Jamie Yang
Bruce Lusignan
Ethics in a Developing Global Environment
12 December 2002
US investment in
China: Why improved China/ Taiwan Relations are not encouraged
With a population reaching
1.29 billion in 1995, and a projected population of 1.49 billion within this
world’s population of approximately 6.4 billion (Heilig 1999), China’s
resources are indescribable. China is undoubtedly on its way to--if not
already--becoming one of the world’s most powerful nations. Currently secure in
its role as the world’s leading economic superpower and most industrialized
nation, the United States needs to be wary of the increased associations
between Taiwan and China. As evidenced
by China’s role in consumer good manufacture and export, its potential for
competition within all market sectors is powerful. Although China is currently
an asset as a source of cheap labor and low technology materials, a strong
alliance with Taiwan, not kept in check by the political tensions that
undermine free trade, could be the boost China needs to surpass the United
States as the world’s number one superpower.
As evidenced by continually increasing economic growth in the face of
world-wide recession or slowed growth economic patterns, China’s predicted
supercedence of all other nations seems likely realized. Most specifically, the
biotechnology business in Taiwan and China reflects the dynamic nature of the
current economic situation in the region. Furthermore, recent
developments with the launching of the manned Chinese spacecraft confirm the
indications that China is pressing towards a more prestigious role in the
higher-technology divisions. In accordance with this line of reasoning, it may
not be surprising to find that the United States government is currently
guarded in its approach towards Taiwan-China relations.
China’s current Economic Standing
China has been exhibiting
indications of a strong economy. Even
as most of the world entered a recession in 2001, China’s Gross National
Product growth reached 7.3 percent. This
was definitely facilitated by its incredibly strong export sector. In 2001,
China alone accounted for 4.1 percent of the world’s exports; furthermore, with
its comparatively lower amounts of imports, it has been building up trade
imbalances. (Moustakersi 13)
China’s strong economic growth potential
In 1998, the China National
Centre for Development Studies issued their 1998 Conference papers and included
short term, medium term, and long term predictions of economic growth in China.
The paper suggests that new sources of economic growth were identified and
advocated by the government including development of infrastructure such as roads, railways, telecommunications
systems, and rural electricity network, housing projects expected to generate
developments in many economic sectors, and high-tech industries including
computer and information sectors. (Song 5)
Future potential: Walmart example
One must only look to the influence and
power of Wal-Mart for a low-tech example of China’s possible economic
influence. The conglomerate has recently superceded ExxonMobil to become the
world’s biggest corporation. It hauls off more in
revenues than the entire GDP of Israel and Ireland combined, $220 billion a
year. Seventy-one percent of the toys sold in the U.S. come from China, and
Wal-Mart now sells one out of five of the toys Americans buy. The profit
margins are nicely supplemented by the abysmally low production costs
originating in China. For example, the National Labor Committee interviewed
workers in China’s Guangdong province and reported that workers within Wal-Mart
factories work 13- to 16-hour days molding, assembling, and spray-painting
toys—8 a.m. to 9 p.m. or even midnight, seven days a week, with 20-hour shifts
in peak season. Additionally, despite China’s minimum wage of 31 cents an hour,
these production workers are paid 13 cents an hour with no health benefits.
(Hightower 2002). Supplied by
cheap-labor and factories with substandard conditions in China, Wal-Mart has
supplanted local companies globally and has obviously succeeded in becoming a
world competitor--and this is just within the low-tech market. If a company can
supplied by the human resources and cheap labor of China can succeed so well in
this sector, just imagine the damage it could do in out competing foreign
companies within the higher-technology sectors.
Past and Future Development: Steel Example
Why
China is so important to the United States: China as a United States import/
export market--United States Balance of Trade
Not only is steel consumption
a strong predictor China’s increasing importance as an exporter, if recent
balance of trade trends between the United States and China are any indication
of China’s importance, bilateral relations will become increasingly important.
With a per capita consumption growth of five percent in the same year, China is
in the position to be an extremely important market for export. (Moustkersi
14) The United States has been
accumulating a huge deficit of trade with China; its imports have far exceeded
the amount of its exports to China.
Most significantly, the deficit has increased over the last decade and a
half. Many sources site that the trade deficit grew from 6.2 billion dollars in
1989 to a total of 83.8 billion in 2000. However, others argue that these
numbers are inaccurate in their calculations of import and export values. For example, they do not take the addition
of value United States products accumulate in Hong Kong while the figures do
use the full value of Chinese exports that pass through Hong Kong.
Additionally, these economists claim that Import /export bilateral deficit is
accentuated by the failure of US estimates to take trade in services into
account. More moderate estimates
adjusting the balance of trade numbers still indicate a steady increase from
3.4 billion dollars to 68.8. (understanding
the US-China Balance of Trade” 2002).
Regardless of the discrepancies between the measures of import and
export, the fact remains that our balance of trade deficit is growing
drastically.
Why
China is so Important: China as a US Supplier
Furthermore, much of United States imports
from China are utilized within the manufacturing process. United States consumers currently benefit
from the ability to purchase cheap products from China. WalMart is only one example of
United States’ exploitation of China’s resources. PRC General Administration of
Customs, China's Customs Statistics Monthly, 1995- October 1997’s figures
display the proportional breakdown of China’s total exports to the United
States. Only 21% of their entire export included Electrical and Power Equipment
and Machinery while the majority of exports included such low-technology
products as apparel, footwear, toys, cloth, metal, mineral, and chemical
resources. Even though the
majority of imports from China include low-tech electrical machinery, toys,
footwear, and apparel, this picture is likely to change drastically if China
continues to develop as predicted, the distribution of types of products will
shift. (“PRC General Administration of Customs.”
1997)
China’s manufacture
potential with Taiwan in 2001
China’s increasing friendliness towards
imports from Taiwan may justify mounting concern. Taiwan’s number one export to the United States was machinery and
transport equipment. (Magee 2001) This coupling of Taiwan and China’s import
and export markets could pose a serious threat to United States’ future
economic standing. Combined with the China’s pure economic potential, Taiwan’s
provision of technologically more advanced equipment and information looks
ominous for American business. (Song 1998). Only 10 percent of imports from China
currently directly with United States goods, but continued growth in the
technological fields and improved relations with Taiwan could potentially generate
greater competition in higher technology production sectors. This is evidenced
by 2000- 20001 trends that suggest that a large-scale shift of production
facilities from Taiwan and Japan to China is underway in fields ranging from
appliances to semiconductors (“Understanding the US-China Balance of Trade”
2002).
Evidence of strength in Taiwan
China relations
With regards to the suggested
attitudes of developing infrastructure and higher-technology sectors,
Taiwan-China bilateral relations will definitely assist in these goals.
Already, China has emerged as Taiwan’s largest export
market. During the first four months of 2002 alone, Taiwan exported 9.22
billion US dollars worth of products and services to China. This indicated a 21.2 percent increase when
compared to export levels of the 2001 year. Furthermore, the officially
registered two way trade between Taiwan and China was measured to be up 19.9
percent from the previous year. More
significant are the contents of Taiwan’s exports. The bulk of shipments
delivered from Taiwan to China is electrical equipment and parts, machine
tools, plastics, steel, synthetic fibers, optical products, organic chemical,
industrial textiles, and brass and bronze products. (“China Remains Taiwan’s Larger Export Market.”
2002) This is a growing concern in
United States attitudes towards China.
As one of the United States’ fastest growing markets, bilateral
relations with China are extremely important.
Additional Evidence of China’s Potential: manned spacecraft accomplishment
China’s recent manned spacecraft launch is a paradigm of its technological capabilities. The purpose of the recent Chinese manned spacecraft launch has been hotly debated with the United States and China taking opposing viewpoints on its purpose. The Chinese explicitly stated that it opposed any type of weaponized approach to space. On the other hand, the launch was greeted by many foreigners including the Taiwanese and Japanese as a possible threat , taking it as a sign that the China’s military is becoming more powerful and is becoming an increasing threat as a possible global bully. NASA officially applauded China’s recent accomplishment, noting that after America and Russia, China was only the third nation to successfully launch humans into space. (Foreman 2003) .
A
feeling of pride no doubt engulfed the Chinese nation with the successful
launch of the October 11, 2003 manned spacecraft. Historically viewed as
unsophisticated and technologically backwards country this was tangible
evidence of the advancement in China’s
technological sector.
Evidence
of U.S. Anxiety: Political Response to Manned Spacecraft
In contrast, to
the National Aeronautics and Space Association’s response, the reaction from
Washington has been far different. The chief of staff for House
Space and Aeronautics Subcommittee chairman Dana Rohrabacher, (claimed that the
success of China’s launch should be attributed to America. Many US lawmakers
criticized the program for borrowing technology transfers from the Unite States
illegally. Other White House officials claim that they do not support the
Chinese space program because it may have “overlaps between China’s improved
civilian spa program and military space program” (Canizares and Lipman) and are
currently looking into any implications for China’s strategic missile
capability. Walker agrees:
"Space is an extremely important part of fighting modern warfare. What
represents a threat, economically and perhaps strategically, is the technology
to make this achievement."
(Stenger)As an example of the United States’ lukewarm response to
China’s technological growth, the United States has trade restrictions as a
result of Washington’s objections to Beijing sales of military technology that
limit commerce between U.S. aerospace companies and China. Experts have
provided predictions that if China's economy continues to grow as expected over
the next 20 years, China's purchasing power will surpass the United States’ by
2020 theoretically providing China with the technological capabilities for
their defense industries as well as enable the buildup of a military
superpower.
Military buildup or just economic threat?
However, are the military fears the true
reason for America’s attempted limitation of China’s apparent technological
growth? It may really be seen as an effort to hinder the smoldering growth of
China’s economy. China’s competition for satellite launching ma undermine
American launching because China charges much less (Stenger). Some
question why a country steeped in social and economic burdens would risk pushing human beings beyond the confines of Earth's atmosphere. Why not
just send an unmanned mission into space? Some hypothesize that it is a matter of prestige
and pride that motivated this decision and asserting that it is not a less
developed country and gives the “aura of being a world leader in
technology." (Stenger… Bob Walker,
a former U.S. representative from Pennsylvania with expertise). Many believe
that the decision to invest billions of dollars into launching taikonauts in
the series of launches to come within the next decade is calculated to lead to
significant economic benefits. This program will attract Technical workers to
China and prevent emigration and subsequent brain drain. The Shenzhou success
serves as an advertisement of Chinese aeronautic capabilities and
sophistication, which may potentially attract outside investment perhaps
leading to confidence in utilizing China as a reliable satellite launcher.
There
is now a debate emerging over whether or not the United States should engage in
an aeronautic race. It seems that with China’s advancements, America cannot
just idly sit back. This may provide the motivation and increase funding for
technological innovation, specifically in the space sector. The Chinese refute
the viewpoint that they are promoting military operations. Even accepting this
claim, more ominously, the successful launch is a sign that China will be
looking to enter the world market more competitively as a high technology
competitor. This launch is more symbolic than revealing any technological
revolutions. With it, China has established its ability to compete with the
most technologically advanced countries in the world.
Are
concerns unnecessary? China’s current standing
However,
as it currently stands, China's current technological
capabilities lag behind world standards; the eight major civilian
industries including microelectronics, computers, telecommunications,
nuclear power, biotechnology, chemical technology, aviation, and space need
to be improved in order to potentially support military development.
Despite these shortcomings, it seems likely that China has been working
towards eliminating these obstacles as evidenced by their space program.
China currently has significant production capabilities in all eight areas, and
in some of them has facilities that are quite advanced. China's
capabilities in producing telecommunications switching systems, fiber-optic
cable, and low-end personal computers are comparable to those of advanced
industrial nations. China has more than 28,000 chemical-producing
enterprises and possesses considerable growth potential in biotechnology.
China's space launch capability is impressive for a developing country, and
China has a manned space program has now put astronauts in space.
General Limitations in China
However the unstable inflation rates, and
limited access to foreign exchange and credit continue to hinder innovation.
The study conducted by RAND researcher Roger Cliff concluded that, while
Chinese technological capabilities will not catch up to, those of the United
States or Japan at any time in the foreseeable future, it is plausible that, by
2020, average technological levels in China might be roughly comparable to
those in Taiwan and South Korea today. Developments have been impeded by
limited production technologies and weak protections for patents. Software
companies have been strongly deterred by the prospects of piracy, while Even
China's
huge chemical industry has typically been unable to turn research results
into commercial products, leaving the country dependent on imports for many
chemicals. (Cliff 2001) The
developments have been most plagued by imperfect incentive and institutional
structures. Patent laws have not been strongly enforced and technological
markets are currently underdeveloped
Drawbacks in China’s Technological Sectors
Despite these successes, China
still lacks critical technologies associated
with these industries it therefore remains largely dependent on imported
components and machinery. For example, China lacks the capability to
manufacture the lithography tools used to make integrated circuits
necessary for microelectronics. Additionally, China's technology sector is
hindered by manufacturing operations inefficiencies and low levels of
computerization in industry. China is limited in its ability to produce
communications and other types of satellites and telecommunications firms
are incapable of producing the terminal node equipment crucial to produce
as cellular phones. (Cliff 2001). This
is a more specific example of where improved relations with Taiwan may have
enormous impacts.
On the Other Hand: Promising Aspects of China’s Biotech Sector--
Even without threat of military advancement,
proof of technological capabilities are clear.
There have been estimations of China's potential for building their
technological sector. The relatively high domestic growth rates and stable
exchange rates look promising and have promoted innovation (Cliff 2002)
Where Taiwan Comes in
Relations
with Taiwan might expedite this process of modernization in China’s
technological sectors thus contributing to China's
eventually surpassing the capabilities of the United States
The biotechnology sector deserves
specific attention as a perfect example where bilateral relations between
Taiwan and China may prove explosive. The biotechnology business in Taiwan and
China reflects the dynamic nature of the current economic situation in the region.
In recent years, biotechnology growth, or rather lack thereof despite string research capabilities, has
been indicative of china’s inability to translate these successes into improved
production technologies. The equipment found in most Chinese research and
development facilities does not meet world standards, while those few
facilities that possess advanced equipment do not use it to its full potential.
(Cliff) Conversely, The major problem
facing the biotechnology industry in Taiwan is the lack of home-grown initial
research which could be patented world wide, and creating a valuation similar
to those common in the US. International marketing of pharmaceuticals or the
other really innovative biotechnology products is also rather weak. On the
other hand, Taiwan is highly flexible in terms of manufacturing experience
which could supply well trained and well-appointed facility for biotech
manufacturing and operations. The legal systems and business practice in Taiwan
is also fairly open and conforms to normal free economic standard.
China's internal huge market potential
that could support most of the intensive research required for modern
biotechnology business and significantly lower operations cost could perfectly
complement Taiwan’s strengths of manufacturing equipment and experience.
China’s improved
international relations: Implications of the 16th Nation Congress of
the CCP
Not only does
the United States need to be concerned with China’s increased bilateral
relations with Taiwan, there are strong indications that all of its
international relations may be shifting more positively. In the aftermath of
the 16th National Congress of the Chinese Communist Part, CCP
leadership changes could predict accelerated transformation in China’s domestic
macropolitical, economic and social contexts since the last party
congress. There has already been
consolidation of China’s economic reform resulting in tits expediting
marketization, WTO accession, growing foreign investment, etc, In the
transition from Jiang to Hu Jintao, although there seems to be no indication of
any major disagreement within the new leadership over key foreign and security
policy issues of China’s vital national interests and goals—safeguarding its
sovereignty and territorial integrity, there will be important differences at
the more concrete level of daily routines and crisis management in foreign
relations. This portents personalization of China’s foreign relations,
increased bilateral relations, and increased competition. As China becomes more
powerful, it political positions and tensions will likely increase.
Additionally, China’s increasing involvement in international institutions is
likely to foster more cooperation in bilateral, minilateral, and multilateral
strategies and increase its willingness to continue expanding on international
cooperation. In terms of specific improved relations with Taiwan, imminent
leadership turnover in the State Council’s Taiwan Affairs Office is predicted
to introduce more talented people with strong backgrounds in international and
economic affairs. This infusion may facilitate the reorientation toward
concrete tactics in Beijing’s Taiwan policy (Hsu 2003). The general increase in
international trade is even more fuel for China’s economic spurt.
Conclusion
World
leaders have historically risen and fallen. While there are many areas for
dominance, economics typically drives political change. In this case, with its
potential for future economic growth and dominance within the high-technology
sector, China poses a true treat to United States status. Historically highly
invested in bilateral trade with China resulting in the enormous trade deficit
and utilization of China’s cheap
production capacity has placed the United States in a precarious position. If China’s current economic status,
historical dominance in the capacity for cheap production, promising steel
purchasing numbers, and manned space launch are any indicators, China’s future
looks promising. Furthermore, using China’s biotechnology sector as the
paradigm for ascendance in the higher technological sectors when reinforced by
bilateral trade relations with Taiwan portent supremacy. With its reactions
towards China’s manned space program, the United States has demonstrated its
concern and wariness for the economic course it seems China has chosen. The
dynamics between Taiwan and China as well as China’s future international
attitudes will likely determine the next shift in world powers.