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~------------------------------~ Taiwan's Perspective on Sino-American Economic Relations Tzong-shian Yu INTRODUCTION The purpose of this chapter is to attempt to provide a perspective from Taiwan on recent developments in Sino-American economic relations. Since 1950, Sino-American economic relations have meant both the economic relations between Taiwan and the United States and the economic relations between China and the United States. So, it is logical for us to start our exploration with an assessment of the background and current status of Taiwan's economic relations with the United States, and to proceed to an examination of the recent development of economic relations between China and the United States, and then to consider the prospects for the further development of the triangular relationship between Taiwan, China and the United States. When dealing with the issue of Sino-American economic relations, one cannot ignore the fact that the economic relationship between Taiwan, China, and the United States has continued even though the two countries broke off diplomatic relations in 1979. The economic relationship between China and the United States, on the other hand, has become more important since 1979, when the US government recognized the People's Republic of China and the latter started to adopt its open-door policy. It should also be noted that the recent developments in Sino-American economic relations are mainly part of the overall US strategy towards Asia. According to the US strategy, Taiwan is a key card for the United States to play against China. China is a counterweight for the United States to employ to balance Japan, since Japanese power has gradually reemerged since World War II and is once again considered a potential threat to US security. And, according to the US view, only China has the capacity to check Japan in the Asia-Pacific region. Based on the above considerations, it can be understood that the same US trade policy used towards Taiwan in the 1980s, when Taiwan enjoyed a big trade surplus with the United States, will now be applied to China in the 1990s, as China starts to accumulate an increasing trade surplus with the United States. As for US direct investment in the two parts of China, the 50 Tzong-shlan Yu mainland and Taiwan, this depends completely on private enterprises' profitmaking motives and is independent of US government policy.l To explore Sino-American economic relations, our analysis will proceed from the point in time before 1979, when no diplomatic relations existed between China and the United States, and then move on to the period after 1979, when the United States established diplomatic relations with China, and China initiated its open-door policy and economic reform strategy. In addition, the prospects for this continuing triangular relationship will be discussed. SINO-AMERICAN ECONOMIC RELATIONS BEFORE 1979 As stated above, Sino-American relations before 1979 include the economic relationship between Taiwan and the United States, and the economic relationship between China and the United States. The Economic Relationship Between Taiwan and the United States Since 1951, Taiwan has had a close economic relation~hip with the United States, not only because Taiwan received US aid amounting to US$1.5 billion (1951-65), and has been host to many US-sponsored foreign direct investment (FDI) projects, but also because the United States has been the largest market for Taiwan's products.2 For instance, exports to the United States accounted for 41.9 percent of Taiwan's total exports in 1972, and 39.5 percent of Taiwan's total exports in 1978. Conversely, imports from the Unlted States to Taiwan made up 21.6 percent of Taiwan's total imports in 1972, and 21.5 percent in 1978.3 As a result, Taiwan enjoyed a trade surplus every year. In 1978, the trade surplus with the United States accounted for 52.6 percent of exports to the United States, but this was only a small proportion of the US trade deficit, so the US government did not pay special attention to Taiwan's increasing trade surplus, and Taiwan still enjoyed a favourable trade status with the United States. With regard to foreign direct investment in Taiwan, the United States and Japan together were the biggest foreign investors pnor to 1979. While the latter's FDI accounted for less than one-third, the former accounted for about one-third of total FDI, which indicates that US investment in Taiwan was significant and helpful for the continued expansion of Taiwan's...

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