China's Iron Horse: PRC Deploys Giant To Scare Victory For Ma

In a follow-up piece to the Big Bike pre election rally for the incumbent, Ma Ying-jiu, Bicycle Retailer offers up another cheerleading piece for the Chinese Nationalist Party (KMT).

Taiwan’s manufacturers will benefit from a stable cross-strait relationship, said Tony Lo, chairman of the Taiwan Bicycle Exporters Association and CEO of Giant, the island and the industry’s leading frame maker.

“Taiwan’s high-end bike export to China has grown 87 percent in 2011. It could double again in 2012. This will have a positive influence of the transformation of the Chinese bike market toward recreational and sport in the future,” Lo said in an e-mail.

Lo cited Ma’s ECFA, or Economic Cooperation Framework Agreement, which eliminated duties on bikes shipped between Taiwan and China as of January 1. Since Ma signed the ECFA in June 2010—gradually reducing duties on bicycles and other consumer goods exported from Taiwan—the trade pact has already boosted business in China for Taiwan manufacturers like Giant, Merida and rim maker Alex Global.

I think what is important and puzzling to note is that the DPP challenger, Tsai Ing-wen, gave absolutely no indication of repealing ECFA, nor did she indicate anything other than continued business relationships with China. Without the Chinese Nationalist ideology, Tsai's platform actually appeared more pragmatic and tenable for the long term.

So why is cross strait economic stability continually at stake in Taiwan's democratic election cycles?

Simple... It is not.

This is a fantastic example of some of the levers China uses to influence Taiwan's democratic elections.

The only party which can elect to create instability in the economic relations between Taiwan and China... is China. Taiwanese politicians of any stripe gain nothing from poor economic relations with any state, let alone China. China's "anger" is a strategic device. Now, rather than negotiating against diverging interests, Taiwan is reduced to negotiating against the mercurial device of China's potential anger-- a device with no clear definitions or triggers.

So why would China imply it might consider punitive action should its chosen candidate (Ma) not be elected?

The answer would be that China's economic relationships with Taiwan are not designed to be purely economic and in the interest of creating a better business environment, but they also come tainted by China's political designs for Taiwan, which it seeks to annex as part of a greater strategic program of regional economic and territorial expansion.

Ma Ying-jiu makes the perfect foil for Beijing as he also harbors beliefs in Taiwan as a political and cultural dependency of China and therefore, politically, makes sense to Beijing as the candidate who will best cooperate in bringing China's plans to fruition.

Gaint's Tony Lo simply exemplifies how Taiwanese businesses in China can allow themselves to become pawns of a much larger, more dangerous game.

For a long-time observer, it is a little sad seeing a company that has risen on the back of Taiwanese pride, allow itself to be used as a political lever against Taiwanese democracy.

Ma's Victory: The Election Cycles

Although the elections may be over, there is still plenty to think about in the wake of Ma Ying-jou's victory on Saturday.

Ma has found a well of support from big business, which hopes to take advantage of Ma's desire to lock Taiwan's economic fortunes to those of China, despite divergent interests and needs. It is like the meaning of the oft misinterpretation of "What is good for General Motors...." Part of Ma's desire to make Taiwan an economic dependency of China is pragmatic in serving the business community, the other part is his ideological belief in Sun Yat-sen's Chinese nationalism.

Of course we see this each election cycle, where the business community rallies around the president who supports Taiwan's economic and political annexation by China... and then that same community realizes what the more cautious observers are seeing. This is precisely because of the ideological component of the KMT's program.

The American Chamber of Commerce had such a realization in June:

“Taiwan should pursue greater balance by consolidating its economic connections with such other major markets as Europe, Japan, Southeast Asia and especially the United States, the world’s biggest economy,” AmCham chairman Bill Wiseman told a media briefing on the release of the organization’s annual white paper.

Wiseman’s warning came a few hours before the release of Taiwan’s latest trade data, which showed China accounting for 40.2 percent of exports last month, while the US took only 12.3 percent.

“Over-reliance on one market is always risky,” Wiseman said. “Taiwan should not turn away growth when it can get it, but it needs to lock in the future. It needs to go and start broadening its economic relationships beyond focusing so much on China.”

Just prior to Saturday's election Nicola Formosa from Bicycle Retailer released this piece detailing what is essentially a list of KMT talking points thinly veiled as a news article promulgated by the big movers of the bike industry.

TAIPEI, Taiwan (BRAIN)—Taiwan voters go to the polls this weekend to decide a close presidential race that bears implications for cross-strait relations between the island and mainland China.

Incumbent Ma Ying-jeou of the Chinese National Party, or the Kuomintang, is being challenged by the Democratic Progressive Party’s Tsai Ing-wen. A third candidate, James Soong Chu-yu of the People First Party, represents that party’s first-ever presidential bid. In the past four years, President Ma’s administration has eased relations between Taiwan and China, opening doors to Chinese tourists with direct flights from the mainland—previously Chinese had to fly through Hong Kong or Macau before arriving in Taipei—and signing the Economic Cooperation Framework Agreement (ECFA).

The ECFA, a trade pact that ended a 12 percent duty on bikes and most bike parts shipped from Taiwan to China, has already benefitted the cycling industry. Taiwan’s top two frame manufacturers, Giant and Merida, both realized significant increases in revenue from the Chinese market last year. Merida’s revenue from China was up 124 percent through October 2011 and Giant’s rose 40 percent through August. Rim maker Alex Global pointed to the ECFA when announcing that its turnover in China tripled last year. Taiwan exports about 3.8 million bikes annually to the global industry with the U.S. importing about 21 percent of those units. It also exports $480 million in bike parts.

Another term under Ma’s leadership could lead to further cooperation between Taiwan and China, which stands to boost the bottom line for Taiwanese businesses. But, Ma’s opponents believe closer ties across the Taiwan Strait threaten Taiwan’s future independence as the Chinese Communist Party strives to reunite Taiwan and China. Tsai and her Democratic Progressive Party have pushed for formal independence from China, which considers Taiwan a renegade province.

Now that the results are in and we know Ma Ying-jiu will be continuing to shape Taiwan's economic policies with China at the center, we need to wonder what this means for Taiwan's bicycle industry.

The big bike companies will continue making money hand over fist using Chinese labor and selling to a Chinese market, creating Chinese jobs. This is very good for the few people who are associated with those big corporations... but this begs the question.... If all those jobs are being created by Taiwanese companies in China... what does Ma intend to replace them with in Taiwan?

The jury is still out. From what I have seen Ma intends to block the hemorrhaging with cycle paths and tourism-- A far cry from any real jobs.