A Tiger and a Lion A New Scenario for the Cross-strait Economy 一 隻 小 虎 與 醒 獅 Chi Schive 薛 琦 Chair Professor, Shih-Hsin University, Taipei April 18, 2008, Nankai University

Contents 大 綱 Prelude 楔 子 Growth 成 長 Challenges 窒 礙 Opportunities 昇 華 Remark 結語

Prelude 楔 子 Herman Kahn ( The World Economic Development, 1979 ) Two and half heroes 兩個半英雄 Napoleon, a wakened lion 拿破崙，東方的醒獅 “If China wakes, the sleeping lion will shake the world.” “When China awakes, it will move the world.”

Growth

Table 1 Economic Growth, Taiwan and China 台灣、中國大陸經濟成長 Taiwan 台灣 China 中國大陸 1950 ‘ s ‘s ‘s ‘s ‘s 單位： % 資料來源： 1. 行政院主計處。 2.

Figure 1 GDP, Taiwan and China 台灣、中國大陸 GDP ( ) US$ billion (current prices) 資料來源： Times 倍數 China/Taiwan 中國大陸 / 台灣 Taiwan 台灣

Figure 2 Living Standard, Taiwan and China 台灣、 中國大陸生活水準 （ GDP PPP adjusted ） US$1,000 資料來源： Times 倍 數 China/Taiwan 中國大陸 / 台灣 Taiwan 台灣

Figure 3 Investment and Savings, Taiwan 台灣 投資與儲蓄 ( ) ％ 資料來源：行政院主計處。 Investment 投資 Excess Savings 超額儲蓄 Savings 儲蓄

Figure 4 Investment and Savings, China 中國大陸 投資與儲蓄 ( ) ％ 資料來源：中國統計年鑑， 2005 年。 Savings 儲蓄 Investment 投資 Excess Savings 超額儲蓄 2004

Figure 5 Trade Dependence, Taiwan and China 對外貿易依存度 ％ 資料來源：經濟部國貿局。 Commodity, China 中國大陸（商品 ） Current Account, Taiwan 台 灣（商品及勞務 ） Commodity, Taiwan 台 灣（商品 ）

Figure 6 Direct Foreign Investment 外人 直接投資 （ Arrived DFI / GDP ） ％ 資料來源： 1. 行政院主計處。 2. 中國統計年鑑， 2005 年。 China 中國大陸 Taiwan 台灣

World GDP Share since the First Century 西元 1 世紀以來中國 GDP 佔全球 GDP 之份額

Challenges

Challenges for Taiwan 窒 礙 Financial Reforms 金融改革 Fiscal Reforms 財政改革 Labor Market Juvenescence 勞動市場活力化 Cross-strait Relations 兩岸關係

Challenges for China 窒 礙 Resource Efficiency 資源使用效率 Income Distribution 所得分配 Rural and Urban Gap 城鄉差距 Appreciation of ZMB 人民幣升值 Over savings 儲蓄過多

An Inquiry into the Nature and Causes of The Wealth of Nations Adam Smith “The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes…”

V. Challenges Ahead

According to Adam Smith “Adam Smith’s economy grows to its ‘full complement of riches’ as permitted by its laws and institutions, and there it rests.” Arthur W. Lewis, 1984

Opportunities

Collateral Benefits from Closer Economic Ties across Taiwan-strait Direct sea and air link Cost savings may amount up 20-30% which will enhance the global competitiveness of both economies. Time savings for travelers and tourists will boost the real-estate and the sluggish tourism market in Taiwan. Both factors will revitalize the plan “Building Taiwan as an Asia-Pacific Regional Operations Center,” focusing Taiwan’s location advantage, manufacturing strength, and rich cultural assets.

Collateral Benefits from Closer Economic Ties across Taiwan-strait Lifting investment cap and trade barriers Current situation : 1) There is a 40% cap on investment in China for listed companies in Taiwan. 1) There is a 40% cap on investment in China for listed companies in Taiwan. 2) Around 1,200 items of Chinese industrial products and 800 items of agricultural goods are not legitimated for free import in Taiwan. 2) Around 1,200 items of Chinese industrial products and 800 items of agricultural goods are not legitimated for free import in Taiwan. 3) Investments in infrastructural, finance and certain high-tech industries in China are regulated by Taiwan authority. 3) Investments in infrastructural, finance and certain high-tech industries in China are regulated by Taiwan authority.Impact: 1) Further cross-strait division of labor along the horizontal product line and/or vertical process will be possible and enhance the trade competitiveness of both economies accordingly. 1) Further cross-strait division of labor along the horizontal product line and/or vertical process will be possible and enhance the trade competitiveness of both economies accordingly. 2) Taipei’s position and opportunity as a regional financial center will be reconfirmed 2) Taipei’s position and opportunity as a regional financial center will be reconfirmed

Collateral Benefits from Closer Economic Ties across Taiwan-strait Further collaborations may take place: Environmental protection Culture activities Higher lever of education Development of high-tech industries

Collateral Benefits from Closer Economic Ties across Taiwan-strait Prospect: A reinforced cross-strait economic ties will contribute to a more stable and sustainable economic growth for both parties, for the region, and the world economy as a whole. A reinforced cross-strait economic ties will contribute to a more stable and sustainable economic growth for both parties, for the region, and the world economy as a whole. China in her interest to boost its economy by raising consumption and narrowing trade surplus will provide a cushion for the foreseeable falling world economy. China in her interest to boost its economy by raising consumption and narrowing trade surplus will provide a cushion for the foreseeable falling world economy. Taiwan, on the other hand, should apply all its liberalization measures to China and thus qualified as a fully open economy. Taiwan, on the other hand, should apply all its liberalization measures to China and thus qualified as a fully open economy.