The Great Debate UK

from The Great Debate:

China’s bailout of Taiwan is good for the region

wei-gu.jpg-- Wei Gu is a Reuters columnist. The opinions expressed are her own --

If market performance is anything to go by, Taiwan is the biggest beneficiary of China's economic stimulus.

Because of Taiwan's heavy dependence on exports to Western consumers, it was assumed there was little Beijing could do about its downturn. But Beijing has gone out of its way to take care of the recession-hit island. This year, it sent several procurement missions to Taiwan to buy billions of dollars of goods, even though Taiwan's trade surplus with China is already approaching as much as a fifth of its economy.

China might be pursuing its unification agenda. After all, it has vowed to bring the island under its rule, by force if necessary. But money is a lot better than missiles. The whole point of inter-dependency is that there will be less chance of confrontation. Taiwan could use more investment, particularly in properties and infrastructure, while China is looking for new areas in which to invest its excess liquidity.

In the short run, increased purchases from Taiwan may come at Korea and Japan's expense. For example, computer maker Lenovo <0992.HK> is increasing its orders from Taiwan companies, probably also because Taiwanese firms are happy to stay as contract manufacturers.