Fortnightly Review

Fortnightly Review

Fortnightly Review

Russell Hsiao is the executive director of the Global Taiwan Institute and the editor-in-chief of the Global Taiwan Brief.

Siew-Xi Meeting: Beijing Draws Taiwan’s Business Community Closer as US-China Trade Tensions Simmers

On the sidelines of the 17th annual Boao Forum for Asia held on Hainan Island from April 8-11, Chinese Communist Party (CCP) General Secretary and President Xi Jinping met with the former vice president of Taiwan and honorary chairman of the Cross-Straits Common Market Foundation (兩岸共同市場基金會), Vincent Siew (蕭萬長). The significance of the meeting is not lost on close observers since it is the first meeting that Xi has had with a prominent political figure from Taiwan since the 19th CCP Congress last October—and as Beijing continues its freeze on high-level dialogues with the Tsai Ing-wen government.

Before the opening of the Boao Forum, Xi met with Siew’s delegation composed of business leaders from Taiwan. This was the third meeting between Siew and Xi at the Boao Forum, which has been held since 2002. In the meeting, Xi noted that “only if we insist on the 1992 Consensus, oppose Taiwan independence, the road ahead for cross-Strait [relations] will become wider, and prospects [for cross-Strait relations] will be very good.”

The Chinese media reportedly covered the meeting between Xi and Siew in its entirety. This is rare for the state-run Chinese media when it comes to Taiwan-related coverage, which suggested that Xi and the CCP’s propaganda apparatuses wanted to highlight the meeting.

Business leaders accompanying the former vice president included, but were not limited to, President of TPV Technology Limited, Jason Hsuan (宣建生), HTC Corporation Chairperson Cher Wang (王雪紅), and TSMC General Counsel Sylvia Fang (方淑華), among others. In his comments, Xi noted that many entrepreneurs from Taiwan flocked to China in the early stages of Deng Xiaoping’s “reform and opening-up.” At the time of opening, Xi was in Xiamen, Fujian, and then went to Fuzhou. Between 1991-1992, Xi reminisced how he convinced the president of TPV Technology, Jason Huan, to invest in Fuqing, a county-level city in Fuzhou. Xi pointed out that as this year marks the 40th anniversary of China’s “reform and opening up” and the 30th anniversary for when Hainan became a province, it is imperative to give credit to the Taiwanese and Taiwanese companies for China’s development. Moreover, Xi also emphasized that the prospects for cross-Strait relations is bright.

The former vice president of Taiwan attended the Boao Forum as the honorary chairman of the Cross-Straits Common Market Foundation, which he established in 2001 to promote a common market between China and Taiwan. In remarks to the press, the former vice president described the atmosphere in his meeting with Xi as warm, and expressed hope that the 31 measures that Beijing government announced in late February will be implemented as soon as possible.

In late February, the PRC State Council announced 31 broad measures to entice Taiwan businesses and persons to invest, live, and work in China. The measures are now being executed at the provincial and local level. According to the spokesperson for the State Council’s Taiwan Affairs Office (TAO), Ma Xiaoguang, the 31 measures were reportedly being fully implemented in Xiamen City, Fujian province, and in Wenzhou City, Zhejiang Province. On April 10, Xiamen City introduced 60 measures in accordance with the 31 measures, which, among other things, set a target of offering people from Taiwan up to 5,000 jobs and internships each year, and allowing them to enjoy the same benefits of employment and training subsidies as the local people. For instance, a master’s degree candidate who has worked in the locality for a year can also receive a subsidy of NT$140,000 (US$4,774.25).

The 60 measures introduced by Xiamen were divided into five major parts, which complement and enhance the 31 measures announced by the TAO, with a focus on youth, primary and secondary schools, scientific research institutes, higher education, and enterprises in order cultivate talents on both sides of the Taiwan Strait. The measures include opportunities for students to: study, find internships, seek jobs, and start businesses. Moreover, the measures allow for the provision of medical insurance, waived fees for funeral services, subsidies for vocational training, living rent subsidies, transportation subsidies, as well as significant monetary subsidies for people with exceptional talents to work in China.

The meeting between Siew and Xi took place against the backdrop of a brewing “trade war” between the United States and China. In early April, the Trump administration announced that it will levy 25 percent tariff on more than 1,300 imported goods from China. Beijing responded by announcing its own tariffs on American products worth around $50 billion, including soybeans and pork. As Washington and Beijing raise the stakes in a potential trade war, Beijing appears to be deliberately drawing Taiwan and, in particular, its business community and youth closer into its economic orbit. This will present a unique challenge to Taiwan’s current government as it tries to navigate the increasingly complex strategic environment. According to analyst Alexander Huang who was quoted in the South China Morning Post, “I think the [Taiwan’s business community] will welcome the further improvement and integration of the so-called cross-Strait common market, but the government will raise the alarm and probably remind people that there are potential risks.”

The main point: Against the backdrop of a brewing “trade war” between the United States, Beijing appears to be deliberately drawing Taiwan closer into its economic orbit.

Taiwan: Next Stop, Super-Aged Society by 2025

Taiwan is officially an “aged society.” According to the country’s Ministry of Interior (內政部)—a cabinet level policy-making body responsible for population, land, construction, military service administration, national emergency services, local administration systems, law enforcement and social welfare—Taiwan’s elderly population, 65 years and older, has exceeded 14 percent of the total population in March.

According to the World Health Organization, when a country’s population is composed of 7 percent of people 65 years or older, that society is by definition an “ageing society.” When that ratio reaches 14 percent of the total population, then that society is an “aged society;” when it reaches 20 percent then it is a “super-aged society.” Taiwan became an ageing society in 1993. After 2011, ageing on the island began to accelerate. At the end of 2014, elderly people composed 12 percent of the population, and exceeded the young population in 2017. In March,  people aged over 65 accounted for 14.05 percent of the population.

The national trend in ageing is reflected at the county and city levels, according to the Ministry of Interior. Between 2011 and 2018, the number of aged counties and cities increased five-fold, from three to 15. The elderly population in Chiayi County in southwestern Taiwan is the highest at 18.61 percent. With 16.58 percent of elderly people, Taipei City is among the six major cities with the highest ratio of elderly people.

Compared to other major Asian countries, the elderly population in Taiwan is second only to Japan, and comparable to South Korea. Taiwan’s National Development Council’s forecasts that Taiwan will become a “super-aged society” by 2025. Japan has been a super-aged society since 2013 with more than 25 percent of its population 65 years or older. By comparison, “in the 1950s, at the height of the US manufacturing supremacy, less than 10 percent of the country was older than 65. That share will double to 20 percent by 2050.” The pace of its transition, however, sets Taiwan apart. Taiwan’s transition from an aged society to a super-aged society (est. eight years) will be faster than the 11 years it took Japan, 14 years for the United States, 29 years for France, and 51 years for England, but comparable with the estimated time horizons for South Korea (8 years) and Singapore (7 years.)

Ageing, however, is a not a new problem for Taiwan’s leaders. As early as 2011, Taiwan’s officials have warned about a demographic “time bomb.”

In order to deal with the challenges associated with an ageing population, such as retirements, elderly care, reduction in the work force, and the low fertility rate, the Ministry of Interior began implementing the “Long-term care 10 year plan 2.0” (長期照顧十年計畫二.○). The “Foreign Professionals Appropriation and Employment Act” (外國專業人才延攬及雇用法), which was passed last November, also aim to enhance employment competitiveness by loosening the restrictions for foreign professionals to work in Taiwan. The Ministry of Interior has also developed the “Countermeasures for Responding to Ageing Population Shocks” (內政部因應人口結構老化衝擊之對策) to retain and support talents, foster a safe home environment, and provide safety nets for new families and pregnancies that involve minors through rent subsidies and other measures.

While the challenges facing Taiwan as its society ages is attributed in large part by the country’s low fertility rate and high-life expectancy, the problem for Taiwan is made more complex by other factors, such as a brain drain in which many of the country’s talents are being lured by Beijing to work and hence live in China, and further exacerbated by the military threat it faces from across the Strait.

In the 1950s, Taiwan’s birth rate was at 7.05 births per woman, but today Taiwan’s birth rate is below 1 birth per woman (2011). According to Sinclaire Prowse, “Taiwan currently has the third lowest fertility rate in the world. If the situation does not improve, the projected overall fertility rate will drop back down to 0.9 by 2060. This is an unsustainable drop that could have potentially devastating economic and security implications for Taiwan.” Immigration will serve as a crucial mean of addressing the problems associated with the demographic challenge of a shrinking workforce in Taiwan, according to Prowse.

Yet, that’s not all. On the military implications of this demographic trend, analyst Mike Mazza observed:

First, with an aging and shrinking population, government tax revenues are almost certain to contract … The national budget pie is likely to shrink in the coming decades. Even if defense spending does not shrink relative to other line items, it will shrink in absolute terms … Taiwan’s demographic trends also have a more direct effect on the island’s defense. As Taiwan’s 2017 Quadrennial Defense Review noted, “the impact of our social and economic environment, along with a low birth rate, has been to reduce available manpower, negatively impacting our troop replenishment and operational strength.””

These challenges are compounded with the trend of how “hundreds of thousands of Taiwanese flooding to their booming neighbor to find work,” and this is “fueling fears of a brain drain on the island.” As astutely noted in the Washington Post article, “it is a brain drain that China appears to be gleefully exploiting.”

The main point: Taiwan is officially an “aged society” and accelerating to a “super-aged society” with serious implications for economic and national security. Taiwan’s government is taking steps to respond to this reality, but questions remain whether it will be enough.