PRC Applies Economic Pressure ahead of Taiwan’s Local Elections

PRC Applies Economic Pressure ahead of Taiwan’s Local Elections

PRC Applies Economic Pressure ahead of Taiwan’s Local Elections

Russell Hsiao is the executive director of the Global Taiwan Institute and the editor-in-chief of the Global Taiwan Brief. Meghan Shoop is a Summer 2022 intern at the Global Taiwan Institute and a graduate student at George Washington University.

With local elections in Taiwan less than five months away, Beijing is pulling out all the stops to apply pressure on the Taiwan government and affect voters on the island in the lead up to the vote. In a string of seemingly capricious import restrictions on a growing list of agricultural products from the island that began to ramp up in 2021—along with a record number of incursions into Taiwan’s air defense identification zone—Beijing authorities have now placed import bans on pineapples, sugar and wax apples, and most recently on grouper fish. Arbitrary regulatory fines on Taiwanese companies operating in the People’s Republic of China (PRC) that have reportedly donated to the Democratic People’s Party (DPP) have accompanied these measures. [1] While these economic measures are consistent with Beijing’s overall “soft-hard” strategy of utilizing both carrots and sticks to intimidate and cajole voters on the island, Beijing has begun employing more sticks, potentially signaling a new phase of Beijing’s coercive tactics. 

Targeted Economic Measures to Affect Political Conditions

Over the past year, China has banned the import of four major Taiwanese agricultural products: pineapples, sugar apples, wax apples—and most recently grouper fish in June. Although Chinese government officials have cited harmful pests or chemicals as justification, many experts believe that Beijing is using these bans as a tool of economic coercion. In 2020, China imported over USD $1 billion worth of agricultural products from Taiwan, making it the largest importer of Taiwanese agricultural goods, including the ones it has recently banned. For instance, of the 420,000 tons of pineapple that Taiwan produces annually, China imported 41,661 tons of pineapple worth about USD $53.9 million in 2020. Thus, China accounted for 91.2 percent of the total exported pineapples from Taiwan. The export market for sugar and wax apples relies on China even more heavily than pineapples. Annually, Taiwan produces around 55,000 tons of sugar apples and 54,000 tons of wax apples. In 2019, Taiwan exported around 13,900 tons of sugar apples and around 4,800 tons of wax apples to China, accounting for 97 percent and 98 percent, respectively, of exports for those products. Looking at the most recently banned product, 36 percent of the overall annual grouper output of 17,000 tons went to China in 2021. Beijing’s dominance as the main overseas market for these products has allowed it to hold economic leverage over Taiwan, and use these agricultural bans to punish Taiwan for perceived slights. 

China might have chosen these specific products to ban because counties in the southern part of Taiwan produce the bulk of the four banned products. The fact that Democratic Progressive Party (DPP) has historically possessed a stronghold in these southern counties indicates that China may be targeting these voters’ livelihoods to influence their political decisions. Examining recent presidential and local election data for these counties can help determine the validity of this conjecture. Pingtung County, Tainan City, and Chiayi County all elected DPP candidates in the 2020 presidential and legislative elections and the 2018 mayoral elections. Pingtung County produces 30 percent of pineapples, 75 percent of wax apples, and 40 percent of groupers produced annually in Taiwan. Tainan City produces 14 percent of pineapples, 2.5 percent of sugar apples, and 25 percent of groupers; and Chiayi County produces 13 percent of pineapples and 8 percent of wax apples in Taiwan. Kaohsiung City, which produces 14 percent of pineapples, 10 percent of wax apples, and 25 percent of groupers in Taiwan, elected DPP candidates for the 2020 presidential and legislative elections, but elected a KMT candidate in the 2018 mayoral election. Although these counties elected almost all DPP candidates, Taitung County remains an outlier. Taitung County produces almost all the sugar apples grown in Taiwan at 94 percent, but voters in Taitung County elected KMT candidates in the 2020 legislative and 2018 mayoral election and voted for the KMT presidential candidate. Instead of targeting specific counties, China might be more broadly targeting products that represent Taiwan’s main agricultural exports to China. 

Many feared that the agricultural bans would devastate Taiwan’s agricultural industries, but the Taiwanese government’s quick and effective responses have offset much of the potential damage. The Taiwanese government has spent USD $72 million to bolster the promotion of pineapples, sugar apples, and wax apples both abroad and domestically, and pledged to spend USD $13 million to support the grouper industry. Additionally, the Taiwanese government has skillfully used social media to promote the banned products to overseas markets other than China, especially pineapples. The government marketed Taiwanese pineapples as “freedom pineapples” to symbolize Taiwan standing up to China’s oppression. This effective utilization of social media greatly increased domestic and foreign demand for pineapples. Taiwan exported 28,000 tons of pineapple in 2021, with 70.6 percent going to Japan and 23.7 percent going to Hong Kong. From January to March 2022, Taiwan exported 9,805 tons of pineapple, up 12.2 percent from the same time period in 2021. Lastly, to counteract the most recent ban of grouper fish, Taipei announced plans to provide interest-free loans to grouper farmers, assist with processing frozen storage, and promoting groupers to foreign markets. Despite Chinese efforts to economically hurt Taiwan, Taipei’s swift response has neutralized many of the impacts from these bans. 

In addition, these bans have had the unintended consequence of creating closer ties between Japan and Taiwan, and have allowed Taiwan’s agricultural sector to start breaking free from its reliance on China. Previously, China was the largest importer of Taiwan’s agricultural goods, but that spot now belongs to Japan, with the United States coming in second. Japanese people began rallying behind Taiwan when China instituted its first major ban in 2021 on Taiwanese pineapples. Viewing Taiwan’s security as linked to its own and wanting to return the favor of Taiwan supporting Japanese goods after the 2011 tsunami, Japan imported almost 18,000 tons of pineapples in 2021, up 726 percent from 2020. Japan’s fervor for Taiwanese pineapples only continues to grow. Besides pineapples, Taiwan will begin exporting sugar apples to Japan using freezing technology sometime in 2022. Japanese people have also begun rallying behind Taiwanese grouper fish, referring to them as “democratic fish.” Japanese people now feel more closely linked to Taiwan as two democracies combatting China’s authoritarian reach. Exporting to Japan and other countries comes with several logistical issues, such as frozen transportation and storage; however, the benefits outweigh the costs. Taiwan has not only garnered a closer relationship with the Japanese people, but also expanded its market beyond China. 

Image: Workers pose with grouper fish at an aquaculture farm in Kaoshiung County, Taiwan, June 2022. Grouper fish are the latest of Taiwan’s agricultural exports to be targeted by the PRC for politically motivated import restrictions. (Image source: Taiwan Central News Agency)

Implications for the Local Elections

The recent raft of economic sanctions ostensibly targeted at punishing certain parts of Taiwan’s agricultural industry is consistent with Beijing’s longstanding efforts to use a combination of diplomatic, information, military, and economic tools to shape the political behaviors of voters in Taiwan. In 1995-1996, Beijing provocatively test-fired several missiles in the Taiwan Strait in a failed attempt to intimidate Taiwanese voters in the lead-up to the country’s first direct presidential election. On the economic front, the PRC’s efforts in the past have relied more on using enticements to lure Taiwanese businesses and people to support cross-Strait integration, such as through the 31, and subsequent 26, preferential economic measures introduced in 2018 and 2019, respectively. As China’s economic leverage over Taiwan expanded with increased trade and economic ties, however, Beijing has also become more willing to utilize economic levers like pressuring prominent CEOs of Pan-Green-leaning corporations, such as I-Mei (義美) to endorse Beijing’s “One-China Principle.”

The imposition of the grouper ban announced on June 13 also follows a noticeable pattern in Beijing’s efforts to influence public opinion through economic means. In the lead-up to the 2018 local elections, Beijing announced the 31 economic measures that offered preferential economic incentives to Taiwanese businesses and persons to enter the Chinese market. The KMT scored a significant electoral victory in those local elections, initially pointing to a reversal of political fortunes of the ailing party. While the KMT has traditionally performed more strongly at the local level due to its organizational infrastructure, these economic enticements likely played a role in the election due to the general focus on the economy as a salient local electoral issue. 

Although cross-Strait relations do not currently appear to be a salient electoral issue in the upcoming local election in Taiwan, it remains unclear how this latest tranche of coercive measures will play out this November. Similar punitive measures in the past have tended to result in counter-productive effects for Beijing’s perceived goals—and could end up helping, not hurting, the DPP. The Pan-Green Taiwanese Public Opinion Foundation (TPOF, 台灣民意基金會) released a poll in late June that asked respondents: “The Chinese Communist (China) authorities announced two days ago that they will ban grouper imports from Taiwan starting from June 13. Do you think the CCP’s actions are reasonable?” Nearly 65 percent of respondents believed that the action was unreasonable, and only around 17 percent believed it was reasonable. 

In addition, while China has been the largest exporter of Taiwan’s agricultural products since 2013, from January to May of 2022 China came in third behind the United States and Japan. Consequently, China’s own actions could be causing it to lose economic leverage over certain conduits of influence in Taiwan’s agricultural industry. As noted in a prominent RAND study on economic coercion:

For Beijing to initiate economic pressure, a key challenge is identifying and effectively exploiting “conduits of influence” within the target’s (e.g., Taiwan’s) political system—that is, politically influential classes or groups in Taiwan with a stake in promoting the policies that Beijing also supports. These conduits of influence are a key factor in converting economic influence into effective political leverage. These conduits of influence are a key factor in converting economic influence into effective political leverage.

Chinese economic statecraft includes not just enticements but also punishments. Beijing’s recent bans on specific Taiwanese agricultural exports indicate an amplification of the CCP’s “soft-hard” strategy as laid out by General Secretary Xi Jinping at the 19th Party Congress. Although recent measures do not appear to represent a departure from this longstanding strategy, these bans do seem to represent a doubling down of Xi’s strategy to pressure Taiwan and its voters. The risks of a full-scale military invasion still remain low in the near term, but the clear use of more sticks—both military and increasingly economic—likely signal an intensification of these types of coercive measures in the months and years to come, especially with the next presidential election in 2024.

The main point: A recent string of import restrictions placed on Taiwanese agricultural products by Beijing appears aimed at influencing the island’s upcoming local elections. While this strategy is consistent with Beijing’s overall “soft-hard” approach, China has begun employing more economic pressure, potentially signaling a new phase of Beijing’s coercive tactics in the run up to the 2024 presidential election.

[1] Chinese textile and cement subsidiaries of Taiwan’s Far Eastern Group (遠東集團) were fined more than USD $13.87 million for a series of violations, including breaches of environmental protection rules. Ironically, the Far Eastern Group is a known donor to both major political parties.