China quietly captures Taiwan

[Chris Burford <cburford@xxxxxxxxxx>]

This weekend sees the entire economy of Taiwan slip out of the
gravitational field of the USA and into the gravitational field of China.

Of course there may be countervailing factors, and it will take time for
the momentum to build up. But this weekend's developments are a remarkable
phase shift in the battle for world domination between different masses of
capital.

Taiwan, faced with a recession for the first time for years, faced with
mainland China taking over its position as number 3 computer manufacturer
in the world, finds it has been badly hit by US investors cutting back
sharply in the last 12 months in purchases of computers.

The total capital of the US economy is of course very much larger than that
of China (or capital equivalent, since China's finances combine private
ownership and state control). Nevertheless in terms of future developments,
the Chinese consumer market of 1 billion people is likely to grow in mass
of purchasing power more than that of the USA. Also the centralised Chinese
state, has been prudent in its economic relations with neighbouring south
east Asian countries, carefully avoiding a competitive devaluation at the
time of the Asian financial crisis last year. Also politically, the
citizens of Taiwan have been able to read this year the interesting story
of how a US spy plane, patrolling near the mainland to preserve the barrier
between Taiwan and China, is being sent home disassembled in crates.


Drawing on Barkley's points earlier this week about phase shifts in foreign
exchanges,

> it is possible for the system to jump discontinuously from one basin of
> attraction to another at a certain point


 I suggest, this is the moment when we see the cusp of a phase shift in
the consolidation of the economies of east Asia around the growing Chinese
economy. Neither the USA nor Japan have been healthy enough at this moment
to offer a sufficiently strong counter-attractor to the liberalisation of
trade - and investment ties - between Taiwan and China.

It may take some decades, but once captured in China's economic
gravitational field, it is now a matter of time, before Taiwan joins the
mother planet. And from this moment onward, economically, the gravitational
force of the economic field around China, is proportionately that much
stronger. This will have knock on effects on the appraisals of all other
countries of south east Asia, which may further strenghten the centripetal
tendencies to what, ironically, will be a Chinese led, east Asian
co-prosperity zone. China has no need to boast about the significance of
these events for the momentum to continue to go in its direction.

http://asia.cnn.com/2001/WORLD/asiapcf/east/08/26/taiwan.china/index.html

> TAIPEI, Taiwan -- A group of influential advisers has urged Taiwan's
> president to relax limits on commercial ties with mainland China, a
> historic move business leaders say would boost Taiwan's economy and create
> a powerful trading zone, the Associated Press reports.
>
> For years, Taiwanese have been arguing about expanding trade relations
> with China. Critics have warned that further opening up to the mainland
> would drain away precious capital and jobs and make the island overly
> reliant on i ts biggest enemy.
>
> But on Sunday, a high-profile group of 120 presidential advisers urged
> President Chen Shui-bian to relax Taiwan's "patience over haste" policy,
> which puts a $50-million cap on single investments in China.
>
> This summer, Chen formed the advisory panel, made up of lawmakers,
> academics, officials and business leaders. He has promised to accept any
> unanimous consensus reached by the group, but he has said his cabinet will
> have the final say on policies endorsed by the majority.
>
> In addition, Reuters reports, the panel's subcommittee on cross-strait
> relations asked the government to discuss with China direct transportation
> links across the Taiwan Strait under the auspices of the World Trade
> Organisation, which both are expected to enter later this year.
>
> While the committee's recommendations are non-binding, President Chen
> Shui-bian has said any consensus that emerges from the committee will
> carry the weight of government policy.


Taiwan has moved from one tectonic plate to another this weekend.

Chris Burford

London