Transcript Recommending a Strategy

ECFA – Economic Cooperation Framework Agreement
BUSI 3001 SBLC
Week 7(9), Spring 2010
Charles Mo & Company
April 19, 2010
ECFA
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Why both sides need ECFA
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History and background of the modern China in Beijing
and Taipei
Taiwan’s economy after the 50’s
China’s economy after 70’s
Relationship between cross-Taiwan-straight during
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Deng’s era
Jiang’s era
Hu’s approach
Potential ECFA economic impact on Taiwan
BJ and Taipei set stage for ECFA
Three agreements signed under ECFA
Future potential for the two sides
China’s modern history
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In 1950, the Nationalistic Party (KMT) led by Chiang Kai-shek was
driven off the mainland by the Communist Party to the island of
Taiwan with two million soldiers and civil servants.
Chiang fled to Taiwan and hung on to two island clusters near the
province of Xiamen, Kinmen and Matsu.
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Why?
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The two sides shut off all communications and were at
war until 1978 when the artillery shelling stopped to
Kimen islands.
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Why? February 21, 1972
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In 1978, China’s second generation leaders led by
Deng Xiao Ping embarked on market reform and
economic development
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"One country, two systems" is an idea originally proposed
by Deng Xiaoping
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In 1996, US dispatched two aircraft carriers after
Chinese missile tests over the island.
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What happened and why?
What was the result of this action?
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In 1998, Hu Jing Tao became the president and during
his rein,
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Chen Shui Bian was arrested for corruption in 2008
Ma Yin Jeou was elected president of Taiwan in 2008
ECFA discussion was resumed in May 2008
Rapprochement between the two sides
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May 2008: China and Taiwan resumed trade talks, first of the ECFA
four meeting began.
June 2008: Taiwan and China reach agreements for direct flights and
Chinese tourists’ visits to Taiwan
July: First Chinese tourist group lands in Taiwan
April 2009: Both sides sign agreements for regular passenger and
cargo flights, financial cooperation and mutual assistance in cracking
down on crimes.
April: Taiwan introduces a cross-Straight industrial exchange project
to promote cooperation in 15 industries
June: Taiwan opens 100 industries to Chinese investments
June: resumed ECFA talks following a suspension of some 10 years
June: China sends the first procurement delegation to Taiwan
November: The two sides sign memorandum of understanding for
financial investment
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Founding father of the current China
Market reform and economic boom
Negotiated return of Hong Kong and Macau
During his time, Hong Kong and Macau returned
to China
Possible signing of landmark ECFP
Taiwan’s economy
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Technology industry
Taiwan firms make world’s many Personal Computers and
related products
Taiwan is part of the global high tech value chain
Both sides have staked personal prestige on this pact
China is Taiwan’s largest export destination
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1/3
Taiwan export destined to China
Bilateral trade amounting to US$130 b in 2008
Taiwan opens tourism to China
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Tourists from China arrive in Taiwan
from a cruise ship this year amid
loosened restrictions on visitors from
the mainland
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China and Taiwan are launching key talks toward
a trade pact that would mark the biggest step
forward in a détente that is reshaping East Asia’s
economics and politics.
The talks are expected to result in the signing of
2011 free trade deal between the onetime
enemies
This new pact includes opening:
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Business, travel, and political contacts.
If successful
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Bind Taiwan to its giant neighbor
Erase decades old barriers in Taiwan to investments
from China
Jiang’s era
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Pressure for reunification
Taiwan’s new democratic party pushing for independence
Missile tests in the Taiwan Straight
China had 1500 missiles pointing at Taiwan
Hu’s approach
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Abandoned the sort of fiery threats toward Taiwan
Instead signing a series of free-trade deals with its Asian
neighbors including one with Taiwan’s major competitors
When the pacts take effect next year, Taiwan’s exports to
China will become much more expensive.
Forbid its regional partners from making similar deals with
Taiwan
ECFA Potetial Economic impact on Taiwan
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1.65-1.72% to Taiwan’s gross domestic product
Create 263,000 jobs
Taiwan has in the past prevented multinationals
from integrating Taiwan into their global
operations, driving many to Shanghai
Limits on banking and investment in China set
back in companies
Taiwan government study
Beijing, Taipei set stage for landmark pact
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Rapid improvement in relations with China since
Taiwanese President Ma Ying Jeou took office.
Taiwan-China tension is the greatest security
concern in East Asia
What may be accomplished in the week Dec 21, 2009
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No formal trade talks
Setting a frame work for the free-trade deal
Set a time frame for trade talks
An agreement is expected in the first half in 2010
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A list of zero-tariff products
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Including financial, machinery, and petro chemical industries
Something will come out during the week of Dec. 21, 2009
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Agreement on fishing-industry cooperation
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Quality checks of agricultural products,
Cooperation in inspection and certification
Prevention of double taxation
Ease visits by Chinese professionals
Offer scholarships to Chinese students
On going talks
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Enabling Chinese banks to enter Taiwan
Worry by the Taiwanese
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Chinese banks market capitalization is often 10 times of the
Taiwanese banks.
Control by Chinese banks
Financial regulators will bar from buying stakes in Taiwanese
banks
Talking points/key issues in Taiwan-China trade negotiations
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Tariffs on machinery, textile, and petrochemical – Taiwan
seeks tariff-free sales in these industries
Ban on agricultural products – Taiwan vows not to open its
market more than 800 Chinese agricultural products
Ban on industrial products – China urges Taiwan to open its
market to some 1300 industrial Chinese products
Local currency service – Taiwan seeks right for Taiwanese
banks to provide local currency
Chinese investments to Taiwan
Investment Protection Agreement
Taiwan, China signed 3 agreements
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Tuesday, December 22, 2009 signed 3 agreements
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Industrial standards
Food quarantine
Fishery cooperation
Effective in 90 days after the signing
Taiwan would like to sign the trade pact with China and set in motion the
negotiations ASAP
China’s position is that in light of the importance and complexity
involved, it is not wise to set a timetable for the signing of ECFA
Expected to hurt makers of shoes, socks, towels, garments, automobile
parts, and petrochemical products
Industrial standards
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Taiwan and China will work together to establish joint
standards and specifications on products for which there
are not international standards yet
Bureau of Standards, Metrology and Inspection under the
Ministry of Economic Affairs
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Exporters would have to ensure the products complied with these
standards
Related companies may collect royalties if they register patents
on them
Profit involved is huge given the size of the Chinese market
Benefit Taiwan’s light-emitting diode, solar-cell and flat panel
makers because international standards aren’t available
Other discussions
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Trade talks will also settle which sectors will be included in the
list of the first industries to be allowed to sell their goods at
lower or zero tariffs
Taiwan hopes to indlude
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Banking,
Textile
Auto parts
Machinery
Increase cross straight flights during lunar year
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Taiwan and China currently operate 270 passenger flights a week
Future potential
US & UK
China & Taiwan
GDP
$14 T;
$2.6T
$4.7 T;
$0.395 T
Geography
9.83 m sq km; 243K sq
km
5.03 m sq. km;161k sq
km
population
309 m;
58.7 m
1.3 b;
23 m
Export
$1.1 T;
$351 b
$1.2 T;
$204 b
Two economies
China
Taiwan
GDP 2009
$4.3 t
$357 b (CIA Worldfact,Jan10, 10)
Per Cap GDP 2009
$3,180
$16,590
GDP growth 2009
8.75%
(4%)
Currency
Yuan
NT$
Birth rate
1 child policy
1.0 per woman
Exchange Rate
1US$=6.82
$1US=32.84
Trade surplus with US
2009
$233 b
$12.7 b
FD Investments 2008
$111b
$8.23 b
Unemployment
4%
6.4%
Export countries in the world
Rank
Country
World
Exports
$12,461,000,000,000
Year
2009 est.
12
13
14
15
European Union
PR China
Germany
United States
Japan
Netherlands
France
Italy
Belgium
South Korea
United Kingdom
Hong Kong
Canada
Russia
Singapore
Mexico
Spain
$1,525,000,000,000
$1,202,000,000,000
$1,121,000,000,000
$1,057,700,000,000
$ 581,000,000,000
$ 499,000,000,000
$ 475,000,000,000
$ 405,000,000,000
$ 370,000,000,000
$ 364,000,000,000
$ 351,000,000,000
$ 330,000,000,000
$ 316,000,000,000
$ 304,000,000,000
$ 270,000,000,000
$ 230,000,000,000
$ 218,000,000,000
2009 est.
2009 est.
2009 est.
2009 est.
2009 est.
2009 est.
2009 est.
2009 est.
2009 est.
2009 est.
2009 est.
2009 est.
2009 est.
2009 est.
2009 est.
2009 est.
2009 est.
16
Taiwan
$ 204,000,000,000
2009 est
1
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3
4
5
6
7
8
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10
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