MA ECONOMIC PLAN ADDRESSES IMPLICATIONS OF

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 002351 SIPDIS SIPDIS STATE PASS USTR, STATE FOR EAP/TC,USTR FOR STRATFORD AND ALTBACH, TREASURY FOR OASIA/TTYANG, COMMERCE FOR 4431/ITA/MAC/AP/OPB/TAIWAN E.O. 12958: DECL: 10/16/2017 TAGS: ECON ETRD PGOV PREL TW CH SUBJECT: MA ECONOMIC PLAN ADDRESSES IMPLICATIONS OF CROSS-STRAIT ECONOMIC OPENING REF: A. TAIPEI 2283 ¶B. TAIPEI 2193 TAIPEI 00002351 001.2 OF 002 Classified By: Robert S. Wang, Acting AIT Director, for reasons 1.4 (b) and (d). ¶1. (U) This cable is one in a series on the Taiwan presidential candidates' economic policies and advisors. ¶2. (C) SUMMARY. In an October 16 meeting with AIT economic chief, KMT Legislative Yuan (LY) member Su Chi said he is advising presidential candidate Ma Ying-jeou on how to address the practical ramifications of increased economic integration with China, including immigration, law enforcement, and product safety. Su espoused the Ma campaign's standard line of combining revived domestic demand with greater economic openness (reftels),but also noted the importance of maintaining a degree of separation between Taiwan and China. He cited development of higher value-added industries as the key to Taiwan's economic future. END SUMMARY. ¶3. (C) KMT legislator Su Chi told AIT that there is broad internal KMT consensus on a campaign strategy that would increase Taiwan's economic openness to China and the rest of the world, while at the same time stimulate domestic demand and encourage the economy's shift into higher value-added industries. Taiwan should focus on developing its service sector, he argued, and leave most manufacturing to the Mainland and other low-wage economies. Within the Ma presidential campaign, Su, who previously served as Mainland Affairs Council (MAC) Chairman, said that he is responsible for examining the possible negative effects of greater economic integration with China. "We agree with the DPP that we should protect ourselves from the possible ramifications of opening up" to the Mainland, he observed. Su cited illegal immigration, law enforcement/crime, labor, food and product safety, information protection, and piracy in the Taiwan Strait as among the most important policy areas he is now examining. In his view, Taiwan and China must work out "sub-systems" to manage the practical aspects of cross-Strait economic interaction. Compared with the Mainland, explained Su, Taiwan is smaller, less corrupt, and more reliant on the 
rule of law, and Taiwan must develop measures that would "segregate" the two societies even as economic exchange continues to grow. "We need opening that doesn't lead to chaos," he concluded. ¶4. (C) In Su's analysis, Taiwan's relative economic importance to the PRC is declining, but Taiwan maintains the ability to "pull the nerves of their (i.e., the Chinese government's) internal power struggle." By Su's reckoning, China's past efforts to foster unification with Taiwan have only backfired and bolstered the island's pro-independence forces. The PRC has now realized the value of maintaining the cross-Strait status quo, he said, and will likely be content to continue doing so for the next one-to-three years. ¶5. (C) Su believes that jobs and wages are the primary economic concern of Taiwan voters. He cautioned foreign observers against merely pointing to Taiwan's GDP growth figure (note: now at 4.58%) as proof of the economy's strength, maintaining that statistics do not reflect what he characterized as stagnant wages in many sectors, weak domestic investment, and the continued migration of population to the Mainland in search of economic opportunity. According to Su, perceived competence on economic issues will be the KMT's trump card during the legislative and presidential elections. ¶6. (C) In Su's view, income disparity and social inequality are growing problems in Taiwan. He decried what he saw as a Taiwan cultural tendency on emphasizing short-term profit over long-term investment and development. Taiwan's technology sector, for example, is based on "downstream" TAIPEI 00002351 002.2 OF 002 products with relatively low profit margins. Taiwan, he complained, is weak in branding and research and development. He attributed the problem in part to what he described as Taiwan residents' traditional "immigrant" behavior and comparatively shallow "roots" on the island. This cultural propensity has made Taiwan's economy flexible and adaptable, he argued, but is hampering long-term investment and development of high value-added industries. Su stated that stimulating domestic demand, including attracting Taiwan residents back from the Mainland, will be a key factor in boosting economic growth. ¶7. (C) COMMENT. A senior KMT legislator focused primarily on defense and political issues, Su Chi also appears to be advising Ma Ying-jeou on "big picture" economic policy, with an emphasis on addressing the implications of economic opening to the Mainland. His comments on economic openness and stimulating domestic demand were squarely in line with what we've heard from other KMT advisors. END COMMENT. WANG