Shanghaied? The Economic and Political Implications of the Flow of Information Technology and Investment across the Taiwan Strait

By Michael S. Chase; Kevin L. Pollpeter et al. | Go to book overview

2.
GOVERNMENT POLICIES AND CROSS-STRAIT FLOWS

THE MECHANICS OF CROSS-STRAIT TRADE AND INVESTMENT

This chapter addresses the mechanics of cross-Strait trade and investment and assesses the Taiwanese government's attempts to regulate trade with and investment in China.


The Evolution of Taiwanese Government Controls on Trade and Investment

Prior to 1979, there was virtually no economic interaction between China and Taiwan. At the beginning of the 1980s, Taipei enforced a nearly complete ban on exports to the mainland and permitted only certain Chinese foods and medicines to be imported from China via Hong Kong. As China became more open, however, Taiwanese businessmen began to see opportunities on the mainland. Despite the continuing prohibitions, trade between Taiwan and the mainland reached nearly $1 billion in 1985. Perhaps recognizing the futility of enforcing the ban on trade and investment, the Taiwanese government in 1985 adopted a noninterference policy with respect to indirect exports to China,1 with the result that Hong Kong became the main entrept for goods shipped to the mainland. Direct investment in China by Taiwanese companies also remained banned and had to be carried out through subsidiaries or front companies in Hong Kong. The Taiwanese government, however, generally tolerated investment in China as long as it was relatively small and involved “sunset” industries.

Yet, the economy in Taiwan was undergoing important changes that would lead to an accelerated transfer of production to the mainland. As a result of the economic “miracle” that occurred in Taiwan from the 1960s to the 1980s (with its peak in the 1970s), the standard of living in Taiwan began to increase. Between 1975 and 1985 the nominal wage rate in Taiwanese manufacturing increased at 13.7 percent annually, while nominal labor productivity was growing only half as fast, at 6.8

____________________
1
Clough, Ralph N., Reaching Across the Taiwan Strait: People-toPeople Diplomacy, Boulder, Colo.: Westview Press, 1993, p. 43.

-3-

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Shanghaied? The Economic and Political Implications of the Flow of Information Technology and Investment across the Taiwan Strait
Table of contents

Table of contents

  • Title Page *
  • Preface iii
  • The Rand Corporation Quality Assurance Process v
  • Contents vii
  • Figures ix
  • Tables xi
  • Summary xiii
  • Acknowledgments xxv
  • Acronyms xxvii
  • 1 - Introduction 1
  • 2 - Government Policies and Cross-Strait Flows 3
  • 3 - The Current Cross-Strait Information Technology Dynamic: Statistics and Case Studies 43
  • 4 - Assessment of Key Analytical Questions and Policy Implications 135
  • Bibliography 157
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