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Pact row could harm Greater China economic integration: ANZ

2014/04/02 12:05:22

Taipei, April 2 (CNA) The dispute over a trade-in-services agreement between Taiwan and China could spill over and dampen economic integration in the Greater China region, Australia and New Zealand Banking Group Ltd. said Tuesday.

The ongoing protest in Taipei "may heighten the anti-China sentiment that is seen in Hong Kong," the bank said in a research note, adding that such sentiment could further affect economic development in the region.

"There have been significant benefits for Taiwan and Hong Kong to encourage free flows of trade, investment, capital and tourists with China in the past decade," ANZ said.

"Turning back such economic integration will only exacerbate the current plight of the middle class, increase youth unemployment, and lead to a loss of thousands of high quality job opportunities."

Despite the potential economic downside of the protests, the bank left its gross domestic product growth forecasts for the three markets unchanged.

The agreement, signed in June 2013, has been stalled in the Legislature and sparked a student-led protest that has included the occupation of the main chamber of the Legislative Yuan since March 18, effectively paralyzing the lawmaking body.

Taiwan's government estimates that the pact would lift the country's service exports by 37.2 percent and generate 11,651 jobs in Taiwan, but "it is likely to have underestimated the total benefit," ANZ said.

Based on Hong Kong's Closer Economic Partnership Arrangement with China, Taiwan's services providers may hire 10 times as many people in China as in Taiwan, creating more opportunities for Taiwan's workers, especially professionals, across the Taiwan Strait, it said.

Critics of the pact have criticized this possibility, however, arguing that the migration of Taiwanese professionals to China could further hollow out local businesses and weaken the domestic talent pool.

The bank also expressed concerns that the dispute and the possible scrapping of the pact will adversely affect Taiwan's economy over the long term, especially as South Korea, Taiwan's main trade rival, has been signing bilateral free trade agreements with other countries.

It is even expected to conclude negotiations on a free trade pact with China later this year, ANZ said.

"Boosting service trade is a key step for the tech-intensive economy to attain sustainable growth," the bank said.

(By James Lee)
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(Click here for the latest on the ongoing protest and developments since the Legislature occupation starting March 18.)

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