political implications. While it is a common refrain for other works to also omit political analyses, leaving them out of this book is strange. Rosen and Wang take a strong stance on the economic benefits of the ECFA and liberalization, so one would think they have to know that the political relationship between Beijing and Taipei would obviously. 政治. 大 be or even acknowledge that it be influenced. Still, they make no mention of what that might. 立. ‧ 國. 學. would be an issue.. ‧. Most of the literature shies away from claims about how the economic relationship. sit. y. Nat. could ultimately affect the political situation between Taipei and Beijing. As Kaster points. er. io. out, the interplay of economics and policy is tremendously complicated and it likely is not. n. a. iv. l C However, he does wise to draw firm conclusions either way. U n point out that the general h. engchi. assumption that greater trade implies greater peace might be largely faulty. On the other hand, scholars like Rosen and Wang have no qualms claiming the best case scenario is one where Taipei liberalizes as much as possible in regard to Beijing. While unstated, the implication is that Taipei be drawn into Beijing’s metaphorical orbit, and that is ultimately better for Taiwan’s economy. Another universally acknowledged fact is that Beijing’s strategy towards Taiwan has been to “buy” its erstwhile province rather than force Taipei to unify with the Mainland. As such, Beijing has been a huge proponent of increased trade and cross-Strait investment and commerce. This growth has produced a degree of mutual dependence, but especially on the.

(28) 28. part of Taiwan. It has also given clout to the “international economic interests” on both sides of the Strait, who strongly support further integration (Chang & Goldstein, 2007). Because Taiwan and China are so linked economically, many analysts expect Beijing to wield undue influence over Taipei. However, Kastner shows this has not been the case. As mentioned, Beijing has courted the Taishang and has hoped to develop them into a pro-China lobby. This effort has been largely unsuccessful however. Taishang businessmen have adapted and keep their political leanings quiet, and as it stands, winning the Taishang vote is not imperative to retaining political power in Taipei, as Chen Shuibian showed in his reelection when he won with a coalition made up of nativists and protectionists (Kastner, 2009).. 政治. 大 towards Taipei has been Another important piece of Beijing’s economic strategy. 立. ‧ 國. 學. continually signing trade agreements, like ECFA. Much of Rosen and Wang’s book is. ‧. invested in predicting the future of the economic relationship given that the Economic. sit. y. Nat. Cooperation Framework Agreement (ECFA) was signed by both Taipei and Beijing. The. er. io. agreement is essentially a roadmap for further liberalization of Taiwanese policy, and would. n. a. iv. n ensure a few things. First, that Beijingl did Taiwanese trade C hnot attempt toUpreempt. engchi. agreements with other regional neighbors, the subtext being that it was common Chinese policy to isolate Taiwan, and that Taiwan would be able to compete with Southeast Asian exports in China after Beijing signed the ASEAN-China Free Trade Area Agreement (ACFTA) (Chang & Hayakawa, 2014). Furthermore, the FTA signed between Beijing and the ASEAN nations (ASEAN +1), along with being unable to sign its own agreements in the region meant that Taiwan stood to stagnate while China and the region surged ahead. The goal of ECFA was to mitigate that eventuality (Rosen & Wang, 2011). Rosen and Wang further note that China, in dealing with Taiwan, follows WTO regulation and has essentially liberalized its entire trade regime with the island. Taiwan, on.

(29) 29. the other hand, has tremendous restrictions regarding economic interaction with China, specifically in terms of labor, investment, and imports. Both sides behave the way they do, not necessarily for economic reasons, but for those related to security or policy goals. Beijing has stated it is not concerned with the economic outcomes of liberalizing economic relations with Taiwan, the goal being rising interdependence and ultimately political reunification. This is not entirely true, as China has profited immensely from trade with Taiwan (Rosen & Wang, 2011). Still, Taipei’s illiberal policies towards Beijing, very much out of line with how the ROC conducts trade with the rest of the world, are meant to insulate Taiwan’s economy from becoming too intertwined with China’s, and thus vulnerable (Rosen & Wang, 2011; Tanner, 2007).. 政治. 大never used real economic coercion Scot Tanner makes it clear that Beijing has almost. 立. ‧ 國. 學. against Taiwan. The only instance he notes is that of the Taishang putting unequal pressure. ‧. on Taipei to liberalize trade policy with the Mainland. I say “unequal” because some of the. sit. y. Nat. Taishang investors are supporters of the DPP. These business magnates have, in turn,. er. io. experienced some pressure from Beijing, mostly in the form of being hassled by Chinese. n. a. iv. l Cexample, government regulators and government officials. For U n inspectors would visit h. engchi. factories unannounced, or repeated audits of company finances were demanded. This coercion, however, is extremely light and only generally directed at Taishang Beijing has dubbed too supportive of the DPP. There is some further evidence of Taiwanese officials limiting provocative speech in order to court big business support (e.g., Chen Shuibian in 2000 foregoing talk of Taiwan independence), but again, there is no evidence this is directly related to threats of economic pain coming from Beijing (Tanner, 2007). Furthermore, even though Taiwanese voters generally see China as a political threat, they do see China as an economic opportunity (Liu & Lee, 2016). Beijing’s policy has banked on economics being more important than politics (both on the Mainland and in.

(30) 30. Taiwan), thus this perspective seems within the scope of CCP strategy towards Taiwan. Still, and as mentioned regarding Kastner’s analysis, the political fears are intimately related to economic concerns, simply because of how easily Beijing, with economic leverage over Taiwan, could turn that economic relationship towards coercion. In other words, just because China has not attempted major sanctions, it does not mean they never will. Up until the present, China has tried to woo Taipei economically, but they could, through economic venues, impose pressure on Taiwan in a few significant ways. The PRC, according to Tanner, is reaching for the ability to: force Taiwan to reunify under less than favorable conditions, undermine support for developing Taiwan’s defensive capabilities, turn influential individuals, especially Taishang, into a lobby for Beijing, and scare the Taiwan electorate. 政治. 大possible venues of leverage into supporting greater political concessions, among other. 立. ‧ 國. 學. (Tanner, 2007).. ‧. This other option for Beijing, the stick part of its “carrot-and-stick” approach to. sit. y. Nat. Taiwan, is to act in a way so as to “punish” Taipei. As mentioned, one strategy is to target. er. io. Taishang, which they did during the Chen administration. This, however, was largely. n. a. iv. l Cthe rug out from under ineffective - it makes little sense to pull U n your desired base of support, h. engchi. and by hurting the interests of the Taishang, they became less likely to speak to Beijing’s interests in Taipei (Tanner, 2007). Another strategy for punishment is various forms of economic sanctions. We may be seeing this currently with China tapering off the amount of tourists coming to Taiwan, but historically, at least since the late 80s, Beijing has been loathe to signal political resolve through economic means. Chinese leadership is reticent for a number of reasons, not least of which are the economic benefits Taiwanese businesspeople bring to some regions of China. However, and as Beijing has stated again and again, their intentions in doing business with Taiwan are to ultimately gain political leverage in Taipei, and economic sanctions seem to be.

(31) 31. a last-ditch effort before outright conflict (Kastner, 2009). If Chinese clamps on the tourism spigot are an early sign of economic coercion directed towards Taiwan, policymakers should view this as a real warning sign of difficult days to come. Complicating the issue further is that while Beijing seems to have bungled some early attempts at economic coercion, Taiwan’s treatment of policy can be equally ineffective and send mixed messages. Tanner explains that Taiwan has adopted something of a gradual and uneven liberalization policy in regards to Cross-Strait commerce. Depending on the government, sometimes there is an opening, and sometimes Taiwan tries to roll policies back. Furthermore, Taipei occasionally attempts to dislodge Taiwan’s economic integration with China. An example is Lee Tenghui’s “Go South Policy,” that attempted to incentivize. 政治. 大 Asian nations. This policy was moving and opening of factories and production to Southeast. 立. ‧ 國. 學. generally unsuccessful for a range of reasons. First, language and cultural barriers between. ‧. Taiwan and China are much lower than between Taiwan and Southeast Asia. Also, Beijing. sit. y. Nat. actively isolated Taipei and tried to preempt Taiwan investment in Southeast Asian nations. er. io. by striking deals of its own. The “Go South Policy” sounds very much like President Tsai’s. n. a. iv. l C have changed since “New Go South Policy,” and while times U n the Lee administration, there is h. engchi. very little reason to expect the new endeavor to turn out any differently than its predecessor. Perhaps the most effective form of “coercion” Beijing has employed has been lobbying, incentivising, or threatening third parties into avoiding trade deals with Taipei, ensuring strategies like the “Go South Policy” ultimately fail. This action, the authors note, has potentially dangerous consequences and could ultimately undermine the status quo. This is part of why Rosen and Wang hail the ECFA; it put a stop to Chinese meddling in third party agreements. However, if Taipei does not liberalize and further integrate its economy with the Mainland, it would ultimately stagnate and make the people of Taiwan more vulnerable and tend towards a weakening economy (Rosen & Wang, 2011)..

(32) 32. While it is clear that Beijing has positioned itself so as to be able to use economic coercion, it’s less clear that it would ultimately be successful in helping China bring Taiwan further into its orbit. As a matter of fact, Tanner’s central argument is that economic coercion is something of a double-edged sword in Beijing’s hands (Tanner, 2007). He argues that ultimately, while economic pressure on behalf of China could certainly do damage to Taiwan, PRC leadership might not be able to wield it to positive affect, and that in doing so they could push Taipei further from Beijing’s orbit as opposed to frightening Taiwan into greater dependence. The problem with coercion is that it rarely works, and there is strong evidence it would do little to force Taiwan to accept greater political concessions. Tanner explains that. 政治. 大 is unable to resist the sanctions can only work when a “target” country (e.g., Taiwan). 立. ‧ 國. 學. economic pressure of an “initiating” country (e.g., China). Sanctions against democracies are. ‧. almost never effective in extracting political concessions, and, as repeatedly stated, could. sit. y. Nat. have the opposite effect. Consider the 2016 Taiwan elections - the DPP and Tsai Ing-wen. er. io. were swept into power not even as a response to Chinese economic coercion, but the fear of. n. a. iv. closer economic ties to China and thel potential C h for economic U n vulnerability to Beijing. In this. engchi. political environment, it is hard to see how economic sabre-rattling on the part of the Mainland would do anything but strengthen the resolve of the Taiwanese populace and empower protectionist and independence-minded leaders. Tanner also points out that this is not necessarily good news for Taiwan. As previously discussed, if economic sanctions and coercion are seen as a non-viable form of leverage, it removes the ability of Beijing to clearly signal resolve. Economic pressure is often seen as a “middle path” when signaling resolve to take action in support of a political agenda. On the softer side is diplomatic condemnation and isolating actions, which Beijing conducts against Taipei routinely. On the other side, however, is military or covert action. If.

(33) 33. the middle ground of economic pressure is not present to show where Beijing stands in regards to its feelings towards an increasingly independence-minded Taiwan, Taipei could find itself in a significant confrontation with almost no warning. Furthermore, Taipei could likely resist Beijing’s punitive policies for a long time, thus frustrating PRC policymakers. Tanner notes that Taiwan has vast foreign currency reserves, with which it could float its economy even under difficult conditions for an extended period of time. In addition, Taiwan’s tech industry is highly mobile, and if it had to depart from China, chances are it could, even under less than favorable conditions. This would also cause tremendous pain to the Mainland, as Taiwan-owned companies are linchpins of a number of local and provincial economies. True, China could bear the brunt, but it would have to. 政治. 大 on the part of local reconfigure its economy in many ways and risk dissatisfaction. 立. ‧ 國. 學. populations and provincial leadership.. ‧. While Beijing could exert economic influence over Taiwan, the evidence shows that it. sit. y. Nat. might only exacerbate tensions, as opposed to cajoling Taipei into accepting itself as a part of. er. io. China. As such, Beijing is still reluctant to act this way, but this could be a scary, rather than. n. a. iv. l C and stick” policies assuring fact. If China feels that its “carrot U n of luring Taiwan in h. engchi. economically are bound to fail, there may be little warning of Mainland escalation. Furthermore, the subtext for economic coercion on the part of Beijing is that Taipei is already essentially dependent on the Mainland for continued economic growth - a truth further explored in the other texts. Finally, one field of thought that this text touches and draws upon is the idea of economic coercion in international relations. This is rooted in the ideas of economic engagement – namely that one nation can influence the actions of another by how they set policy (Mastanduno, 2003). China, as can be seen, firmly believes that Taiwan can ultimately.

(34) 34. be manipulated into acting according to Beijing’s wishes, and this manipulation will occur largely through economic policy. Take tourism for an example – during the relatively warm relations experienced during the Ma Administration, Taiwan was, in theory, enriched by huge amounts of Mainland Chinese visitors who spent relatively large sums of money. However, when Taiwan’s electorate voted the DPP and Tsai into office, thus pushing away from China culturally and politically, Beijing’s strategy seems to have shifted to enforcing a degree of punishment in the same area. Having been the largest and most important market for Taiwan’s tourism sector, China thus gained leverage over it, and now that political circumstances have changed, Beijing is attempting to wield that leverage. Thus China’s economic engagement is. 政治. 大and the Taiwanese people. apparent in attempting to extract concessions from Taipei. 立. ‧ 國. 學. Interestingly, China seems to be following the lead of the United States in using. ‧. economic engagement as both an enticement and a cudgel in dictating its regional. sit. y. Nat. environment (ibid). However, it is unclear whether China is still attempting to use leveraging. er. io. strategies, say, in attracting friendly Taiwanese to work in China or by a “United Front”. n. a. iv. l C in Taiwan and that strategy that works to empower the KMT U n limits economic benefits felt by h. engchi. known DPP supporters (Tsang & Tien 1999), or if they are simply attempting to impoverish Taiwan through brain-drain and economic coercion, like we are seeing with tourism (Jennings, 2017). This thesis makes the case that with the changing of Taiwan’s political guard, Beijing is more willing to explore punitive economic initiatives against Taiwan, but cautiously, especially at first.. Mainland Tourism in Taiwan The literature, at least in English, regarding Chinese tourism in Taiwan is limited to say the least. However, the English literature discussing specifically Mainland Chinese.

(35) 35. tourism in Taiwan has been supported in this thesis by expert interviews. These experts include business leaders, politicians, trade association directors, and academics. The situation is changing rapidly, as evinced by the range of news coverage and the popularity of the topic in public discourse. However, the literature available and experts point to Taiwan being an important destination for Chinese travelers and that recent political shifts in Taiwan, namely the ascension of the DPP and Tsai Ing-wen, have caused Beijing to begin to limit the number of travelers in Taiwan (Ledsham 2016, Carolus interview, Lee interview, Chen interview, Huang interview, 2017). There is further evidence that Taiwanese tourism industries, like hotels, shops, and transportation, are feeling the effects of the decrease in Chinese visitors (Carolus interview,. 政治. Lee interview, Chen interview, Huang interview, 2017).大 Tour bus operators and drivers have. 立. ‧ 國. 學. flocked to the government asking for help to pay back large loans they took in order to. ‧. finance the purchase of new busses, busses that are now largely unneeded, unfilled, and. sit. y. Nat. unprofitable (Chen interview, 2017). This in turn has had an effect on the banking industry,. er. io. which provided the loans. Now banks are joining drivers in lobbying the government for. n. a. iv. l C(Huang interview,n 2017). A number of hoteliers assistance to avoid large-scale forfeiture U h. engchi. report difficulties in making sufficient earnings from Chinese visitors as their trips are so heavily controlled by Chinese operated travel agencies (Apple Daily, 2015). Even large and high end hotels, like the Grand Hyatt Taipei, report decreases of over 10 percent relative to last year (Carolus interview, 2017). Chinese tourists, in tour groups hosted by Chinese travel agencies, are more likely to visit sites less frequently visited by tourists from other nations, like Japan and the West (Lin 2012, Lee interview 2017). So while the literature in terms of economic and political relations in the Taiwan Strait tends to agree, opinions regarding the beneficial nature of Chinese tourism is controversial. Still, evidence exists that the money Chinese tourists spend often.

(36) 36. finds its way back to the pockets of Chinese business or those owned by Hong Kong investors (UDN, 2016). If this is the case, then a decrease in the number of visitors from China would have a smaller effect on the tourism industry than anticipated, and could be a positive sign for Taiwanese business-owners and workers. Expert opinion supports the fact that there is Chinese and Hong Kongese investment in Taiwan’s tourism industry, but this investment is largely a positive outcome for Taiwan as it means most of the profit and operating costs stay in Taiwan and support local economies and various parts of the larger tourism sector. While some decry the state of the tourism industry and the loss of so many Chinese visitors, others are happier. Many Taiwanese note that Chinese tourists are receiving a self-. 政治. 大 and economy, and these confirming experience and are a drain on Taiwan’s resources. 立. ‧ 國. 學. sentiments are fanning dissatisfaction among locals (Rowen, 2016). Furthermore there are. ‧. real concerns about tourist sites being overcrowded with Chinese tourists (Su, Lin, & Liu,. sit. y. Nat. 2012), a circumstance that mirrors the sentiment of many Taiwanese.. er. io. The aim of this thesis is to become an important entry into the English language. n. a. iv. literature regarding Mainland Chinesel tourism C h in Taiwan. U nIn doing so, this study will address. engchi. the history of Mainland tourism in Taiwan, the economic and social effects of it, and whether Mainlander money enters Taiwan’s economy or is fed back to the Mainland. Furthermore, it will examine literature and data to determine what exactly is changing, what the effect may be on Taiwan, and what can be done to address changes in tourist flow from China. These questions will be addressed more completely in Chapter 3..

(37) 37. Chapter 3 - Mainland Tourism in Taiwan: Past and Present Setting the stage Mainland Chinese tourism in Taiwan did not begin until 2008, but in order to understand why it began then, observers must appreciate the state of China-Taiwan relations. In 1949, when the Republic of China (ROC) retreated from the Mainland to Taiwan, it cut off all official contacts with what became the PRC. Martial law continued until 1987, the same year that the ROC established the Straits Exchange Foundation (SEF) to conduct the ROC’s first semi-official contact with the PRC since 1949.. 政治大 In 1986, China Airlines Flight 334 was hijacked by pilot Wang Xijue and landed in 立 ‧ 國. 學. Guangzhou. The incident forced then-President Chiang Ching-kuo to reverse his “Three. ‧. Noes” policy towards the PRC in order to negotiate the return of other crew members and the. sit. y. Nat. aircraft in question. The “Three Noes” were set by Chiang Ching-kuo in response to Deng. al. er. io. Xiaoping’s 1979 overtures for a degree of rapprochement across the Taiwan Strait,. n. iv n C specifically calling for the opening of the h“Three (Lin & Robinson, 1994). The Three e n g Links” chi U Links are trade, mail, and direct travel, to which Chiang responded with “no contact, no compromise, no negotiation” - his Three Noes. The ROC policy of no contact and collaboration stood until the China Airlines Flight 334 Incident. This event is seen as a “catalyst” for the opening of China-Taiwan dialogue (ibid). Indeed, the very next year, the SEF and its Mainland counterpart - the Association for Relations Across the Taiwan Straits (ARATS) met and set the tone of subsequent Taipei-Beijing communication and collaboration (World Heritage Encyclopedia). Still, it was 21 years between the establishment of the SEF and ARATS and the opening of regular direct flights across the Strait. As is common in China-Taiwan exchange,.