Vol. 2, Issue 35
The Global Taiwan Brief Volume 2, Issue 35
“Four Cities Forum” Spotlights Role of GACC in Cross-Strait Relations
By: Russell Hsiao
Chinese Military Parade Signals “PLA prepared for the game, ready to win”
By: Elizabeth Freund Larus
A Preliminary Assessment of Taiwan’s Restrictions on Chinese FDI in its Semiconductor Industry
By: Matt Schrader
Taiwan Population Resiliency: A Mixed Bag
By: Christopher Yung with Jeffery Taylor
“Four Cities Forum” Spotlights Role of GACC in Cross-Strait Relations
Russell Hsiao is the executive director of the Global Taiwan Institute and the chief editor of the Global Taiwan Brief.
The “Four Cities Forum” (四城論壇)—which Taipei, Shanghai, Hong Kong, and Shenzhen take turns hosting annually—will reportedly be held at the end of 2017 in December. This year’s forum, which will be its 18th iteration, will be held in Hong Kong. According to local media reports, the deputy secretary-general of Taiwan’s pseudo-governmental organization, the General Association of Chinese Culture (中華文化總會, GACC), has been invited by the local host to serve as one of the speakers.
The forum, which began in 1998 as the “Four Cities Cultural Exchange Conference” (四城文化交流會議), has been held consistently for nearly two decades. The conference is broadly focused on the role of cities in shaping contemporary Chinese culture and cultural policies, and is one of many cross-Strait non-governmental dialogues that have continued since the freeze by Beijing on governmental dialogue after Tsai Ing-wen was inaugurated as president. The 2016 forum was held in Taipei while the GACC was still under the leadership of the previous administration.
The GACC is an organization with a long history borne out of the longstanding conflict between the Chinese Communist Party (CCP) and the Nationalist Party (KMT). Established in 1967 by Chiang Kai-shek (蔣中正) in Taipei at the outset of Mao Zedong’s Cultural Revolution (1966-76), a violent political campaign that sought to wipe the People’s Republic of China (PRC) clean of capitalist and traditional Chinese political culture, the GACC was at the forefront of the anti-Communist ideological campaign. At its formation, the GACC was known as the Chinese Cultural Rejuvenation Movement Implementation Commission (中華文化復興運動推行委員會), which the Generalissimo chaired himself.
The Commission supervised five subordinate committees that managed national literature and art resources, citizen counselling, educational reform, advancing literature and art research, and academic research and publication. The overarching mission of the state-led organized mass movement was to preserve Chinese culture and heritage by opposing communist ideology in Taiwan and greater China. One of its primary objectives is the preservation and promotion of Chinese culture (中華文化) as defined politically by Sun Yat-sen’s “Three People’s Principles” (三民主義) and more fundamentally by the party-state’s anti-communism movement (討毛反共). Specific goals included the strengthening of nationalism, advancing the national language, and promoting Confucianism, among others.
From the 1970s through the 1980s, the role of GACC shifted from being a tool in the all-of-society competition between the KMT and the CCP for political and cultural legitimacy over China, to a supporting role in the modernization of the national government. In the 1980s, the influence of GACC began to wane. 1981, the Executive Yuan established the Council for Cultural Affairs (文化建設委員會), which was elevated and renamed the Ministry of Culture in 2012. Domestically, as the localization movement (本土化) in Taiwanese society picked up steam with democratization, as well as with changes in political power, the movement and the organization likewise changed.
As a reflection of the changing state of cross-Strait relations at the time that martial law on Taiwan was lifted in 1987 and the Temporary Provisions against the Communist Rebellion were rescinded in 1991, the name of the Commission was changed to the Chinese Culture Rejuvenation Movement Association. In 1991 the association was incorporated and approved by the Ministry of Interior as a non-governmental organization, with then President Lee Teng-hui as its chairman. In 2006, during the first Democratic Progressive Party (DPP) administration, the name of the organization was changed to the National Culture Association (國家文化總會) and then back again in 2010 after the KMT returned to power in 2008.
Since its inception, the chairman of the GACC has always been the incumbent president of the country. In 2010, then President Ma Ying-jeou decided to remove the president as chairman of the organization and, for the first time in the organization’s history, the GACC was headed—at least figuratively—by someone other than the president of Taiwan. In March 2017, President Tsai Ing-wen again resumed the practice of having the president serve as the chair of the organization. The vice president of Taiwan, Chen Chien-jen (陳建仁), also serves as the one of organization’s two vice chairpersons.
In the absence of senior-level cross-Strait dialogue through official channels, President Tsai Ing-wen has appointed two of her close allies as vice chairman and secretary-general of the GACC. The former deputy secretary of the National Security Council, Antonio Chiang (江春男), serves as one of the two vice chairpersons, and the GACC secretary-general is Lin Chin-chang (林錦昌). The other two deputy secretaries-general are Li Hou-ching (李厚慶) and Zhang Tie-zhi (張鐵志). Zhang was invited as the representative to speak at this year’s forum.
The GACC’s Executive Committee is composed of political heavyweights from both parties and senior governmental officials, including the vice minister of the Mainland Affairs Council and the Minister of Culture, among others. According to its website, the GACC’s current mission is three-fold: First, continue to enhance and deepen Taiwan’s cultural power (持續提升和深植台灣的文化實力); second, continue to promote cross-Strait cultural exchange and cooperation (持續推動兩岸的文化交流與合作); and third, strengthen Taiwan’s cultural exchange with the international community (加強台灣文化和國際的交流).
The main point: Against the backdrop of Beijing’s refusal to engage in senior governmental dialogue with Tsai’s government, pseudo non-governmental organizations such as the GACC may start playing a greater role in cross-Strait exchanges. While there is no adequate substitute for senior dialogues through official channels, the reported participation of the vice-secretary general in the December conference is potentially a positive sign for cross-Strait dialogue.
Chinese Military Parade Signals “PLA prepared for the game, ready to win”
Elizabeth Freund Larus is Waple Professor of Political Science and International Affairs at the University of Mary Washington. She is author of the book Politics and Society in Contemporary China. Dr. Larus was 2015 Taiwan Fellow at National Chengchi University.
The July 30, 2017, parade commemorating the 90th anniversary of the founding of the People’s Liberation Army (PLA) was an impressive display of machinery, discipline, and pageantry. Some 12,000 troops, all in combat-ready status, and hundreds of pieces of military hardware assembled at the Zhurihe Military Training base, China’s largest. Chinese leader Xi Jinping addressed the troops, exhorting them to follow the Party’s absolute leadership, to protect national sovereignty, and to support the “China dream” of rejuvenation of the Chinese nation.
Beyond the pageantry, however, the parade sent several important signals. First, the PLA signaled its determination to evolve into a world-class military, complete with technologically-advanced weapons. The parade showcased nearly 130 domestically-designed jets, battle tanks, early warning radar, anti-missile capabilities, and military transport aircraft. Forty percent of the military equipment was making its debut, including the closely watched J-20 long-range fighter, a potential rival to the US F-22 and F-35. The parade also displayed a remarkable advance in military professionalism. Combat dress, equipment, and tactical dress all had consistent camouflage, an advance over the confusing and unsightly hodge-podge of dress displayed at the 2015 China Victory Day Parade.
Less tangible were the parade’s political signals. Foremost among them is that Xi is firmly in control of the military in advance of the power reshuffle at the upcoming 19th Party Congress. Xi has been the most militarily involved of China’s leaders since Deng Xiaoping. He has reorganized the military, purged corrupt officials, and enforced surveillance of the PLA. Xi signaled his leadership of the PLA during the parade in several ways. He appeared in military fatigues, rather than civilian attire; rode the length of the parade ground in an open military jeep, calling the troops “comrades”; and instructed troops to follow the Party leadership. The presentation of the colors reinforced this last point. The Party flag led the state and the PLA flags, consistent with Mao Zedong’s claim that political power comes out of the barrel of a gun and that the Party must always control the gun. Hence, despite its name, the People’s Liberation Army serves the Party rather than the citizenry, and serves Party chief Xi Jinping above all.
Indeed, the parade was very much Xi’s show. Xi apparently wanted the world to recognize that he is the commander of a muscular military. To do so, he chose an unorthodox method: YouTube, a free video-sharing website available in nearly every country. China Global Television Network (CGTN), the 24-hour English-language news channel run by China’s state broadcaster China Central Television (CCTV), uploaded footage of the entire parade. Because Chinese authorities block YouTube in China, the video was for external rather than domestic consumption. Complementing the parade video was a four-minute long music video, uploaded to YouTube by People’s Daily, complete with a bouncy rap tempo.
There are three likely reasons for posting the videos on YouTube. First, YouTube offers exposure: YouTube attracts more than 30 million visits daily. Broadcasting on YouTube demonstrates to foreigners and overseas Chinese that China is becoming stronger, and that the military will protect China’s interests, come what may. Second, it is a cost-effective way for foreigners to view the parade. Zhurihe base is in the heart of Inner Mongolia, far from anyone but invited guests. Hence, broadcasting it on YouTube assured Xi a large viewership. The music video upload to YouTube also was an attempt to expand China’s soft power by allowing its state controlled news organizations to present China, and its military, in a Westernized, flashy and musically-themed show. This video will likely attract more views than the actual parade.
As impressive as China’s growing military might appears, there are still some weaknesses that the parade did not reveal. First, the PLA is having difficulty transitioning to an all-volunteer force and attracting enough college-educated recruits. The number of soldiers that have graduated from college makes up less than 15 percent of soldiers in grassroots military companies, hindering China’s ability to develop a modern, military force capable of using its increasingly technological weapons platforms. Second, the PLA is finding it difficult to retain personnel beyond their two-year term of service. This hollows out PLA forces, as it requires a never ending cycle of training new troops to develop the skills necessary for operating specialized weapons. This also makes it difficult to develop a strong core of noncommissioned officers (NCO) capable of assuming some of the duties from the officer corps, while at the same time ensuring that the training of enlisted forces remains up to standard. The PLA undoubtedly has made significant technical and professional advances, as evidenced by the parade. A remaining challenge is to fill the enlisted and NCO billets with civilians who are educated and willing to serve.
Another political signal was directed at Taiwan. Xi’s review of the troops, his speech at the parade, and his Army Day celebration address all emphasized a strong military always ready and able to defend the Motherland. At the August 1 Army Day celebration, Xi sent a signal to Taiwan’s ruling Democratic Progressive Party (DPP) that Beijing will never allow Taiwan independence. In his so-called “Six Whatevers” (六個任何), Xi stated that “We will never allow any people, organization or political party to split any part of Chinese territory from the country at any time, in any form.” In a thinly veiled reference to US support for Taiwan, Xi added that “No one should expect us to swallow bitter fruit that is harmful to our sovereignty, security or development interests.” Xi’s references to Taiwan were consistent with his earlier comments on Taiwan and that of his predecessors. The PLA celebrations afforded China one more opportunity to drive the point home to the Taiwan government.
The main point: The PLA 90th anniversary parade was intended to demonstrate that Xi Jingping has successfully harnessed control of the PLA. It sent the signal that China’s military is determined to advance to a world-class force that takes its orders from the Party, and more specifically, from Party Chairman Xi. It also sent a signal to the governments in Taipei and Washington that Xi will not hesitate to use the military to safeguard China’s sovereignty and advance unification of Taiwan with the Chinese mainland.
A Preliminary Assessment of Taiwan’s Restrictions on Chinese FDI in its Semiconductor Industry
Matt Schrader is an MA candidate in Asian Studies (‘19) at Georgetown University. Matt was a Summer 2017 intern at the Global Taiwan Institute.
Controlling direct investment from the People’s Republic of China (PRC) in sensitive or strategically important sectors of Taiwan’s economy has long been a concern of Taiwanese policymakers, including in the semiconductor industry, also known as the integrated circuit (IC) industry. Limited PRC investment in some sectors of the Taiwanese IC industry was nominally permitted in 2013. Yet, Taiwanese policymakers’ lingering concerns over inbound PRC investment in this strategic sector, valid though they are, could have the unintended effect of hampering the long-term competitiveness of one of the country’s most important industries.
IC producers are lynchpins of Taiwan’s economy, accounting for an estimated 13.4 percent of the island’s exports by value. Semiconductors produced by companies like Taiwan Semiconductor Manufacturing Corporation (TSMC) are also of crucial importance to major downstream Taiwanese manufacturers like Hon Hai Precision Industry (also known as Foxconn). Now, however, Taiwanese IC producers are staring down increased competition from Chinese semiconductor companies with strong government backing, in the form of “Made in China 2025” (中國製造2025) a plan unveiled by the PRC’s State Council in 2015 to bolster Chinese domestic producers across a broad sweep of manufacturing and high-technology industries. Through MIC 2025, the PRC has committed to supporting its domestic IC sector through a range of measures, including financing of up to $161 billion over 10 years, and creating, as in other targeted sectors, a dominant firm meant to act as China’s “national champion”—in the case of the IC sector, that firm is Tsinghua Unigroup, a company spun out of Beijing’s Tsinghua University that rose to prominence in 2013-2014.
As the shape of the Chinese government’s MIC 2025 push came into focus in 2014 and 2015, leading Taiwan IC companies began to lobby publicly for Taiwan’s government to open their industry to more investment from PRC companies. Their reasoning proceeded along two paths:
- First, the scope and scale of PRC support for its domestic champions meant Taiwanese companies needed to ‘get on board,’ lest late movers would inevitably be swept away by the strengthening tide of Chinese competition.
- Second, Taiwanese semiconductor executives have asserted that Taiwan’s regulations limit their strategic options by prohibiting them from selling stakes to Chinese companies. This would limit their flexibility compared with other global competitors. David Ku, CFO of MediaTek—a Taiwanese company that competes directly with Qualcomm in semiconductor design—told Bloomberg, “I need to have the strategic flexibility, which means I can go anywhere, talk to anyone and ask for acquisitions or joint ventures with cash or shares. The way that the current Taiwan regulations restrict us, we’re basically not in the same playground.”
The first reason is not convincing. Industry analysts such as the research firm IC
Insights believe China will fall far short of its MIC 2025 goals, making unlikely the short-to-mid-term market dominance Taiwanese producers fear. The second reason, however, makes an important point that policymakers should take note of: China is already a global leader in terms of its importance as a market for IC manufacturers’ products, and as a source of investment capital (an important consideration in the capital-intensive IC industry). Leading IC companies understand that access to markets and capital in China will remain dependent, at least in part, on their willingness to appear supportive of government initiatives such as MIC 2025, which may in turn necessitate the formation of strategic alliances with Chinese entities.
Navigating this concatenation of forces is Tsai Ing-wen’s Democratic Progressive Party (DPP) government, which has tacked carefully away from the PRC since it assumed power last year. Concerns over former President Ma Ying-jeou’s embrace of cross-Strait economic integration was a contributing factor in Tsai’s electoral victory. The Tsai administration has responded, in part, by limiting the acquisition of stakes in Taiwanese IC companies by PRC entities, even in sectors nominally open to investment, such as chip ‘packaging.’
In late October 2015, Tsinghua Unigroup announced it would acquire a 25 percent stake in Powertech, a Taiwanese chip packaging company. Powertech management specifically cited China “market access” as part of its rationale for making the deal. A little more than a month later, Tsinghua announced its intention to acquire a 25 percent stake in two more Taiwanese packaging firms, ChipMOS and Siliconware Precision Industries (SPIL)—SPIL and Powertech were Taiwan’s second and third-largest IC packaging companies by revenue in 2016.
The new Tsai government wasted little time signaling its caution, with an official from the Ministry of Economic Affairs telling Reuters in February 2016, “We said from the start [all three] will not be entirely approved … Whether one or two of the cases can pass, we need to see the review process.” All three deals eventually failed. Although the Tsai government did not comment publicly on its deliberations, neither were any of the applications rejected outright: SPIL withdrew its application in late April 2016 when it appeared government approval would not be forthcoming, with ChipMOS and Powertech following suit in November 2016 and January 2017, respectively.
In erring on the side of caution, the Tsai government has limited Taiwanese IC companies’ “strategic flexibility.” Consequently, many companies have fallen back on second-best options in the months since the collapse of Tsinghua Unigroup’s deals. ChipMOS and Tsinghua Unigroup responded with an announcement that the latter would acquire a stake in the former’s mainland subsidiary. TSMC’s widely-admired chairman Morris Chang—who called in mid-2016 for the Taiwanese government to allow direct mainland investment in his industry—opted to press forward with plans for a US $3 billion foundry plant in Nanjing. In an attempt to build on the scale it believes is necessary to remain competitive, SPIL agreed to a buyout proposal by ASE, Taiwan’s largest IC packaging company. In an ironic, perhaps retaliatory, twist, the deal remains on extended hold, pending antitrust approval from PRC regulators.
Taiwan’s semiconductor industry clearly views the Chinese market and funding as competitive necessities. By refusing to allow PRC corporate entities to acquire non-controlling stakes in relatively non-sensitive parts of its domestic IC industry, the Taiwanese government may be missing an opportunity to carve out competitive latitude for homegrown IC companies. An overly broad approach to restricting inbound investments may also have the inadvertent effect of pushing cooperation offshore, farther from the eyes of Taiwanese regulators who could otherwise ensure compliance with regulations designed to assuage concerns around intellectual property loss and undue PRC influence.
The main point: The Tsai administration’s caution toward investment from the PRC in its highly-prized domestic IC industry for national security concerns, while understandable, could have the unintended effect of handicapping its companies’ long-term competitiveness in one of their key markets.
 As the last step in the chip manufacturing process, packaging—wherein delicate semiconductor components are ‘packaged’ in their protective final casings—is generally seen as less technically demanding than chip design and manufacturing, reducing concerns around intellectual property theft. The packaging sector is on Taiwan’s positive list for PRC investors, giving mainland persons nominal permission to invest, subject to several provisions on corporate control. However, PRC investment in chip design companies (such as MediaTek) and manufacturing companies (such as TSMC) remains prohibited.
Taiwan Population Resiliency: A Mixed Bag
Christopher Yung is the Donald Bren Chair of Non-Western Strategic Thought at Marine Corps University, where he serves as Director and Professor of East Asian Studies. He is the author, editor, and contributor to numerous books, monographs, and articles on Chinese strategy. Jeffery Taylor was a research assistant at Marine Corps University from 2016-7 and provided research support for this article.
A central question related to the effectiveness of Taiwan’s ability to resist the People’s Republic of China’s (PRC) efforts to coerce or at best strongly influence Taiwan back into Beijing’s political sphere is the resiliency of the Taiwan population. In my last essay for the Global Taiwan Brief I discussed the various ways Beijing is attempting to strongly persuade Taiwan to integrate with the PRC. These include a range of activities that include economic incentives to entice Taiwan into developing closer ties between the two sides and veiled threats involving China’s military in order to deter Taiwan from declaring a legal separation in the relationship. The main point made by that essay was that the ability of Taiwan to resist these kinds of activities came down to political will, which ultimately rested on psychological factors. This brief examines the question of resiliency: how resilient is the Taiwan population, and how resistant is it to these kinds of coercive efforts?
The first analytical question that must be addressed is the obvious one: how does the Taiwan population largely sees itself? If it is the case that a large segment of Taiwan’s population has grown to see themselves as Chinese and will continue to do so over time, then the ultimate objective is to tie their fate to the PRC in the long-run, with the hope that China’s political system ultimately evolves or reforms itself to such an extent that eventual political integration is possible or that the Chinese system collapses, leaving Taipei as the only legitimate government of the Chinese people. Resilience in this case comes in the form of resistance to Beijing’s efforts to quickly integrate Taiwan and to ensure Taiwan’s freedom of action and autonomy are robust enough to prevent integration should the Chinese political system not evolve in a favorable manner. Resiliency would come in the form of hard bargaining and a “buying time” strategy while Taiwan continues expanding ties, economic or otherwise, with the mainland.
If, on the other hand, the population increasingly sees itself as Taiwanese, then resiliency must be defined differently. The Taiwan population must be prepared for heightened coercive actions leveled against it, and therefore resiliency in this case must be measured by the Taiwan population’s capacity to resist through willingness to fight for its freedom. Of course in the case of the Taiwan population seeing itself as Chinese, there is still a need for a strong military and a will to resist Beijing’s provocations, but resiliency in the military sphere takes on a particularly urgent note if the Taiwan population increasingly sees its future independent of China. Nonetheless, in both cases resiliency is tied to the population’s willingness to create and sustain a strong military.
Recent polling indicates that the Taiwan population is increasingly seeing itself less as “Chinese” and more as “Taiwanese.” Polls from National Chengchi University, Taiwan Brain Trust, and Academia Sinica have been consistent on this point. While these polls also show that the Taiwan population does not want confrontation with China and is not eager for outright war over independence, large segments of the population, when given the choice between unification and independence, pick the latter. When polls give those surveyed more nuanced choices such as: “depending on how events develop in the future,” “permanent status quo,” “eventual unification,” and “eventual independence,” a large segment of Taiwan’s population chooses a wait-and-see approach. With this said, what else can we infer about Taiwan resiliency?
While Taiwan’s population sees itself as increasingly Taiwanese, and not Chinese, its youth do not appear to be putting any “skin in the game.” Recent reports on enlistment and reenlistment rates, as well as reports on the Republic of China (Taiwan) military’s ability to meet manpower requirements have characterized this issue as disappointing. The ROC Ministry of National Defense (MND) has postponed movement to an all-volunteer force twice since 2015. A large part of this problem comes down to pocket book issues—the MND currently lacks the budget to provide generous recruitment and reenlistment packages—but it also comes down to the fact that the military is not necessarily seen as providing a glamorous career path.
Other forms of resiliency
While willingness to serve in the military is an important indicator of resiliency, it is not the only indicator. There are other measures to determine how resilient a population might be. Taiwan, for example, ranks high in the UN “ World Happiness Report,” a collection of United Nations data on how satisfied populations are with their societies, political systems, governance, and economy. Taiwan ranked #33 of a total of 151 nations surveyed, which is a ranking higher than Spain, Japan, and Italy. The “happiness” indicator also measures how happy or satisfied a population is over time. Taiwan’s “happiness measure” has improved over time. Its current ranking is an improvement over its ranking during the 2005-2007 survey period (#47), which is not bad, given its larger political-strategic context.
Another measure of Taiwan resiliency is the faith that its business community has in the economy of Taiwan. In this regard, Taiwan seems to measure well. According to data from Taiwan’s Investment Commission of the Ministry of Economic Affairs, Taiwan’s level of direct investment in its own economy has increased steadily between 2013 and 2017. This may be the result of recognition that Taiwan needs to fold investment back into its own economy given the rocky road ahead with mainland China. But all of the increased investment cannot be attributed to that fact; at least some of it may be explained by the overall perspective of Taiwan’s business community that the Taiwan economy is viable, with sound businesses, good business models and a reliable work force. At the same time that this is good news economically for the island, a related but troubling data point is that Taiwan’s younger entrepreneurs are risk averse and reluctant to invest in Taiwan.
Finally, resiliency is also measured in the effectiveness of the management of Taiwan’s political system. Taiwan has now enjoyed over 20 years of democratic governance, highlighted by three instances of political power being transferred from one political party to another and then back again. As is the case with the United States’ 2016 election, the Democratic Progressive Party (DPP) victory in January 2016, after which power was transferred from the KMT, is an indication that Taiwan’s political and legal institutions are maturing over time and have become resilient enough to withstand the rough and tumble of electoral politics numerous times.
The resiliency of the Taiwan population is mixed. On the one hand Taiwan’s youth do not appear to have answered the call to military service, which is affecting enlistment and recruitment rates for the Taiwan military. This is a major problem. The MND will need to address this manpower shortage either through better recruitment packages (e.g. more money) or improved public relations campaign to highlight the importance of serving, or a combination of both. At the same time, there are positive measures of Taiwan’s resiliency including its high ranking in the “happiness measure” of the United Nations, its business community’s increased investment in the Taiwan economy itself, and the demonstrated sustainability of its political system and institutions.
The Main Point: Problems for resiliency in Taiwan appear to center around the resiliency of Taiwan’s youth. If future Blue or Green governments decide to focus on the issue of Taiwan’s resiliency, it would be wise to focus resources on promoting resiliency in this demographic. These include providing more funds for the defense budget to improve recruitment and retention packages for military personnel, and providing seed money or incentives to encourage young entrepreneurs to invest in Taiwan itself.