Despite Threats, China Still Strategic Partner Consultant Hopes ‘Calm Minds Will Prevail’ In Asian Dispute

Concern over Monday’s saber-rattling by China should not distract attention from the promising economic ties linking that country ever more closely to Taiwan, a Hong Kong-based business consultant said Tuesday.

Robert Broadfoot said the mainland nation recognizes the value of Taiwanese investment, even as its leaders vent their frustrations with the lack of progress toward reunifying their two governments.

Extreme action is unlikely, he said.

But Broadfoot added that miscalculation in either country, as well as by the United States, could sour relations for a long time.

China, in a White Paper released Monday, said it would not rule out an invasion of Taiwan in its effort to bring the former province back into the orbit of the Beijing government.

Taiwan has been separate since 1949, when the Nationalist government fled the mainland after losing a civil war with the Communists.

An upcoming election and the looming fight over China’s effort to join the World Trade Organization present plenty of opportunity for political mischief in the U.S., Broadfoot said.

“Hopefully, calm minds will prevail,” he said.

Broadfoot said WTO membership should be a boon to Eastern Washington agriculture, although removing the barriers to commodities like wheat and apples will be a long-term proposition.

“It’s very difficult reform,” he said.

The Chinese may have to go so far as to devalue their currency to level the market for domestic producers who have to pay more for inputs like fertilizer than do American farmers, he said.

Broadfoot said other Asian countries share China’s distress despite progress in recent months.

Credit markets remain fragile, and some governments refuse to confront the need for structural reforms.

In Japan, for example, leaders are pushing make-work construction projects - meanwhile piling up huge public debt - instead of forcing consolidation on an industry with 90,000 companies.

The country also must find a way to deal with an aging population, Broadfoot said.

Still, he said there has been progress on several fronts in Asia.

Foreign reserves have been rebuilt, and foreign exchange rates have recovered. Political conflict has subsided.

And some foreign investors have converted debt into equity to help carry their partners through the crisis, he said.

Broadfoot reminded his audience of bankers and their clients that it took the U.S. almost five years to develop a solution to the savings and loan crisis of the late 1980s.

And the booming U.S. economy, which has pulled many others along with it, could itself stumble, he said. The ramifications could be dire internally and externally, he said.