China ties cause widening income gap in Taiwan

TAIPEI, (AFP) -Taiwan was one of Asia’s most equitable societies, but closer ties with China have changed the rules of the game, benefiting some at the expense of others and causing a widening income gap.

People with capital are profiting from the new opportunities that the China boom offers, while those with only their labour to sell are up against a billion mainland Chinese eager to work for a fraction of Taiwanese wages.

Property investor Victor Chen, one of the winners in the new Taiwanese economy, started with a modest fortune less than a decade ago but ballooning land prices have made him worth half a billion Taiwan dollars (16 million US).

“Many investors started to smell investment opportunities back in 2007,” said the 45-year-old owner of 160,000-US-dollar Mercedes, who now wants to buy a yacht. “Especially in the past two years, property prices have risen fast.”Chen does not hesitate when asked to identify the cause of the rising prices: The unprecedented expansion of ties with China that has taken place since Beijing-friendly Ma Ying-jeou became president in 2008.

“People started investing more the moment they felt Ma was likely to be elected and act to improve ties with Beijing,” Chen said.

But just as closer ties with the booming mainland economy have enabled a few to become much better off, a large segment of the island’s 23 million people have seen no improvement or even a decline in their standard of living.

The most prosperous 20 percent on Taiwan reported average disposable incomes of 1.79 million Taiwan dollars (56,000 US) last year, or 6.34 times more than the income of the poorest 20 percent, government data showed.

Taiwan in the past prided itself on having an income distribution that was unusually even for a free-market, high-growth economy.

The absence of a serious income gap in the earlier stages of Taiwan’s development was the result of many factors, including the emergence of rural enterprises that allowed farmers to move to industrial jobs more easily.

But that is all now a thing of the past, and as a result resentment is mounting.

In Hsintien, a city near Taipei, divorced taxi driver Chou Yung-chen complains that his income has kept declining over the past few years.

“Now I have to drive at least 12 hours a day, and I barely manage to keep myself and my son alive,” he said. “Life is getting more and more difficult.”A colleague of his at the Ta Chien Taxi Company, Ma Yu-chin, said he was no better off, struggling to support his mother, and seeing no way out despite being a college graduate.

“My future? I don’t even dare think about it. All I care about is making enough money. Sometimes I have to work 15 hours a day to make that possible,” the 25-year-old said.

“The government claimed that the economy has fully recovered and that the improving China ties have benefited a lot of people. But we don’t feel that at all.”The island’s economy surged 13.71 percent in the three months to March and grew a higher-than-expected 12.53 percent year-on-year in the second quarter, government tallies showed.

“While the poor have remained poor, it’s become easier for the rich to earn money,” said Norman Yin, an economist at the National Chengchi University in Taipei.

Part of the reason is low interest rates which benefit corporate borrowers, he said, but more importantly there has been an exodus of manufacturing industries that used to hire a big chunk of the domestic workforce.

They have gone to less developed markets with lower labour costs, especially the mainland.

Still, Yin was optimistic over to Taiwanese efforts to lure more Chinese tourists to the island, a move which has already created jobs for bus companies, restaurants and tourism operators.

“The spill-over effects will continue and gradually allow more people to benefit from the opening,” he said.

Also in order to narrow the income gap, the government is contemplating a “rich man’s tax” on high-end goods such as luxury mansions, private jets -- and yachts such as the one Victor Chen plans to buy.