Monthly Archives: May 2011

Mazu Pilgrimage

Chenlan Temple in Taichung County (central Taiwan) is the island’s most famous Mazu temple. Every March, the statue of Mazu is carried out for a pilgrimage lasting up to 8 days and 7 nights. Starting from the temple, it travels 65 miles to Fengtien Temple in Chiayi County (southern Taiwan). More than 100,000 Mazu followers participate in the annual pilgrimage, one the most important religious events in Taiwan.

The days of pilgrimage are not fixed. Each year after the Lantern Festival (15 days after the Lunar New Year), the chairman of the Chenlan Temple throws the divination block to determine the pilgrimage’s departure date and time. This year, it fell on April 8. During the pilgrimage, the faithful rush to touch the golden statue of Mazu, praying for good luck.

The photos below were taken by Yang Deng-jie, otherwise known as Jimmy. Jimmy enjoys photography and traveling. From his photos, you can tell he is careful to capture a mix of local history and culture, historical buildings, people, customs and edible delights. Working as a pharmacist, Jimmy often volunteers his medical services at home and abroad. He has volunteered in the Solomon Islands, India, Sikkim, Darjeeling, Manpuri, Nepal and other destinations around the world.

On ROC’s centennial, Deputy Foreign Minister Shen reflects on Taiwan’s friendship with the US

The history of the Republic of China (ROC) on Taiwan cannot be surgically cut in two, with the first period from 1911 to 1949 being discarded while just keeping the second period since 1949. Seen in perspective, the best traditions and the best legacy of the ROC have to be treated as an organic whole to pass on to future generations stressed Dr. Lyushun Shen, the Vice Foreign Minister of Taiwan, in a speech given at Stanford University on April 18th.

During a seminar cosponsored by the Center on Democracy, Development, and the Rule of Law (CDDRL) and the Walter H. Shorenstein Asia-Pacific Research Center, Dr. Shen talked about “A Century of Unique Friendship between the ROC and the US.” The seminar was moderated by Larry Diamond, a senior fellow at the Hoover Institution, Stanford University, and the coordinator of the CDDRL. The event was attended by well over 80 scholars, students, officials and others interested in Taiwan, mainland China, US relations.

As an expert on US-ROC diplomatic history and the island’s external relations, Dr. Shen earned his doctorate in International Relations from the University of Pennsylvania in 1981. He is a seasoned diplomat with a distinguished career serving at Taiwan’s overseas missions in the United States and in Europe since the early 1980s. Prior to his current appointment, he was Taiwan’s representative to the European Union (EU).

Taiwan’s legacy in international relations

In the speech, Dr. Shen emphasized that the ROC government is representing not only the people of Taiwan, but also, the best tradition and the legacy of the republic’s founding father, Sun Yat-sen (1866-1925). These traditions and legacy enrich Taiwan today, he said.

He noted that Taiwan’s best traditions did not merely start after 1949, but can be traced back to 1911. As an example, he talked of the country’s diplomatic service by mentioning people like Lou Tseng-tsiang (1871-1949) and Wellington Koo (1887-1985), who represented the ROC at the Paris Peace Conference in 1919. The ROC was also a founding member of the United Nations and held a seat on the International Court of Justice. These responsibilities are the traditions that have been passed down to the generations that have followed.

These traditions were brought from mainland China to Taiwan by people like Tsiang Ting-fu (1895-1965), a senior diplomat defending the ROC government’s right to represent China at the UN Security Council, and George Yeh (1904-1981), a participant at the Sino-Japanese Peace Treaty (aka, Treaty of Taipei) in 1952, and the Sino-American Mutual Defense Treaty of 1954. Their presence in the international arena was crucial in retaining the country’s status and in preventing invasions by Communist China. Their modern day counterparts are people like former Foreign Minister Frederick Chien and Ting Mao-shih, who have helped shape the external relations of modern Taiwan.

In order to fully understand the unique friendship between the US and China, we also need to go back 100 years to the late Qing Dynasty, according to Dr. Shen.

Historical context of US-China relations

With pride, Dr. Shen told the audience that Taiwan’s Foreign Ministry is the custodian of the many unequal treaties. A total of 173 such original documents are preserved in the archives of the ministry, starting with the first one, the Treaty of Nanking, which included the ceding of Hong Kong to the British. Many of these treaties speak of the disgrace and humiliation the Chinese people experienced since the Opium War.

The first important US-China treaty was the Anson Burlingame Treaty of 1868. Burlingame was an American congressman from Maryland and the ambassador to China. He stayed in Beijing for three years, and was well-liked because of his friendliness and deep knowledge of China. In those days, the US was unique because it had no territorial ambitions towards the Chinese empire. Unlike other Western powers, the US did not ask for territory, lease of any ports, or press their sphere of influence. It only asked for equal trade opportunities. The US later announced its “Open Door Policy” and was the friendliest country towards China at the time.

Shen related the story of Burlingame that illustrates China’s high regard for the American statesman. In the 1860s, the Qing Dynasty could not find a qualified Chinese ambassador, so Burlingame was asked to represent China on his return to Washington in the signing of a treaty with the United States on behalf of China. Serving as a temporary Chinese ambassador, he even secured most favored nation status for China so that Chinese people could stay and work in the US permanently. This would introduce Chinese labor to America for railroad construction at a time when California had already adopted the Chinese Exclusion Act.

The second important treaty Shen mentioned was the Boxer Protocol signed in 1901 between the Qing Dynasty and an eight-nation alliance that included the US. Eight Western nations sent forces to defeat the Boxer Rebellion, which in turn launched a nationalist movement in China to fight Westerners and Christians. When American troops landed at Tianjin port in northern China, among them was an American mining engineer named Herbert Hoover. He helped harbor many US Marines and Chinese Christians. Hoover, also a Stanford student, later became the 31st president of the United States.

In defeat, China was made to pay 450 million taels of silver (roughly $340 million US dollars then) as indemnity. The US received 7.32 percent of the total. Later, President Theodore Roosevelt decided to return most of the money. He set up a scholarship program for Chinese students to study in the US and to fund the establishment of Tsinghua University in Beijing, which now has two campuses – one in Taiwan and one in China. Since its establishment, Tsinghua has nurtured Taiwan’s brightest minds.

In mentioning schools, Dr. Shen noted that Sun Yat-sen had studied at Punahou School in Hawaii from 1882-83, which is also the alma mater of the current US President Barak Obama. Dr. Shen emphasized that Sun’s political legacy embodied in the Three Principles of the People was inspired by President Abraham Lincoln’s belief in a government “of the people, by the people and for the people,” and stipulated as the first article in the ROC Constitution. When the Wuchang Uprising broke out in China in 1911 resulting in the establishment of the ROC, Sun was still in Denver on a fundraising trip.  

American ideology in China and Taiwan

The United States has also played a major role in shaping the Chinese republic with its missionaries, educators and businessmen. Americans built a great many schools and hospitals in China. Most of these pioneers came with good intentions and not out of greed. Early missionaries preached Christianity to the Chinese people while educators and businessmen tried to modernize Chinese society. In times of trouble, the US has always come to China’s aid.

As an example, during World War II, the American Volunteer Group (aka, The Flying Tigers), joined the Nationalist Chinese Air Force to fight the Japanese. Their joint efforts saved millions of civilian lives in China by shooting down 2,600 Japanese aircrafts. Even during the Chinese Civil War, the US sent General George Marshall to mediate between the Communists and the Nationalists. The general did his best, but he eventually failed to stop a civil war in China.

Dr. Shen was especially touched to learn about the specifics of US assistance after Chiang Kai-shek’s government was forced to move to Taiwan in 1949. The US aid came in many forms, touching all aspects of daily life, from agriculture to public health, the construction of transportation arteries to charting the course of Taiwan’s military. Washington had helped Chiang and the people of Taiwan lay down the foundations for the economic miracle that came later.

The US has influenced Taiwan in other ways too. In the last 60 years, Dr. Shen said, about two-thirds of Taiwan’s cabinet members have been American-educated. Taiwanese people understand and appreciate the long-term and unique friendship the country has with the US.

Dr. Shen urged the US government and its people to support Taiwan’s participation in international organizations and to continue vital arms sales to the island, not to fuel an arms race with China. Instead, with the adequate supply of necessary weapons from the US, the island can engage Beijing in searching for a peaceful solution with confidence. As former President John F. Kennedy said, “Let us never negotiate out of fear. But let us never fear to negotiate.” Shen hopes the current easing of tension across the Taiwan Strait will continue, and not revert back to the hostilities of years past.

Bumps in the road

Although the country maintains close economic ties with the US, it is not without hiccups. One such issue pertains to the importation of American beef. In January, Taiwan’s health authorities found that imported American beef contained residuals of a banned chemical called ractopamine. As much as Taiwan welcomes American beef, Dr. Shen said Taiwan has zero tolerance for the use of this chemical in beef products. Some might say this is a scientific issue better left to scientists, but it is also an emotional and a political one.

Despite Taiwan’s improved relations with mainland China, Dr. Shen does acknowledge there are fundamental differences between the two countries. The mainland represents the greatest threat to Taiwan, but also provides a wealth of opportunities. Taiwan’s government has to minimize the threats while maximizing the opportunities.

What is happening in Taiwan and mainland China today is similar to the situation in the European Union. It is one of economic and social integration, said Dr. Shen. Last year, trade between the two sides almost reached US$150 billion. Out of that amount, US$77 billion was in Taiwan’s favor. Globally, Taiwan’s trade last year was US$530 billion, but only US$25 billion was in Taiwan’s favor. It is apparent that the people of Taiwan would suffer economically without the markets on the mainland.

During the Q&A, someone posed the question whether the United States might be concerned with an overly closed relationship between Taiwan and mainland China. Diamond said, from his extensive knowledge and contacts with high-ranking US government officials, he sees no evidence of such concerns. The US is already militarily involved in Iraq and Afghanistan, and possibly in another military engagement in Libya. There are also other global issues that concern the US, such as Pakistan’s instability coupled with its possession of nuclear weapons. Al-Qaeda also continues to be a concern, lurking in many places and seeking fertile ground in Yemen and elsewhere. Plus, with oil prices soaring and set to increase further with China’s continued development, “Americans have enough concerns already,” noted Diamond.

Any rational US government would not want to see any conflict in the Taiwan Strait. Anything that would be mutually, voluntarily agreed upon, that would reduce tensions in the region, would frankly evoke a sigh of relief from the American administration, the Stanford professor said.

Functional and pragmatic diplomacy

Diplomatically, Dr. Shen added, Taiwan is realistic. Today, the PRC has 171 diplomatic allies while the ROC only has 23. When he came into office, President Ma called for a diplomatic truce. Taiwan now works hard to get more countries and territories to grant visa-free status to Taiwan passport holders. This has made our people feel that the government has done something tangible to make their lives easier, he said.

When President Ma took office in 2008, the number of countries granting visa-free status to Taiwan was 53, today it is 113, while merely 18 countries do so for the Chinese mainland. Recently the EU, comprising 27 countries, granted Taiwan this status. Taiwan is the fifth country in Asia to have attained this status. During the EU parliament’s approval, Taiwan received overwhelming support with a vote of 559 to 40. Visa-free status has also been granted by Canada, Australia, Malaysia and other countries. France has also instructed its overseas territories to follow suit. This is definitely not diplomatic status, but it is a vote of confidence in Taiwan, allowing us dignity and ease of travel.

Today, Taiwan has 117 missions abroad. In Taipei, 69 countries are represented. The American Institute in Taiwan (AIT), even though not officially an US embassy, has more than 500 employees. In effect, Taiwan operates like a normal country, Dr. Shen stressed. The size of Taiwan’s Foreign Service and foreign policy operations is comparable to that of a medium-sized European country, such as Sweden, Spain or Italy. Last year, every European country, except Malta and Romania, sent dignitaries to visit Taiwan, even without maintaining official diplomatic ties with the island.

Dr. Shen emphasized that even though the country is represented under an odd name, the Taipei Economic and Cultural Representative Office, its government is pragmatic. It strives to provide its people with the best international life, ensuring that the lack of diplomatic relations will not hinder them much in their desire to be active members of the international community.

Invest in Taiwan: A Gateway to China, a conference in SF on May 18

A large investment and trade delegation, led by Christina Liu, minister of Taiwan’s Council of Economic Planning and Development, is scheduled to visit the US from May 14 to 21. The delegation will hold investment conferences and visit local businesses in New York, San Francisco and Los Angeles, respectively, to promote increased investments in Taiwan. In San Francisco, the conference will be held at the Westin St. Francis Hotel (near Union Square) on May 18.
With more than 100 members in the group, it is the largest delegation from Taiwan aimed at establishing strategic alliances between Taiwanese and American businesses. The group covers five major areas of investment, ranging from biotech and medical tourism, renewable energy & electric vehicles, high-tech industries (including cloud computing, information and communication technologies), cultural and creative/digital content industry, and land development and hotel industry. Nine central government agencies and two local government (Hsinchu County and Penghu County) are sending officials to accompany the delegation in order to readily answer participants questions and help open doors in Taiwan.
Since taking office in 2008, President Ma Ying-jeou’s administration has injected new energy into Taiwan’s economy. With the recent signing of the FTA-like Economic Cooperation Framework Agreement (ECFA) between Taipei and Beijing, the island’s close business connection with China and its location as a Asia-Pacific hub will be further utilized. Bay Area businesses can take advantage of Taiwan’s experience in the Chinese markets by forming strategic alliances with Taiwanese counterparts at the conference. Currently, US is the third largest trading partner of Taiwan and also the largest source of foreign investment, while Taiwan is the ninth largest trading partner of the United States. For more information, please visit website
The delegation will hold the conference at the Tower Salon A of the Westin St. Francis Hotel (335 Powell Street) from 8:30am to 12:30pm. Individual consultations may also be arranged in the sub-chambers. Minister Liu will deliver a keynote speech on the future of investment in Taiwan at 9:40am. Admission is free, but pre-registration is required at

SF Chronicle: A visit to historical Tainan

This past Sunday (5/8), the San Francisco Chronicle featured Tainan, Taiwan in its travel section. In “Exploring Taiwan’s hometown,” Spud Hilton wrote of his recent trip to Taiwan’s oldest, fifth largest city. “While sprawling Taipei is Taiwan’s ultra-visible capital, I had traveled south to Tainan to learn about the often overlooked country through the city said to be its historical, spiritual and cultural heart.”

To read more of Hilton’s article, please click on the link below.  

Documentary of cinematographer Mark Lee at SFIFF

On May 4, the San Francisco International Film Festival (SFIFF) showed the third screening of Let the Wind Carry Me, a documentary about the life and art of Mark Lee. Even though it was scheduled during a weekday afternoon, the theater was packed with filmmakers and film buffs who came to learn about Lee’s brand of cinematography. Co-directed by Kwan Pun-leung and Chiang Hsiu-chiung, only Kwan was present to participate in the Q&A. But much to the audience’s surprise, Lee and his family were also in the audience.

For almost 30 years, Lee has collaborated with well-known director Hou Hsiao-hsien and many notable international directors. With over 40 films under his belt, he has truly established himself in his field and now regularly works outside Asia.  In talking to directors and his colleagues, his talent for setting up visual poetry is praised, along with his generosity for sharing his technical knowledge. One director related how Lee arrived for the start of filming without any crew.  When Lee was assigned one, the mainland Chinese director said, “Within one week, they became his faithful vassals.”

At its heart, this is a film about a man who loves what he does for a living and considers himself truly fortunate, yet he acknowledges it is a profession which takes him away from his family for long periods of time. It is a conflict between one’s creative life and one’s home life.

In one especially poignant scene, the man is again far away working on a film. During a break, he checks his phone and realizes he has received 20 phone calls within 20 minutes. He looks at the phone with dread, fearing it can only be the worst of news. Too apprehensive to listen to his messages, he says a silent prayer, hoping it’s not any of his family. Then he gets a text message, congratulating him on winning the National Literary Award, Taiwan’s highest award. He reflects back with a sense of relief, yet in the midst of his happiness, there is no one for him to embrace. His epiphany – what is important is our family.

During the Q&A, an audience member asked Kwan if he was intimidated to shoot a film about a great cinematographer. Kwan responded, it was nerve-wrecking at the very beginning, but thankfully for Kwan, Lee gets really involved in him films and didn’t pay him much attention.

The questions that followed were aimed at Lee. Some of the questions addressed his particular cinematography style. He responded by highlighting his desire to capture “luxurious realism” by enhancing reality to make it look real. He ascribes much of it to luck, but he also advocates the use of simple lighting.

When asked to compare digital media versus film, he responded it is up to the director’s preference, but he did say even without state-of-the-art equipment, you can make a perfect image. The most important part, he emphasized again, was the lighting.

Someone also asked him, now that he is so well-established, how does he work with a new director? Are they intimidated? How does it work out?  Lee likens the experience to a Chinese kung-fu master. He already has 30 years of experience, but if someone has only been practicing for three years, he hopes he can pass on his experience so the young director may learn some short cuts and benefit from his experience.

For the many who have worked with Lee, the constant mantra remains one of admiration. Lee and the directors he works with may not always agree, but according to Hou, “He always delivers.”

Taiwan’s major parties announce presidential candidates

On April 27, the opposition Democratic Progressive Party (DPP) announced that its chairperson, Tsai Ing-wen, will be the 2012 DPP presidential candidate based on the party’s presidential primary poll. Tsai defeated fellow candidate Su Tseng-chang by 1.35 percent. On the same day, the Central Standing Committee (CEC) of the ruling Kuomintang (KMT) nominated President Ma Ying-jeou as its candidate for the 2012 presidential election.

The United Evening News reported that after learning the results of the DPP primary, Hsu Chia-ching, spokesperson of the DPP, said what Tsai should focus on integrating the party factions and building consensus. By consolidating the DPP, Tsai will strengthen the party and give it a chance to win the presidential race.

In a video conference with the Center for Strategic and International Studies in Washington, DC on May 12, President Ma said if he is re-elected, he will continue his policy of negotiating with Beijing to increase mutual trust. He expressed a wish to maintain Taiwan’s economic growth and social stability by trying to minimize the gap between the rich and the poor and to reduce unemployment.

The Central News Agency reported that the CEC chairperson, Chang Po-ya, announced on April 19 that the next legislative election in 2012 will be combined with the presidential election, with the date of the double election due to be announced in mid-May. Chang said it is not completely impossible that the new date might fall on the day before the Lunar New Year (January 23, 2012).

Currently there is a two-month gap between the legislative election and the presidential election. The merger will reduce the election frequency and avoid unnecessary spending. CEC Secretary-General Deng Tian-you told the United Daily News that the legislative elections are estimated to cost more than NT$1.1 billion (US$366 million) and the presidential election is estimated to cost NT$1.2 billion (US$400 million). The merger could save NT$470 million (US$15.6 million).

According to the Central News Agency, if the combined elections are held in January 2012, there will be almost a four-month gap between the presidential election and the presidential inauguration. Some skeptics have said that this long period might cause a constitutional crisis. However, the CEC stressed that there is no need to worry because Taiwan’s democracy is in good working order.

Taiwan tops Japan quake donors

On May 5, President Ma Ying-jeou offered his sympathies to Japan’s earthquake and tsunami survivors while vice speaker of the lower house of Japan’s Diet, Eto Seishiro, visited Taiwan.  Seishiro, who also serves as the vice chairman of the Japan-Taiwan Parliamentary Friendship Group, is the first vice speaker of the lower house to visit Taiwan since the two countries severed diplomatic ties in 1972, according to the Central News Agency report.

On the day the earthquake struck Japan, President Ma asked Taiwan’s Foreign Ministry to express his condolences to the Japanese government and provide disaster relief aid of NT$100 million (US$3.3 million). He told Seishiro that Taiwan has raised nearly NT$5.7 billion (US$190 million) for the reconstruction of Japan, which probably is the largest in Taiwan’s foreign aid history.

President Ma also said that Taiwanese people appreciate the Japanese for their past assistance, including dispatching rescue teams, providing prefabricated houses and their donations after the 1999 earthquake and after Typhoon Morakot two years ago.

In mid April, Japan’s Shukan Shincho carried a report about President Ma’s attendance at an event benefitting Japanese earthquake victims. The weekly paper said that the Japanese people were surprised to learn that Taiwan ranked top in earthquake donations, and appreciated the gesture of true friends.

The paper said 130 countries have provided assistance and donated to Japan after the March 11 earthquake, including Afghanistan (US$1 million donation) and many less developed African countries. The most surprising donation to the Japanese people remains the amount of aid provided by Taiwan, which not only dispatched rescue teams and materials, but also donated US$135 million (as of April 1) through the Taiwan Red Cross. The donations coming from Taiwan’s 23 million citizens even surpassed that of the United States.

The Central News Agency reported that the memorial park in honor of the Japanese hydraulic engineer Hatta Yoichi (1886-1942) was inaugurated in Tainan, southern Taiwan on May 8. President Ma and former Japanese Prime Minister Yoshiro Mori both attended the ceremony.

Hatta was the major designer of the island’s Chianan Canal Project and was involved with its construction from 1920-30 (including Wusantou Reservoir in Tainan) during the Japanese colonial period. The Chianan Canal was the largest water conservancy facility not only in Taiwan during the Japanese rule, but in Asia as well. Also participating in a number of water conservation projects in Taipei and Kaohsiung, Hatta was known for his life-long contributions to Taiwan. He was killed when the ship he was on was sunk by a US submarine while he was on his way back to Japan in 1942.

Petrochemical project highlights economy, environment conflict

After President Ma Ying-jeou expressed his opposition to the Kuokuang petrochemical project in Changhua County in central Taiwan, Chen Bao-lang, chairman of Kuokuang Petrochemical Technology Co. announced the withdrawal of the naphtha cracker project on April 26. Chen said it is regrettable that the project failed to win approval after 24 environmental impact reviews in the past five years. 

The important factor that increased the strong opposition to the project was the devastating nuclear disaster and contamination caused by the recent earthquake in Japan. This has alarmed the environmentalists in Taiwan, prompting them to focus on the projects likely to have an impact on the surrounding area. In rejecting the project, President Ma stressed that the government has to cultivate a balance between a sustainable environment and economic development. He instructed the minister of the Interior to promote the wetland in Changhua as a national wetland and to develop a national park there.

The United Daily News reported that the environmental movement has been revitalized in recent years by opposing the plans for the Kuokuang petrochemical facility in Changhua.

The Taipei-based China Times said that the case marks a milestone for the Taiwan’s environmental movement. On the one hand, people have mobilized nationally, kickstarting the long-silent environmental movement, yet on the other hand, the government has reversed its policy following a strong public outcry, enabling people to see the possibility of shifting major policies as a result of citizen action.

Specific environmental toll of Kuokuang’s project

Since the start of the environmental movement in Taiwan in the 1970s, most of its protests have been directed at the petrochemical industry. The United Daily News said that the environmental concerns over the Kuokuang project included the destruction of wetlands, seabird habitat, migratory dolphins and other environmental conditions. The most serious concern was the risk of over pumping the groundwater in Changhua and nearby areas. The petrochemical industry requires a huge amount of water, and current water supplies in that region are already insufficient. The land would only sink further if groundwater was further exploited as part of the project.

Another concern was the predicted carbon dioxide (CO2) emissions, which were likely to be in the region of 11.87 million tons of CO2 per year. The Central News Agency reported that environmental groups asked Taiwan’s state-run CPC Corporation to transfer its carbon credits to Kuokuang to allow only 3.7 million tons of CO2 to be emitted per year. Du Zih-jyun, the director general of the Economic Ministry’s Industrial Development Bureau, said it is unacceptable because CPC is a 100 percent state-owned enterprise, while Kuokuang is a private company. Even though CPC is the largest shareholder of Kuokuang, CPC cannot transfer its state-owned assets to the private Kuokuang. He said that even fully utilizing solar energy, wind power and other renewable energy, Kuokuang could only reduce annual CO2 emission to 6 million tons, still higher than the upper limit set by the environmental groups.

Stopping the project would cost 600,000 potential jobs

The Taipei-based China Times reported that the proposed operation of the Kuokuang project was designed to recruit about 6,800 workers. Based on its impact, it was estimated to have the potential to create up to 230,000 jobs. Now that the project has been axed, it is estimated that over 600,000 job opportunities will be lost.

Taiwan’s textile, chemical fiber, apparel industry, and electronics companies, all use a certain amount of petrochemical products. If Taiwan neglects its petrochemical industry, it will have to depend entirely on foreign supplies. And, in cases of natural disasters, even foreign suppliers might be jeopardized and Taiwan would face an industrial shut down.

The China Times noted that Taiwan is the ninth largest ethylene producer in the world with about 4.2 million tons, while 3.12 million tons is produced by the Formosa Petrochemical system, and about 1.08 million tons by CPC Corporation. Up to 70 percent of the medium raw materials produced by Formosa Petrochemical system are for exports, while 70 percent of those produced by CPC are for domestic consumption. The bulk of the CPC production is used to supply the demands of the downstream petrochemical industry in Taiwan, but its capacity is far short of the Formosa Plastics system, limiting the future development of Taiwan’s nationalized industries.

The United Daily News reported that the scrapping of the Kuokuang project, when calculated based on the gross domestic product of the  economy, will cut into the national infrastructure spending by NT$630 billion (US$31 billion), in addition to the loss of NT$280 billion (US$9.3 billion) of future added-value which is not accounted for yet.

Back to agricultural past?

The United Daily News said in an editorial that from an environmental point of view, discarding the petrochemical industry would resolve all disputes. But from an employment perspective, without a petrochemical industry, how can Taiwan create more than 600,000 job opportunities? If the industry’s environmental impact can be reduced, causing less damage to human health and to ecosystems, the petrochemical industry may still be an option.

With great candor, Vice Economics Minister Hwang Jun-chiou said Taiwan’s economy has to keep a certain amount of high energy consuming industries so as to maintain its international competitiveness. Is it a zero-sum game or a life and death issue for environmental protection and economic development? Can we find a better balance between them?

If we object to industrial development on the one hand, yet complain that there are no jobs for our young people, lament the aging population, and ask for improved social welfare on the other hand, Taiwan will fall into a vicious cycle of mutual destruction. The paper questioned can Taiwan afford to revert back to its agricultural past.

Taiwan welcomes Chinese investment with some reservations

Chinese investors have poured into Taiwan with amazing speed and magnitude. They have been likened to a pack of vigorous, highly intelligent and combative wolves. How will Taiwanese companies cope as they begin to entangle themselves with these ravenous wolves? This is the topic of a recent edition of the Commonwealth monthly that addressed the many business segments that could be under the shadow of Chinese ownership.

The Chinese investors have already penetrated the computer and electronics, optoelectronics, banking and property markets in Taiwan, adding a new variable to Taiwan’s competitive environment and quietly entering the lives of Taiwanese people. The online games children play, the houses and hotels Taiwanese live in, the media and even jobs are now open to mainland influence.   

Opaqueness of Chinese investments

According to Taiwan’s Economics Ministry, Chinese investments in Taiwan as of February 2011 totaled US$140 million, while the US$12.2 billion invested by Taiwanese businesses in China last year was nearly 100 times that amount (and cumulative Taiwanese investment there is nearly 1,000 times the amount). The numbers appear lopsided, but China’s investment in Taiwan is actually far greater than the figures would suggest. Through their use of a global network of subsidiaries and affiliates, Chinese enterprises have grabbed stakes in Taiwan in many different sectors, including those that are not legally open to Chinese investment yet.

A number of big Chinese corporate names have entered Taiwan through affiliates in third countries (taking stakes of less than 30 percent). This took place before investment permits for Chinese investors were issued in 2009. As an example, Lenovo invested through the PC department of IBM Netherlands. Alibaba established a presence through its Singapore subsidiary, and telecom services provider Huawei Technologies Company set up a Taiwanese branch office through its Hong Kong subsidiary.
In addition, 35 Chinese enterprises have set up offices in Taiwan and registered with Taiwan’s Economics Ministry – including the Bank of Communications, Bank of China, China Merchants Bank and China Construction Bank – and none of these appear on Taiwan’s official list of Chinese investors in the country, even though they could soon be major players. Once they begin operations, their investments could expand significantly since the minimum operating capital for a branch in Taiwan is NT$250 million (about US$8.4 million).

China uses Taiwan to upgrade

The Chinese rush to Taiwan has also been driven by internal pressures to upgrade operations. “Chinese businesses along the coast are urgently trying to upgrade. With the appreciation of the Chinese Yuan (RMB), they have plenty of financial muscle to buy Taiwanese companies. It’s the fastest and easiest way for them to upgrade,” said Yang Chia-yan of Taiwan Institute of Economic Research, speaking to the Commonwealth.

According to Thomas T.M. Chen of Jones Day, an international law firm, their main goal is to gain access to Taiwan’s technology and brainpower. Entering into Taiwan’s market is not their primary interest.

China’s biggest LCD panel maker BOE Technology Group Co., which has an 8.5-generation plant to make large displays, announced in March 2010 that it was acquiring Taiwan’s Jean Co., Ltd., a Tatung Group subsidiary and OEM/ODM manufacturer of visual display products, for RMB300 million. The package included a 100 percent stake in Jean’s China subsidiary and some of its assets in Taiwan, including over 200 employees.

Although Jean is not a leading LCD display assembly plant, it has strong design and OEM capabilities and a complete stable of international clients, all elements that Chinese enterprises lack. BOE Technology then applied and received approval to set up “Taiwan BOE Vision Technology Ltd.,” becoming the Chinese boss of Jean’s production line and its Taiwanese monitor department.

The Commonwealth reported that China is no longer satisfied with raw materials and low-cost manufacturing, but is learning how to command technology, brands and markets.

Accessing a superior testing ground and markets

Aside from directly buying technology and talent in Taiwan, Chinese enterprises also see Taiwan as their cheapest and closest internationalized testing ground. Although they are gaining experience investing abroad, the vision and attitude of Taiwan’s talent, and the R&D capabilities of its wafer, IC design, LED, textile and its cultural and creative sectors remain superior. The gaming industry is just one example.

“In Taiwan, you can compete with international games. Taiwan’s game players have experienced the challenge of games from around the world. There are products from Korea, the United States, Japan and Europe. The level of competition Chinese games face in China is not the same,” says Aaron Hsu, president of the Taiwan-based Game Industry Promotion Alliance.

Taiwan is the world’s fourth largest machine tools exporter, behind Japan, Germany and Italy, with yearly exports totaling US$3 billion. It is a major supplier of equipment for China’s manufacturing sector with nearly 50 percent of those exports going to Hong Kong and China. This year, the machinery industry has a shot at becoming Taiwan’s third trillion-Taiwan-dollar industry (after semiconductors and flat panel display units). There are more than 10,000 companies involved in the upstream and downstream supply chain in the Taichung area alone, making it the world’s most densely concentrated machine tool industry cluster.

Skirting around Taiwan’s laws

One Taiwanese entrepreneur with sales of NT$10 billion (US$346 million) in Taiwan and China, said that Chinese companies are staking out land and buying everywhere with the voracity of a large conglomerate, bringing turmoil to other people’s markets. “For the whole world, they’re all like wolves,” the entrepreneur says.

Several business people in the gaming industry said Taiwan’s law stipulated that Chinese gaming companies may conduct research and development in Taiwan, but not sales. As a matter of fact, Chinese companies have made money by selling their products through their Taiwanese partners or through Taiwan’s financial system. It is not fair that Taiwanese firms cannot reciprocate by running their gaming businesses in China.

Not too long ago, the British newspaper The Guardian reported that European countries were selling their souls by allowing China to buy a large amount of European bonds, alleging China’s investment in the European economy serves as a Trojan horse.

The Commonwealth concluded it is not right to be over optimistic or pessimistic about Chinese businesses entering Taiwan. It is healthier to recognize and understand that the Chinese bring to the world a new competition level.  

Taiwan faces brain drain as China lures island’s talent

China has been copying Taiwan’s development model by setting up industrial technology research institutes to nurture scientific and technological growth. Along with China, Taiwan’s neighboring countries like South Korea, Hong Kong and Singapore are also actively luring  talent away from the island. Concerned with this issue, President Ma Ying-jeou called a National Security Council (NSC) meeting in early April to hear from scholars and experts. In summary, they warned him that Taiwan is encountering a talent deficit crisis.

According to the United Daily News, the NSC special group found that the influx of foreign workers arriving in Taiwan are mainly non-professionals from the Chinese mainland, but there is a gradual outflow of Taiwanese professional talent. In particular, Singapore is attracting medical professionals, Hong Kong is recruiting professors, and South Korea is poaching scientific and technological personnel. Hence,  Taiwan’s Industrial Technology Research Institute (ITRI) is facing a significant drain. ITRI chairman, Tsay Ching-yen, said that China has established industrial technology research institutes in 38 provinces and cities. One by one, it has targeted and attracted talent away from Taiwan’s ITRI.

Established in Hsinchu (northern Taiwan) in 1973 as a non-profit organization under the supervision of the Ministry of Economic Affairs, the ITRI has played an instrumental role in creating Taiwan’s economic miracle and fostering the island’s information technology development.

An ITRI executive said the essence of the institute is in the personal contacts they have been established in industry over the years. The Chinese are not stingy in paying headhunters or offering a generous salary, at least four to five times higher than that in Taiwan. They also provide housing to reduce worries and ease the transition. Once the executives are lured away, the industrial professionals will inevitably follow. If the industrial talent pool leaves, where will Taiwan be?

The Central News Agency reported that Wong Chi-huey, president of Academia Sinica (Taiwan), told the Legislative Yuan that 62 people have retired and 61 have resigned from his institution in the past five years. Among these people, half of them were recruited by organizations in Hong Kong, Singapore and China. Wong expressed his worry about the “talent deficit.” With regard to himself, he said he would never accept a foreign offer after his retirement.

The Economic Daily News reported that Taiwan’s wages have been stagnant for almost a decade. The average wage grew at 0.8 percent per year from 2000 to 2010, adjusted for inflation, real wage growth is negative. Last year, Taiwan registered a 10.82 percent domestic economic growth rate, pushing up the average salary increase by 5.3 percent, but this increase only makes up for the losses brought on by the financial tsunami the previous year. The real wage level is not as high as 13 years ago.

More worrisome is that 3.6 million workers earned a monthly salary of less than NT$30,000 (US$1,000) last year. Among them, 1.04 million people earned less than NT$20,000 (US$670) per month. The wage gap between the highest-paid and the lowest is widening, with fewer higher paying jobs avaliable in Taiwan.

In China, wages have risen much faster  than in Taiwan. Except during the financial tsunami in 2009, the average annual salary of Chinese enterprises has risen by more than 10 percent in the last five years. The average wage levels in Shenzhen, Shanghai, Beijing, Guangzhou and other cities are about 35 to 45 percent of that in Taiwan. Based on the current rate, the wage level in China’s coastal provinces may catch up with that of Taiwan by 2020.

The higher pay offered in the prosperous regions of China is a strong magnet for Taiwan’s professional workforce who are the target of Chinese recruitment companies. Taiwan has a serious shortage of upper level professionals and needs to study how to neutralize China’s magnet attraction.

In order to reverse the plight of ill-managed recovery achieved through economic growth, but not wage growth, the government has initiated a 3 percent salary increase for the military, public servants and teachers starting July 1. President Ma hopes that businesses will do the same for their employees.

The Economic Daily News said in a review that it is up to market mechanisms to decide the level of a pay rise in the corporate sector. The government will have little effect in urging companies to increase their wages. If companies increase salaries, it is not because of the government’s pleas, but because they are earning a profit and have a good corporate culture embedded in their business plan that includes a pay rise. The vast majority of low-wage workers will hardly reap any benefits from these recommendations. Therefore, rather than urging  corporations to raise pay rates, the government could drive wage growth by creating new job demands. This can be done by making Taiwan a more attractive investment and operational environment, thus attracting more local and foreign capital investments.

In order to retain Taiwanese talent, the government must spare no expensive to promote industrial restructuring and upgrades, transforming businesses and enhancing their long-term competitiveness. These are the enterprises that are needed and are capable of offering better pay to retain talent, stressed the Economic Daily News.