Topic in Cross-Straits Economic Relations between Mainland China and Taiwan

Professor Yan Chen, an Economics Professor at the University of Xiamen, delivered a lecture on Cross-Straits and the economic relations between mainland China and Taiwan.

During the lecture, we learnt that Taiwan signed the Mutual Defence Treaty with the US which helped to stabilise its economy. Mainland China was only able to catch up to this development when it opened up its economy in 1987, through which they experienced rapid growth. ($8000 GDP per capita)

After 1987, Taiwan began to grow closer to China through policies such as the SEF (Straight Exchange Foundation) and ARATS (Association for Relations Across the Taiwan Straits). The 1992 consensus, refers to the ‘One China’ policy, was established in order to secure a diplomatic relationship with one another. Moreover in 2010 the economic pact, ECFA (Economics Cooperation Framework Agreement) was signed between Mainland China and Taiwan.

The benefits of cross-straits relations are economic liberalisation and integration which leads to more efficient allocation of resources as well as there being an overall higher level of growth with a larger market, scale economy, more competition and more consumer surplus etc.

Overall, we were taught that:

  • China is currently the world’s largest exporter with a GDP of $82 trillion and Taiwan having a GDP that is 4.5% of China’s ($3.4 trillion).
  • Mainland China exports to EU, US, Hong Kong, Japan, South Korea, Russia and India etc.
  • China is running a large trade deficit with Taiwan and running a surplus with the US.
  • Taiwan mainly export to mainland China, Hong Kong, USA and Singapore.
  • Taiwan is the 7th largest trade partner and 6th largest import market of Mainland China. Mainland Taiwan’s the largest export market and second largest import market.

Diandra Wilmot, Farzana Yeasmin, Premsai Patel, Yinka Sobamiwa