The Asian Tiger has good Japanese cars, less smokers, fewer bikes, and all motorbikers wearing a helmet on, fast (and totally free) Internet. Besides the construction of the massive new highway from the airport to Taipei, there is little building activity to be noticed on an island where the major infrastructures have been built long time ago at the time of the Japanese occupation during the first half of the 20th century as well as in the 50s when Chiang Kai-Shek launched some strategic projects to give a job to thousands of its followers from Mainland China, or thoroughly rebuilt after each earthquake and typhoon that regularly plague the island.
The trains are not modern, but work well. The roads are not brand new, but well-maintained. I could hardly see any significant residential project being built in Taipei or Taichung (another major city in the middle of the island). Except in the more industrial area of Taipei, I could also enjoy some blue sky and fresh air, which sadly are a rare thing in China, and in general a much “greener” environment where you see Taiwanese doing sports, wearing masks not to contaminate people around when they have a cold and sneeze (also something one would dearly wish for in China!) and focusing on organic food.
Caption: Chiang Kai Shek’s favorite lake, the Ri Yue Tan (Sun Moon Lake) looks like Alpine scenery
Some Taiwanese sites are so safe, clean and nice that one could think it is Japan or Switzerland. But the culture and traditions are so definitely Chinese. Moreover, learning about the recent history of Taiwan is like reading a captivating book about China’s history, political, economic and diplomatic development during the last 60 years.
The visit of the amazing National Palace Museum in Taipei that exposes the finest part of the collection of the Chinese dynasties that have been created by great masters during thousands of years gives also another angle on the level of sophistication the Chinese civilization had reached such a long time before the Western civilization did.
Taiwan has a fascinating history; and this history could be analyzed following the different foreign nations that controlled it (the Netherlands, Spain, France, Japan, China) or dissecting its past growth drivers. There was a time when camphor trees were the largest export product of the island, there was also a time when Taiwan had one of the world’ biggest production of sugar and tea, then when gold was discovered in 1890 in the north by railway workers cleaning their rice bowl in the river and the gold rush had a big impact on the economy until the second World War.
WW2 and Chiang Kai Shek’s arrival to Taipei together with 2 million people, including members of the business elite of China, clearly transformed the island into a military-focused island with martial law until 1987. Taiwan however became one of the Asian Tigers demonstrating outstanding economic growth in the 70s and 80s, largely based on ultra-competitive exports of textile, then electronics to Europe and to the US.
Taiwan has its own challenges. Nowadays the island is experiencing annual GDP growth of 3.5%-4%, which many could envy but which seems very shy in comparison with the 8-10% of its giant neighbor.
Mainland China is not only growing much faster but it is also taking jobs away (as Taiwanese workers’ monthly wages are what Chinese workers earn per year), taking FDIs away (many multinationals prefer to establish themselves on the other side of the strait as despite an improvement of the relations between the two countries there are still tensions in the air and trade restrictions) and also brains away.
Thousands of Taiwanese white-collars now work in China, I’ve met quite a few in Shanghai. Usually these are people that have studied in the US and decided to come to China, which offers more managerial and entrepreneurship opportunities. Another cloud in the horizon for Taiwan is the changes in the tech space where the local extremely important PC manufacturing industry might be threatened if they fail the technological shift.
But there are opportunities as well, of course.
First, a 4% GDP growth is still offering opportunities and domestic demand has improved. Chinese tourists – first allowed in groups in 2009 now even individual travelers since 2011 - are still subject to a daily arrival quota, but are very visible and active in the shopping centers and hotels. When they stop being obsessed about shopping these tourists will also certainly start to appreciate the beautiful natural sites of the island. The Taiwanese industry’s high-quality qualified workforce is also attractive as there is a lack of such in mainland China, often cited as an obstacle on China’s path to climb the value chain.
Several Taiwanese companies have been very successful doing business in China, for instance some retailers. The bio-tech sector is also part of the strategic agenda in Taipei. Interestingly, the great migration in 1949 of 2 million followers of Chiang-Kai-Shek from all over China means that the island’s genetic base is extremely broad hence suitable for clinical testing of drugs for the Chinese population.
The genetic base might be very broad but Taiwan itself gave the impression of having a homogeneous development. Of course, the countryside seems poorer than the cities but the contrast is not as huge as in China; and the cities themselves seem to have reached comparable levels of development. The economy is maturing, what will be the next impetus for growth? This week, Taiwan announced a liberalization of the restrictions for Chinese capital inflow, expanding the list of sectors and lifting the current 10% cap to 50% for key sectors. That is expected to boost the economy thanks to more M&A and FDI. Further along the line another trigger could well be the long-awaited and much-discussed ASEAN Free Trade Area, AFTA that will be implemented in 2015, triggering more trade in between Southeast Asian Nations.
