As Taiwan’s Workers Flock to China, Concerns About Economy Grow

By AUSTIN RAMZYJAN. 13, 2016

The New York Times

TAIPEI, Taiwan — Jason Lee spent most of the last decade building a business in a field for which Taiwan is famous. With three friends, he founded an animation studio here, churning out TV shows and special effects for games and films.

But costs rose and orders dried up, and they closed up shop in 2011. A few years later, Mr. Lee left Taiwan for mainland China, where he was hired to run an animation studio in the city of Qingdao. Five months ago, he started his own studio there. He has 20 employees, a number he hopes to double after the Chinese New Year next month — growth he could not have imagined in Taiwan.

“Personally, I see this as a good thing,” Mr. Lee, 38, said.

But what is good for Mr. Lee, and for many of his hundreds of thousands of compatriots working overseas, may not be as good for Taiwan. People here are increasingly worried that growing cross-strait trade and investment and the large number of people from Taiwan working on the mainland are making Taiwan dangerously dependent on China, which claims the island as part of its territory and has tried to use its economic clout to buy influence.

Such concerns helped set off large protests in 2014 against the ruling party, the Kuomintang, which faces the likelihood of heavy losses in presidential and legislative elections on Saturday.

As in past elections, the crucial political issue is China, and whether Taiwan’s future lies in a closer relationship with its giant neighbor or an autonomous identity. But after eight years of increasing trade ties, the question has taken on a deeply economic tone, as candidates from the Kuomintang and its main rival, the Democratic Progressive Party, debate the risk and reward of China’s embrace.

Tsai Ing-wen, the D.P.P.’s presidential nominee, holds a wide lead in opinion surveys. Polls also indicate that her party has a strong chance of taking control of the legislature for the first time, giving it unprecedented power to push through its policies.

During the campaign, Ms. Tsai has criticized the Kuomintang over Taiwan’s weakening economy, saying it had not protected domestic enterprises from state-sponsored Chinese competition.

“Taiwan’s environment for innovation and entrepreneurship is getting worse and worse,” she said last month. “Workers are going overseas, and a huge number are being poached by Chinese enterprises. Many of our young people abroad can’t find a way home.”

The Kuomintang’s presidential nominee, Eric Chu, has argued that China remains important to Taiwan’s economic future. But as the island’s economic growth has ground to a standstill, voters appear cautious about continuing that path. Mr. Chu’s electoral prospects have also been hurt by a third-party candidate, James Soong, who split from the Kuomintang in 2000.

Brain drain has emerged as a symbol of Taiwan’s economic woes. The issue, analysts and economists here say, is that a lack of good jobs and low pay drive many to seek better opportunities overseas.

China is by far the biggest magnet for that talent. A study of immigration records found that in 2013, 600,000 of Taiwan’s 23 million people spent more than half of the year abroad. Three of every four were in China. Other estimates say that one million or more people from Taiwan work overseas.

In the past, many people went to China to manage Taiwan-owned factories. But now, the jobs leading them there are increasingly in creative industries like animation, or in high-tech fields like integrated circuit design, where Taiwan has more advanced technology.

“One thing we’re concerned about is that as China grows, they want to recruit more people from key industries in Taiwan,” said Kao Shien-quey, deputy minister of the island’s National Development Council. “To develop flat screens, LEDs, LCDs and solar power, they came and lured away people from Taiwan. Now we’re worried that they want to develop integrated circuits, and to develop those they will take away a lot of people.”

Taiwan’s economy has experienced some benefits from workers going abroad, such as when people who had been employed in Silicon Valley returned to help develop technology companies. But increasingly, those workers are helping China develop its own domestic industries, rather than bringing new skills to Taiwan.

“We can’t blame others for trying to attract Taiwanese talent,” said Lu Jiun-wei, a research fellow at the Taiwan Institute of Economic Research, which conducted the study of the Taiwan work force abroad. “We have to make sure our policies are sufficient to keep them here. If our policies are good and more people will stay here, then Taiwan’s future will be better.”

During the 2012 election, the Kuomintang portrayed itself as better able to handle the economy and relations with mainland China. Under President Ma Ying-jeou, Taiwan reached more than 20 agreements with China, and trade between the two sides climbed more than 50 percent over his eight years in office.

But the benefits were not widely felt in Taiwan, where wage growth stagnated in recent years. And as China’s growth has slowed, Taiwan’s economy has plummeted, contracting over the most recent quarter. Gross domestic product growth for 2015 is expected to be just 1 percent.

The Kuomintang, which switched presidential candidates in October after its initial nominee stumbled badly early in the campaign, has continued to promote the importance of ties with China for developing Taiwan’s economy.

Mr. Ma held a historic meeting with China’s president, Xi Jinping, in Singapore in November, and Mr. Chu has cited that and the previous agreements between the two sides as proof that the Kuomintang’s engagements have produced results.

The D.P.P. questioned whether the meeting with Mr. Xi was an effort to influence this month’s election. But it had little effect on the polls in any event, and Ms. Tsai’s lead has remained steady in recent weeks.

“The Kuomintang hasn’t taken care of those of us in the middle class,” said Ling Shih-how, 30, who sells construction materials in Taipei. “They only take care of corporations, and they want to rely on China. The truth is: For exports, we should look to Europe and the U.S. We should have some balance.”

Mr. Ling said he planned to vote for Ms. Tsai, the first time that he has supported a D.P.P. candidate for president.

Both the D.P.P. and Kuomintang candidates have spoken about the need to revive Taiwan’s capacity for innovation. But Ms. Tsai has put a heavier emphasis on social safety nets, like affordable housing units for people who have suffered in the downturn.

The candidates all say that trade will remain critical to the economy. But while Mr. Chu says China, Taiwan’s biggest trading partner, should continue to take priority, Ms. Tsai has stressed a strategy of developing trade with a broader set of partners, including the United States.

If it takes power, the D.P.P.’s ability to pursue that goal will be limited by China, which has a de facto veto on Taiwan’s participation in international agreements, said Jonathan Sullivan, an associate professor at the School of Contemporary Chinese Studies at the University of Nottingham.

“Through the campaign, the economic focus has been more on the socioeconomic issues, like increasing provision of affordable social housing and raising graduate salaries,” he said. “These policies capture the zeitgeist, but I do not see the D.P.P. being able to, or promoting, a radical overhaul of the economy.”