Fears for Cross-Strait Economic Backlash after Trump-Tsai Phone Call

Fears for Cross-Strait Economic Backlash after Trump-Tsai Phone Call
Photo Credit: Kim Kyung-Hoon / Reuters / 達志影像
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Will there be a backlash for Beijing?

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Beijing may move to squeeze Taiwan’s China-dependent economy after the historic phone call between U.S. President-elect Donald Trump and Taiwan President Tsai Ing-wen (蔡英文).

Amid the ever-present tension across the Taiwan Strait, China, including Hong Kong and Macao, is still Taiwan’s largest trading partner, accounting for about 40 percent of Taiwan’s total exports.

Ross D. Feingold is a senior advisor at DC International Advisory, a consultancy that advises clients on political risk in markets across the globe. Taipei-based Feingold is wary the phone call may have implications for Taiwanese companies with interests in China.

“When European governments or Australia, for example, met the Dalai Lama or undertook other actions that displeased Beijing, their companies felt repercussions through regulatory investigations, loss of procurement opportunities, and the like,” Feingold says. “In addition to political or military pressure, China has this tool to deploy against Taiwan, whereas up to now under President Tsai, China may have looked at the Taiwan corporate world as a friendly group to utilize in its united front tactics."

More than 93,000 Taiwanese businesses have invested in China since 1988, according to the Council on Foreign Relations. Reciprocal Chinese investment by Taiwanese firms has also increased, totalling US$34.5 billion between 2008 and mid-2015, the think tank notes.

The Trump-Tsai conversation, which took at 11 p.m. on Friday (Taiwan time), is thought to be the first time a president or president-elect of the United States has directly contacted the leader of Taiwan since 1979, when formal diplomatic ties between the United States and China were established. The call marks a major break with convention, as China has for decades blocked formal relations between the U.S. and Taiwan.

Earlier on Friday, Taiwan’s state-run Central News Agency reported that Zhang Zhijun (張志軍), head of China's Taiwan Affairs Office, said that his country continued to welcome investments from Taiwan companies but not those that support the idea of Taiwan independence. CNA also noted speculation in Chinese media surrounding a Taiwanese seafood restaurant chain, Hai Pa Wang (海霸王), which was recently fined in China for mislabeling items. Reports suggested the company had been fined because its owners had ties to President Tsai’s family. Zhang denied knowledge that was the case.

China dismissed the conversation between Trump and Tsai as “just a small trick” by Taipei and said it hoped relations with the United States would not be “damaged,” according to The Telegraph. “I believe, this won’t change the One-China Policy which has been adhered to by the U.S. government for many years,” The Telegraph quotes Wang Yi, China’s Foreign Minister, as saying.

However, Feingold says the “muted” initial reaction from Chin may indicate that a more “robust reaction” might still be coming.

He says China’s reaction to the call will also remind the international community how entrenched and unreasonable China’s policies are when it comes to Taiwan.

Since the Tsai-led Democratic Progressive Party (DPP) took office in May, Beijing has cooled ties with Taipei. It has also blocked Taiwan’s involvement in a number of international institutions, saying that Taiwan’s participation should be made with respect to the “one China” principle and the “political basis” of the so-called 1992 consensus, which the Tsai administration has refused to recognize.

“The last six months have seen repeated efforts by China to restrict Taiwan’s international organization participation, combined with its refusal to interact directly with President Tsai’s government due to Tsai’s refusal to adhere to the ‘1992 Consensus’ policy of former President Ma Ying-jeou (馬英九)," Feingold says.

He adds that the Taiwan “government must be prepared respond to actions China takes directly against Taiwan in the aftermath of the call.”

“Last week’s military exercise by China that involved passing through waters close to Taiwan in order to demonstrate an ability to access the Pacific Ocean beyond the first island chain of Okinawa and Taiwan is a reminder that Taiwan must continue to develop its defense capabilities.”

Taiwan has long been criticized for failing to allocate 3 percent of its GDP annually to national defense.

Editor: Olivia Yang

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