Taiwan fears Beijing Olympics fallout

By Benjamin Kang Lim

TAIPEI (Reuters): Taiwan's leaders fear Beijing's success in clinching the 2008 Olympics will unleash a fresh bout of "mainland fever" on the island, further eroding confidence amid an economic slowdown.

Political analysts predict that the psychological impact of what is a major international feather in Beijing's cap could exacerbate an exodus of investment and of migrants to China.

But one supporter of President Chen Shui-bian, whose first year in office has helped spawn a crisis of confidence and who has most to lose from such a trend, suggested that Taiwan should simply keep calm and capitalize on the investment opportunities.

"In the short term, the Olympics could give Taiwan a new bout of 'mainland fever'," Yang Kai-huang, a professor of political science at the private Soochow University, said, referring to Taiwanese flocking to China to invest, work, study or resettle.

The International Olympic Committee's decision last Friday to award the 2008 Games to Beijing could not have come at a worse time for Chen and his Democratic Progressive Party, with crucial parliamentary elections in December.

His first year in office has at times been messy and marred by a string of policy flip-flops, political gaffes and opposition threats to dismiss him.

Taiwan's first-quarter growth sputtered to 1.06 percent and some economists forecast the pace will slow further in the second quarter -- in stark contrast to China's impressive growth of almost eight percent in the first half of this year.

"Taiwan appears to be sinking. The mainland is on an uptrend with the world reaffirming it. This could deal a psychological blow to Taiwan in the short term," Yang said.

Adding to Taiwan's economic woes, the opposition-dominated legislature has been deadlocked since Chen took office in May 2000 to end more than five decades of one-party rule.

A lingering threat of a Chinese invasion hangs over the island's political future, denting business confidence and driving investors overseas.

Despite simmering political tensions, Taiwanese investors, lured by low land and labor costs, a common culture and language and China's proximity, have poured US$60 billion into the mainland since detente began in the late 1980s.

"There are business opportunities and there are political opportunities to stabilize the cross-Strait relationship," said Alexander Huang, a professor of strategic studies at the private Tamkang University.

Analysts say Beijing's growing international stature could revive Chinese nationalist pride in some.

This could set back efforts by Taipei in the past decade to create an identity distinct from China's and sever Taiwan's political, economic and cultural links to the mainland.

Taiwan's authorities have sought to play down the economic impact of Beijing winning the right to host the Games.

Chen Po-chih, Taiwan's top economic planner, dismissed media reports of massive spending by Beijing on infrastructure projects, saying the economic benefits have been exaggerated and business opportunities are limited.

"It's no big deal. It's just a sports event," economic planner Chen said, arguing that the economies of South Korea and Mexico did not boom after staging the Games.

Vice President Annette Lu said Taiwan should not lose confidence in itself "or else we will be swallowed by mainland China".

President Chen, further highlighting government concern, has slammed domestic media for predicting doom-and-gloom.

Alarmed at the prospect of Beijing winning over the hearts of ordinary Taiwanese, the island's top China policymaking body poured cold water on media polls suggesting growing support for Beijing's "one country, two systems" formula for reunification.

The cabinet's Mainland Affairs Council published this week the results of a survey which showed 13.3 percent of respondents backing reunification under the "one country, two systems" model, down from a record of 16.1 percent in April.

The survey conducted on July 8-9, days before Beijing was given the Games, showed 80.5 percent of those polled favored the political status quo with China.

Similar polls by privately owned newspapers and television networks showed more than 30 percent of respondents favoring the "one country, two systems" formula.

Ever since a 1949 civil war split, Beijing has considered Taiwan a breakaway province that must be brought under its rule -- by force if necessary.

It has tried to woo the island back to the fold under the "one country, two systems" formula, which saw the former British colony of Hong Kong revert to Chinese rule in 1997 with promises of a high degree of autonomy.

President Chen has rejected such reunion overtures saying that the self-governing island does not owe its democracy and economic achievements to the People's Republic of China.

Diehards might favor hardening Taiwan's policy towards China in a zero sum game or deliberately opposing such Beijing initiatives as letting the Olympic torch relay pass through the island.

But analysts say hard ball would hurt more than help Taiwan.

"Taiwan will not surrender. Taiwan will never surrender," Chen Chung-hsin, a legislator and member of President Chen's Democratic Progressive Party, said.

"But we should avoid confrontation with the mainland. On the contrary, we should explore development opportunities to reap benefits," the deputy added.