Cross Strait Relations and Cooperation Opportunities between Taiwan and Korea Dr. Yuan, Hao-Lin Professor and Direct of Graduate Institute of National Policy and Public Affairs, National Chung Hsing University

Development of Cross Strait Relations Stage 1: (1950s) Military Confrontation Stage 2: (1960s-1970s) Cold War Stalemate Stage 3: (1980s) Openness and Engagement Stage 4: (1990s) Economic Interdependence but Political Independence Stage 5: ( ) One China Principle vs. Taiwan Independence Stage 6: (2008~) Comprehensive Engagement

Why Taiwanese Businessmen go to China? Supply Side: Taiwan (push effect) Demand Side: China (pull effect) (pull effect) Political Phase Political Phase Economic Phase Social Phase Scale of Market, Cheap Labor, Lack of EnvironmentalConscious,AttractiveInvestmentPolicies

Why Taiwanese Businessmen go to China? Supply Side: Supply Side: Taiwan (push effect) Political Phase: Retreat of State Capacity and Autonomy Inconsistence of Government Policy Confrontation between Political Parties Debates on Ideology Issues (Such as Unification or Independence) Economic Phase: Lack of Labor Forces Rise of Land Price Rise of Labor’s payment Insufficient of Basic Infrastructures Social Phase: Increase of Social Movement Increase of Crime Rate Awareness of Environmental Conscious

Why Taiwanese Businessmen go to China? Demand Side: Demand Side: China (pull effect) Scale of Market Cheap Labor Lack of Environmental Conscious Attractive Investment Policies

Top 10 Motivations to Invest in China Cheap Labor and Full of Labor Forces Culture Similarities Cheap Land and Easy Access to Factory Site Request by Foreign Importers Diversify Operating Risk of Parent Company Dispose Used or Idle Equipment Attractive Investment Inducement Policies Strive for Massive Domestic Market Obtain MFN, GSP and Quotas Easy Access to Natural Resources

Waves of Taiwanese Business in China Wave I (1990s) Wave II ( ) Wave III (2008~) Cross Strait Relations From harmony to tension (esp. after 1995 crisis) Terminate any government-to - government Dialogue and Contact Rapprochement and establish closer relations ROC’s Governmental Policy Not aggressive but conditional open Tend to close links with China Moving toward comprehensive engagement Major Types Traditional and labor intensive industries Information technology, capital intensive and service industries Scale of Firms Small and medium Small, Medium and large Major Investment Area The Pearl River Delta The Young Tze River Delta

Trends of Taiwanese Business in China Region: From South China to North China Areas From South China to North China Areas From Offshore to Inertial Areas From Offshore to Inertial AreasSector: From Labor Intensive to Capital Intensive From Labor Intensive to Capital Intensive From Traditional to Information and Service Sectors From Traditional to Information and Service SectorsSize: From Small to Medium and Large From Small to Medium and Large

Major Investment Areas 珠江三角洲 The Pearl River Delta (Fukien and Canton Provinces) 長江三角洲 The Young Tze River Delta (Great Shanghai Areas) 渤海灣區 The BoHai Rim (Peking and Tientsin) The BoHai Rim (Peking and Tientsin)

STATISTICS ON APPROVED INDIRECT MAINLAND INVESTMENTYearCaseAmount1991~199720,36211,208, ,519, ,252, ,607, ,1862,784, ,4903,858, ,8374,594, ,0046,940, ,006, ,0907,642, ,970, ~ ,53864,869, （ unit ）：（ US$1,000 ） Sources: Investment Commission, MOEA

Top 10 Investment Cities and Provinces (1962~2008) （ unit ）：（ US$1,000 ） AreaCasePercentageAmountPercentage Jiangsu Province 5, %22,693, % Guangdong Province 11, %17,205, % Shanghai5, %10,655, % Fukien Province 5, %5,178, % Chekiang Province 1, %4,842, % Tientsin %1,305, % Shantung Province %1,283, % Peking1, %1,230, % Hubei Province %684, % Chongqing %641, % Sources: Investment Commission, MOEA

Top 10 Investment Industries (1962~2008) （ unit ）：（ US$1,000 ） IndustriesCasePercentageAmountPercentage Electronic Parts and Components Manufacturing 2, %11,408, % Computers, Electronic and Optical Products Manufacturing 2, %10,849, % Electrical Equipment Manufacturing 2, %6,348, % Fabricated Metal Products Manufacturing 2, %4,498, % Plastic Products Manufacturing 2, %3,523, % Chemical Material Manufacturing %3,048, % Machinery and Equipment Manufacturing 1, %3,005, % Non-metallic Mineral Products Manufacturing 1, %2,967, % Wholesale and Retail Trade 2, %2,373, % Manufacturing Not Elsewhere Classified 2, %1,920, % Sources: Investment Commission, MOEA

The Concept of Distance Advantage Culture Distance Economic Distance Geographic Distance Administrative Distance

Changes in Investment Environment in China Increase Regulations on Employment Terminate Preferential Treatments for Foreign Investments Increase Operational Costs (especially after the rise of oil prices) Increase Environmental Regulations Rise of Labor Costs More Competitions among Foreign and Chinese Investors

Prospect of Cross Strait Relations Continuous Enlarge the Scale and Scope of Economic Links Economic Issues First and Political Issues Last Comprehensive Engagement Form a Regional Economic Regime

Prospect of Taiwanese Businessmen in China Seriously Consider to Move Back to Taiwan Seriously Consider to Move Out to Southeast Asia Countries Expand Investment Scale and Scope Consolidate Closer Link with Local Community Cautiously Search for Their Own Blue Ocean

Thank You for Your Listening and Have A Good Time