Chinese mainland proves boon to struggling Taiwan economy

The stalled U.S. economic recovery and a devastating sovereign debt crisis in Europe have both impacted Taiwan's export-driven economy during the past few quarters.

However, business opportunities through stable cross-Strait relations in the last four years have provided a much-needed positive stimulus for the island's struggling economy.

Taiwan leader Ma Ying-Jeou told a summit on the island's competitiveness in Taipei on Tuesday that its economy faces unfavorable external conditions, which were even worse than the global financial crisis that broke out in 2008.

Ma noted that the anti-crisis policies taken by Taiwan authorities four years ago were on the whole correct as the island's economy bounced back rather strongly, but now, given the problems in both the U.S. and Europe, Taiwan faces a different situation.

International economic turbulence has dragged down Taiwan's economy considerably. A latest report by the International Monetary Fund predicted that Taiwan's real Gross Domestic Product will only grow by 1.3 percent in 2012, substantially lower than the 4.0-percent growth rate registered in 2011.

Meanwhile, the unemployment rate in Taiwan soared to 4.4 percent in August while the figure among young people was at a staggering 12.7 percent. Inflation also remains at relatively high levels.

With a bleak economic outlook, participants of the summit saw a bright spot in the island's economy. Stable cross-Strait relations and numerous business and trade agreements between Taiwan and the mainland have brought a new wave of "bonuses" to the island's economy.

Cross-Straits relations have improved since May 2008 when Ma Ying-jeou took office.

The Taiwan-based Straits Exchange Foundation (SEF) and its mainland counterpart, the Association for Relations Across the Taiwan Straits (ARATS), reopened dialogue in June 2008 after a hiatus of nearly ten years.

Since then, eight rounds of negotiations between the SEF and ARATS have resulted in a total of 18 agreements between Taiwan and the mainland. The agreements meant to facilitate cross-Strait trade and investment and pave the way for millions of mainland tourists to visit the island.

Founded in 1990 and 1991, respectively, the SEF and the ARATS are the non-governmental organizations authorized by Taiwan and the mainland to engage in talks regarding cross-Strait exchanges.

Ma said that Taiwan should not only rely on the manufacturing to create jobs and that the service sector, especially tourism, has an important role to play in relieving pressure in the island's job market.

He predicted that the number of incoming tourists to Taiwan will rise to a record of 7 million in 2012, mainly boosted by mainland tourists.

He added that it used to take an average of five to ten years for Taiwan to attract 1 million extra tourists but the number of incoming visitors has increased by 1 million every year after the island welcomed mainland tourists.

According to latest statistics released by Taiwan's mainland affairs authority, a total of 4.28 million mainland tourists had visited Taiwan by August 2012, creating revenues of 216.7 billion new Taiwan dollars (about 7.4 billion U.S. dollars).

But tourism is only a part of the "bonuses" that stable cross-Strait relations have brought to Taiwan. Ever expanding economic, trade and investment ties between the island and the mainland have a lasting positive influence on the island's economy.

Besides, Taiwan shares the same language and culture with the mainland, the world's second largest economy, giving it an advantage that has been increasingly appreciated by international investors.

Jim Rogers, a U.S. investor, said in a speech in Taipei on Oct. 9 that he sees a great future for Asia in the 21st century and one of Taiwan's big advantages is that its people speak the Chinese language.

Taiwan authorities have made economic policies their focal point as the island's people struggle with high levels of unemployment and inflation.

Chiang Pin-kun, the former head of the SEF, told the summit that both Taiwan and the mainland have realized robust economic growth in the past, but Taiwan's economy has largely lost steam in the past decade as the Kuomintang and the DPP engaged in endless partisan fighting.

Chiang, who has managed Taiwan's economic affairs for a long time, called on Taiwan authorities to learn from local officials in the mainland, who have been working resolutely to offer all kinds of conveniences and incentives for investors.

Despite Taiwan's recent economic woes, its overall competitiveness is still there. According to the Global Competitiveness Report released by the World Economic Forum in September, Taiwan ranks 13th among 144 economies.

At the summit, participants urged Taiwan authorities to further improve the island's competitiveness and adjust its economy in unfavorable international conditions.