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Marching towards China. Taiwan:. Beth Block Sam Bonsall Ching-Yi Liu Michelle Walker. Taiwan: Marching Towards China. Background Relationship with China Migration of Business to China Technology Example. Taiwan is a small Island off the eastern cost of Asia in the western Pacific

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Marching towards China

Taiwan:

Beth Block

Sam Bonsall

Ching-Yi Liu

Michelle Walker


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Taiwan:Marching Towards China

  • Background

  • Relationship with China

  • Migration of Business to China

  • Technology Example


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Taiwan is a small Island off the eastern cost of Asia in the western Pacific

The capital Taipei, is located on the northern end of the island


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Taiwan’s Population

Home to 22.5 million people

  • 68.75% live in metropolitan areas

  • Population density is 622 people per km2

  • 9827 people per km2 in the city of Kaohsiung (154 km2)

  • Second highest population density in the world

    Education of the people has been a focus in recent years

  • Now 9 years of school are required and nearly 100% of the school age children are enrolled

  • There is also an increased number of people seeking higher education


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Taiwan

Taiwan is part of an island chain forming an arc along the Asiatic continental shelf

  • Taiwan is the largest island in the chain between Japan and the Philippines

  • 394 km x 144 km or 36,000 km2

  • Slightly smaller then Maryland & Delaware combined

  • Ranges from 130-220 km from China

  • Equidistant to Shanghai & Hong Kong


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Taiwan

Taiwan’s Topography

  • Has a central range of mountains running the length of the island

  • Steep mountains constitute 31% of the island

  • Hills & terraces represent 38% of the island

  • Plains make up the remaining 31% accommodating the farming, industry and communities of the island


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Business in Taiwan

  • Services make up the largest sector in Taiwan’s economy with more then 50% of the GDP

  • Industry comes in second with 31%

  • Agriculture has fallen to near 2%


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Business in Taiwan

  • Taiwan relies heavily on the exportation of goods thus the recent economic slowdown has affected Taiwan

    • Increased unemployment

    • Decreasing income

    • New Taiwan dollar has deprecated against the US dollar

  • In 2002 Taiwan was the 14th largest exporter and the 16th largest importer

    • Their major trading partners comprising 70% of Taiwan’s international trade are US, Japan, Hong Kong, China, the ASEAN area and Europe

    • Machinery and electrical equipment is both the largest export and import commodity


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History

  • In 1949 there was a civil war in China

  • The communists won and the democrats retreated to Taiwan or the Republic of China

  • Since then China has viewed Taiwan as a renegade province

  • Taiwan, however, views themselves as a separate country


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History: Politics

  • After the retreat of the democratic peoples to Taiwan Chiang Kai-shek was elected by the congress of democratic China or the mainland to the office of president

  • Chiang Kai-shek died in term and his son Chiang Ching-kuowas elected the next president also by the congress of democratic China


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History: Politics

  • Chiang Ching-kuo then died during his term and Vice President Lee Teng-huiassumed power

  • While serving his term as president Lee modified the laws for elections

    • Presidents were to be elected directly by the people and serve terms

  • Lee was then the first president directly elected by the people in 1996


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History: Politics

  • The next election took place in 2000, where Democratic Progressive Party candidate Chen Shui-bian was elected the current president

  • This election was significant as the party in control, the KMT, ended their 50-year reign in the presidency as theDPP took control


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Independence From the PRC

  • Since 1949: the ROC and the PRC governed as separate territories

  • 1979: Beijing launches intensive United Front Campaign

    • Taipei responds with “Three No’s Policy”

No contact

No Compromise

No negotiation


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Cross-Strait Talks

  • 1987: “Cross-straight economic, cultural, and educational exchanges increased rapidly” (Taiwan Yearbook 2003)

  • 1990: National Unification Council set up “Guidelines for National Unification”

    • Taiwan announces independence from PRC

    • Representatives meet in Singapore in Apr. ’93 for cross-strait talks

    • Every time Taiwan thought they made progress, Beijing would suspend negotiations.


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“A New Era”

  • “I pledge that during my term in office, I will not declare independence… and I will not promote a referendum to change the status quo in regards to the question of independence or unification.” -- President Chen’s Inaugural Speech

  • “Goodwill, active cooperation, and permanent peace” -- President Chen

  • Mini-three-links: direct transportation, postal services, trade between China and off shore islands, and opening of bank offices in China


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Looking Into the Future

  • 2001/2002: China and Taiwan admitted to WTO

  • Beijing has not responded in good faith and refuses to renounce use of force against Taiwan

    • “One country, two systems” approach

  • “Taiwan and China stand on opposite sides of the Strait, and there is one country on each side. This should be clear… Only the 23 million people of Taiwan have the right to decide the future, fate, and status of Taiwan…” – President Chen

    • President Chen is willing to resume talks at anytime


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Migration of Business to China

-Taiwan’s outward investment was approximately USD 32 billion by the end of 2001.

-Mainland China has attracted 38.8% of Taiwan’s total foreign Investment. (12.4 billion)

-Mainland China is Taiwan’s third largest trading partner. (Meanwhile, Taiwan is the 5th largest source of foreign investment in China)


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Migration of Business to China (Continued)

-Mainly invested in Electronics and electrical products (30.43%)

-Investment mainly centered in Jiangsu (61.6%) and Guangdong (24.4%).


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Investment Advantage in China

Labor costs

Unit: USD

Year

Area

Labor rate per hour is around 1/9 of Taiwan’s.


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Compensation: Taiwan Vs. Mainland China


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Investment Advantage in China (Continued)

Incentives

  • Many kind of incentive scheme were provided by Mainland China government, such as R&D investment , capital expansion, and tax reduction & exemptions.


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IT Production in Taiwan

  • Taiwan became a force as U.S. firms used it as Original Equipment Manufacturer (OEM)

  • Ranked 4th in the world in total IT production at $23.5 billion per year

  • Ranked 1st in the world in production of:

    • Scanners (91.5% global market share)

    • Motherboards (70.4%)

    • Notebook Computers (55.3%)

    • Monitors (54.2%)


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Ferrying IT across the Strait

  • Taiwan has invested over $60 billion in China since 1978

  • Over 100 hi-tech products formerly restricted can now be manufactured on mainland

  • “The argument our industry is making is the size of the mainland China market is such that no industry and company in Taiwan can ignore it.”

    -Chenming Calvin Hu, CTO of Taiwan Semiconductor


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Taiwanese IT Firms Presence in China


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Taiwan’s Offshore IT Production


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Taiwan’s IT Production in China


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New Tech Investments on the Mainland

  • Foundries to manufacture 8-inch wafers

    • Taiwan Semiconductor Manufacturing

    • United Microelectric

  • Notebook Computer production

    • Quanta Computer doubles Shanghai capacity

    • Produced 10 million in 2002

  • Flat Panel Screen Module Plant

    • Chi Mei Optoelectronics

      • World’s 4th largest panel maker


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Impacts on Taiwan business

  • Companies have lowered production costs by using China’s low-cost labor

  • Taiwan still maintains much of value from final goods

    • 3/4 of total value for LCD monitors

  • Taiwan has emerged as a lead development haven for IT products


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Future for Cross-Strait Relations

  • Investment in China has made it more dependent on Taiwan

  • Economic costs of military action are higher for China

  • Membership in the WTO for both China and Taiwan creates an “economic embrace”


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“Most intriguing of all across the Taiwan Strait is the possibility that global forces of commercial integration may be transforming a political legacy of division in ways not commonly thought of, much less understood.”

-Terry Cooke, Foreign Policy Research Institute


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Notes

  • CIA World Factbook-Taiwan

  • Taiwan Yearbook 2003

  • Taiwan Headlines

  • Straits Exchange Foundation

  • Economist Intelligence Unit

  • BBC News Online

  • Conway Data

  • Carnegie Endowment for International Peace

  • Foreign Policy Research Institute

  • CNN.com

  • ISI Emerging Markets Database

  • Taipei Times


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