Taiwan Today

A senior associate at the Center for Strategic and International Studies, Georgetown University, Washington, D.C., Dr. Cline is a specialist on Chinese affairs. Dr. Wu is a consultant at the Hoover Institution on War, Revolution and Peace, Stanford University, California, U.S.A., and at SRI-International, specializing in economics.

FCR interviewed the two distinguished visitors, and their views are presented below:

FCR: Dr. Cline, as a long-time friend of the Republic of China, what do you really think of the ROC's "three-no's" policy and the ROC's objective of reuniting China under the democratic guidelines of its founding father, Dr. Sun Yat-sen—the Three Principles of the People?

Cline: I am encouraged by the enormous growth and strength of the society here. So I am optimistic about the ability of the government of the Republic of China to maintain its own principles and its own policy objectives.

Now I don't see anything fundamentally wrong about the posture of saying that China will be united someday on the basis of the three principles of Dr. Sun Yat-sen. They are roughly equated to what we in the West call democratic principles and, in economics, social justice principles.

And the "three-no's" principle clearly says there is a conflict and unsettled war—in fact, a bitter disagreement of principles between mainland China and the Republic of China.

The common recognition of something like the Three Principles of the People requires you to go through a transition stage, when the objective conditions are there suggesting that a common agreement could be reached on political goals like Dr. Sun Yat-sen's.

Clearly, the "three-no's" will begin to moderate. Some contacts, some compromises, in a sense, on tactical matters might be appropriate. I think, however, at the present time, in view of Peking's unwillingness to renounce the use of force and its repeated insistence that it will stick to the four fundamental principles—to party dictatorship, and Mao Tse-tung thought, and so on—that there is no practical opportunity for compromise or useful contact. So the "three-no's," in fact, is a way of stating a principle when conditions are not yet ripe for any unification of China. And that's all it means. Now when the time comes, I am sure there will be a way found to be flexible enough in international relations to explore the possibility of unification on principles acceptable to Taipei.

FCR: For the Republic of China, is it possible that a new, reunited China can be brought about without talks or the outbreak of violence between us and mainland China? If it is, how? If it isn't, why?

Cline: I think it is possible for unification to take place out of some sudden revolutionary change of attitude and policy on the mainland. But I don't think that's an early prospect. There is no sign that it's going to happen soon. I do believe that the possibility of the use of military force to resolve the problem is existent, but only to a very small degree. It is not very feasible for Peking to settle things by fighting.

Therefore, what is more probable is an evolution of the posture on the mainland in a direction completely compatible with the principles of the Republic of China, so that the "three-no's" policy can be modified. Obviously, the government here hopes someday for unification. They are not ruling out contacts and discussions for the purpose of unification. They are saying, in fact, "We don't see any prospect for that right now." So the "three-no's" are a policy, not an eternal verity. Now if there is no change on the mainland, of course, they would go on for a very long time.

FCR: No matter how one sees the "three-no's" policy, it exists. On the other hand, however, as you have said, mainland China is still sticking to its four fundamental principles. In these respects, do you think both sides of the Taiwan Straits are stubborn, as some have charged?

Cline: Well, I think the relationship between Taipei and Peking is so embittered by many years of Chinese Communist assault on the freedom of the people here, that it is going to be very difficult to arrive at a common understanding. Yet, it is certainly the hope of all Chinese that a common understanding compatible with the free institutions here on the island of Taiwan can be worked out.

It's very difficult to say when and how, and I do not see it happening under Teng Hsiao-ping. And I don't know what's going to happen after Teng Hsiao-ping passes from the scene. So I think it is prudent for the Republic of China to be restrained and take a wait-and-see attitude—which is how I interpret the "three-no's" policy.

But if objective conditions change that seem to alter the strategic relationships of East Asia, I am sure the government of the Republic of China will be intelligent enough and flexible enough to find a way to explore the possibilities of relaxing the "three-no's" policy.

FCR: Do you see the recent China Airlines "talks" with Peking's "Civil Air Administration of China (CAAC)" negotiators to gain the return of a hijacked aircraft and its crew members; the Kuomintang's new efforts at communication with "non-Kuomintang" politicians; and the ROC government's apparent go-ahead to the ROC women's basketball team to compete for the World Cup in Moscow, an indication of basic change in the ROC government's attitude? In other words, do you think the ROC government has become more flexible, or is it doing these things because of pressures from, say, the American government or its critics abroad, as some have speculated?

Cline: I don't think pressure from the United States has been important in these instances. I am not even sure there has been any pressure. I am sure the policy has been made in Taipei by the officials here on the basis of their concern for the country's own interests.

I would say that the basic principles have not altered at all, that the circumstances have changed in these unofficial issues to make it in the interest of the overall policy here to permit something new to happen—because it is for the common benefit that they are being flexible. In a sense they are following their principles in a realistic way. That's good, and it is not a violation of the principles.

I don't think there is any pressure on them to do these things, although many foreign observers certainly applaud the concept of flexibility and reasonableness in detailed issues of international affairs. The international world is full of exceptional situations, and you have to make your stand on the basis of preserving your principles while living life in a realistic way.

FCR: Do you see any similar flexibility in Communist China, as some have suggested, because of their economic reform?

Cline: Unfortunately, I do not see similar flexibility on the mainland. I think they are indeed exploring various methods of economic reform that they think are strictly compatible with Mao Tse-tung thought and one-party dictatorship. I predict that kind of reform will not be very successful.

When I see them as getting more flexible will be when they begin to follow policies that may turn the mainland away from the Soviet model of political and economic life. But what Teng Hsiao-ping is trying to do, as he says himself, is let the Chinese on the mainland get rich without changing the political system. I don't think it will be possible. So I don't consider that a very flexible posture. Unfortunately for the mainland Chinese, I think it will be an unsuccessful experiment—that it will prove itself in time to be unsuccessful.

The question then is, what happens after a few years? I think the regime in Peking will have to decide whether to become genuinely more flexible—rather than just for propaganda purposes—or whether to return to a more restrictive, Maoist-type policy. That would be a very hard decision for them. I don't know how they will make it. We'll have to wait and see.

FCR: Could you briefly compare political and economic developments on both sides of the Taiwan Straits.

Cline: Basically, the economic development on this side of the straits has been based on a market economy—on a great deal of free choice on the part of entrepreneurs—and that has proved to be, because of the education and the skills of the Chinese people, very, very successful. It has resulted in a standard of living about ten times as high as on the mainland.

Now, on the mainland, there is no such freedom of choice. What the mainland has done and what it calls economic reform is mainly in the countryside—to allow the peasants to do what they always knew how to do: raise food on land which they control. While they are not allowed to own the land, they have been allowed to make choices about planting and agriculture, and that has indeed improved standards of living on the mainland on a one-time basis; but they are still miserably low.

And in my view, the attempt to transfer this kind of experience to the mainland urban society will not work, because there you do not have the basic fact of millions of peasants who knew exactly what to do if you let them have the use of the land—the same is not true in the big industries and even the small shops in the cities.

While there may be some improvements in the cities, I would say the control system restricting economic choices to centrally planned institutions is still basically intact. They do not have the price mechanisms of the free market to regulate their activities. Therefore, I think economic progress will continue to be limited and the political system on the mainland will handicap the reforms very much.

Now in contrast, because the society here in the Republic of China has been so dynamic and the growth so great, I think this government has the opportunity to continue to introduce more elements of representative government—of electoral choice—into the political system, because there is a basic loyalty to the society here.

I don't know many people in Taiwan who want to become part of a Communist mainland; therefore, their future is with the government of the Republic of China. And I think that the ROC government will gradually become more flexible and incorporate more elements of choice just as the economy here has done. I think the Republic of China is moving toward more and more openness and freedom. I think the authorities on the mainland are talking about some of those ideas but making very little progress toward genuine freedom.

FCR: Finally, any suggestions for the ROC government?

Cline: No. I think the ROC government is conducting its affairs in an extremely enlightened and careful way.

I believe they should perhaps be more self-confident and willing to explain the secrets of their success to other people, because it is indeed not just an "economic miracle" here, as people often say: It is also a miracle of the growth of a society which is, in many ways, the amalgamation of good ideas from classical Asian and specifically Chinese culture, and modern political and technological concepts from Europe and America. This is a really amazing achievement.

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FCR: What do you think Taiwan's economic success signifies for people on both sides of the Taiwan Straits?

Wu: Taiwan's economic success has several ramifications:

First, historically, the Chinese people have thought and talked intensively about economics for one and a half centuries, ever since the 1839 Sino-British Opium War. But, because of various historical factors, they failed to develop China's economy. The rare chance that appeared in the 1930s was aborted directly because of Japanese invasion. Another valuable chance to develop China's economy was wasted by the Chinese Communists, after they took control of the mainland. So, the most eventful economic development ever created by a totally Chinese community occurred in Taiwan.

Though affected by a "complex" background—such as an island economy and so forth—Taiwan's success testifies to one thing: In a well-organized administrative environment, the Chinese people has proven to be potent, even masterful, in the handling of economic affairs. This is inspiring for all Chinese.

Second, Taiwan now faces a phase of economic transformation in its development that requires both legislative and moral adjustment.

But here, I have to point out two fundamental differences between Taiwan's transformation and the Chinese mainland's record:

First, is that Taiwan does not need to alter its ideology or basic system to meet needed adjustments, such as industrial upgrading from basically labor-intensive to technology and capital-intensive. The Chinese Communists, on the other hand, grope around for an opened door and hesitate to step in, if one is found, causing their Communist regime to fall way behind. Thus, we have two results from different natures.

The other difference is that the people on Taiwan are free to seek solutions through open discussion, while their mainland compatriots are deprived of the freedom to criticize the Communist system. They do discuss, but only about the marginal, with the set policies left enshrined and immune. So, there is no real discussion at all.

As far as I am concerned, Taiwan's economy is a miracle, indeed. However, its freedom of expression is certainly another one. Through the years, the ROC has built a confidence in its future which is most significant for the Chinese as a whole.

FCR: As one of the largest markets for Taiwan's exports, will Hongkong be closed to ROC goods after 1997?

Wu: There are three different forms of Taiwan-Hongkong trade: (1) Taiwan's exports are transferred, directly and indirectly, en route from Hongkong to the Chinese mainland; (2) Taiwan's shipments are transferred, directly and indirectly, via Hongkong harbor to other markets around the world; (3) Taiwan's products are delivered to the Hongkong market.

Thus, the future of the first kind of Taiwan-Hongkong trade is determined by the economic development of the Chinese mainland and by Communist China's policies, with no decisive relationship to the '97 takeover. The second kind will, likely, be much affected by the takeover. That implies as-soon-as-possible precautionary moves for Taiwan's exporters to take before it is too late. But this is all surmountable.

As to the future magnitude of Taiwan's exports to the Hongkong market itself, the economic potentiality of this market and Communist China's future policies for this free harbor are two integral elements. So, the ROC cannot afford a failure to take early counter­measures.

It is very important to correct the misperception that the Chinese Communists will keep Hongkong economically free after 1997. This has come about simply because the Chinese Communists' only concern for Hongkong is that it yields great benefits for Communist China.

As we know there is a massive "capital escape" taking place now in Hongkong. What will probably happen in the future is accelerated "capital escape," increased smuggling and arbitrage between the harbor city and mainland China, and associated privilege abuses of high-ranking Chinese Communist officials and their offspring, in their personal interests. Accordingly, Hongkong, as an opened door for "capital escape," stands with mainland China's economic liabilities instead of its assets. This will threaten the Communist system and thus force a change in Communist policy on Hongkong. This, particularly, requires ROC deliberation.

FCR: Would you comment on the economic reform in mainland China in the light of the fact that successful economies have, so far, only emerged in open societies?

Wu: I welcome mainland China's economic reforms. It is for the benefit of all Chinese that they should succeed. But, as I mentioned earlier, the Communist Party needs to revise its ideology, political system, and policies. In other words, Hongkong will retain its status as a free harbor should mainland China succeed in its reforms. If not, Hongkong is gone, simply because the Communists will fear the possible function of the harbor as an economically malignant tumor.

FCR: What about Communist China's "one country, two systems" policy?

Wu: That is nothing but a Communist verbal ploy. They want to plant an illusion in people's brains—that two different systems can serve the set course of a country. But they don't clarify the coincident premise that the system of a country only includes one sovereignty, with one armed forces policy and one diplomatic identity. How can two contradictory systems co-exist under one sovereignty?

FCR: The ROC has accumulated gigantic amounts of foreign reserves and is being troubled, as many economists point out, by a unique wealth problem—how to use money. What is your view on this?

Wu: First of all, the ROC doesn't have to deposit its reserves in foreign banks' cash accounts. It can use them to buy foreign national or private sector bonds, stocks, and mutual funds, which mean more control over foreign assets. For instance, the ROC can either buy Australian coal mines for its domestic consumption, or buy Iowa's ranches for its imports of American grain. Though the ROC doesn't want to buy them, it still can buy coal stocks or grain futures.

Even, for a technology-advanced domestic electronic industry, the ROC may choose to set up an electronic company in the United States, in terms of either its own capital or of U.S. investment. I mean, the ROC does not need to import unnecessary commodities just to balance trade. It can turn foreign reserves into assets by investing abroad. Also, in order to deal with its own cash money, the ROC may issue more bonds or stocks to diminish the magnitude of currency in circulation which, in turn, will help ease pressure for commodity price hikes.

Indeed, this should be viewed by the government as a longstanding financial exercise instead of as a temporary countermeasure to ease a surfeit of foreign reserves.

But prudent investment commands the expertise of financial talent. The ROC now desperately needs such specialists. So long as the ROC wants to keep well-informed and sensitive about the trends of international trade, the first priority shall be given to generating its own quality manpower.

The ROC on Taiwan now has a pretty-decent economic structure. What it most needs to do is to accelerate adjustments in tune with the present degree of its economic development.