The Tiger Leading the Dragon traces the development of cross-Strait economic integration over the past few decades. The main argument is that Taiwan has played a crucial role in bringing China into the global supply chain network as well as in transforming China's social development. Shelley Rigger interviewed a wide range of people to provide readers with first-hand information. The book comes out at the right time, when close economic ties between Taiwan and China are about to experience dramatic changes. It offers solid background information for scholars to look ahead amid the volatile political economy across the Strait at present. The analysis and interpretations are coherent, and the real-life stories described in between the academic debates make the entire book an interesting read.
Chapter one sets the scene for the whole volume by addressing an important question: how did Chinese producers find their way into foreign markets? The author argues that the large amount of foreign investment flowing into China is the answer. Among various overseas investors, Taiwanese are the most important in channelling Chinese goods to other countries, especially to the United States. The development of Taiwanese firms in different political and economic environments is the key that links the interplay between all the actors in the book.
Taiwanese firms’ manufacturing strength and close working relations with global multinational corporations (MNCs) established their capability to integrate China into the global supply chain network. Therefore, another important question is: how did Taiwanese firms build up their manufacturing strength and extensive manufacturing network? As detailed in chapter two, the government's policies and the vibrant and dynamic small- and medium-sized enterprises (SMEs) are fundamental bases of Taiwan's manufacturing prowess. A stable political and economic environment was also imperative for the manufacturing economy to prosper. US aid from 1951 to 1965 played a significant role in stabilizing KMT's governance in Taiwan; it also provided an initial economic impetus.
Taiwanese firms encountered a business development bottleneck in the late 1980s. US trade sanctions against Taiwanese exports, appreciation of the New Taiwan dollar, and rising production costs at home, all made overseas investment an unavoidable choice. Chapter three explains how China could have provided an ideal environment to accommodate Taiwanese business needs. Investing in China with lower production costs and on a larger production scale allowed Taiwanese firms’ products to remain competitive in the global market. China's greater economic opening-up after Deng Xiaoping's “Southern tour” in 1992 and China's joining the World Trade Organization in 2001 prompted surges of Taiwanese investment in China. Apart from the PRC's policy, the US market opening for the Chinese exports was another key factor, that lured Taiwanese investment aimed at exporting to America's market. As such, in examining Taiwan and China alone, the author overlooks an important driver behind the whole scene of “tiger leading the dragon.”
Chapter four shifts the focus to the manufacturing network among Taiwanese SMEs. With their improving skills, Taiwanese SMEs adopted their role in the supply chain network from original equipment manufacturing (OEM) to original design manufacturing (ODM) (p. 49). Indeed, Taiwan's improving skills had much to do with their investment in China. This is an area that that the author could have explored. Relocating labour-intensive manufacturing production to China allowed Taiwanese firms to focus on producing higher value-added goods at home. The division of labour across the Strait was gradually developed with Taiwan and China specializing in producing goods at different levels of technology and capital intensity. In other words, the different comparative advantages possessed by Taiwan and China spurred greater bilateral trade exchanges and deepened the division of labour in manufacturing production.
Taiwan is often categorized as a model of “state-led economic development.” Ironically, the Taiwanese government’ s policy was ineffective in restraining its vast outward investment in China. Deeper cross-Strait economic integration through Taiwanese investment was not what the government had wished for. Chapter five discusses the Taiwanese government's unfruitful effort to direct its outward investment away from China. In the face of uncontrollable investments flowing into China, the government had no choice but to switch the policy from restraining to effectively managing investment in China. Indeed, overseas foreign investment has been a central adjustment strategy of Taiwanese firms. Taiwanese investors are typically engaged in rescue operations from a home base to maintain the international competitiveness of their products. They are more concerned with “business opportunities” which are highly related to international environmental changes, notably China's FDI promotion policy and the US opening for Chinese exports.
The intensified economic integration across the Strait came to an end with China's growing economic strength and the rising importance of Chinese firms in manufacturing IT products. In chapter six, the author elucidates two major challenges that Taiwan has been facing in the last decade. First, Taiwan's relatively small economic size could be easily swallowed by China's huge economy through any economic deal with PRC. China's greater weight in Taiwan's economy through its active promotion of Chinese investment and its outbound tourism during the Ma Ying-jeou administration posed a threat to Taiwan's political sovereignty. Second, several key Chinese firms in their high-technology industry were fostered by the PRC government to move up China's position in the global supply chain (p. 99). Taiwan's comparative advantage in manufacturing high-technology goods is challenged as a result.
Despite being successful in integrating China into the regional production network, there is distrust and unfamiliarity blocking further integration between Taiwanese manufacturers and their mainland counterparts as described in chapter seven. Rigger further argues that Taiwan's importance in China's economic development is beyond manufacturing production. Taiwanese firms are also influential in developing China's service industry as revealed in several case studies in chapter eight. China's vast market and the Chinese people's aspiration for the Taiwanese lifestyle allowed Taiwanese services to develop their businesses with their own creative marketing ideas. However, with the growing competition from both local and foreign firms, Taiwanese firms in services no longer enjoy the strong advantage they once had (p. 146).
Taiwan is also influential in Chinese society through its religious groups, pop music and legal services. In chapter nine, the author describes in great detail the famous and indicative social groups and artists in Taiwan that shaped trends in Chinese society. However, those influences waned with the worsening cross-Strait relations and China's stricter control over domestic politics and foreign influence. Instead of allowing Taiwanese culture to influence China, the PRC government seeks to use its market power to shape Taiwan (p. 171).
Taiwan's investment in China started to decline after China's wage hike more than a decade ago. The growing US–China confrontation in recent years accelerated the Taiwanese business shift away from China. The development of cross-Strait economic integration is a historical conjuncture of political and business coherence and the environment for conducting business in China has evolved with time and policy changes. The new political economic setting has caused both sides across the Strait to drift further apart. As Rigger points out rightly at the end of the book, “the two sides of the Taiwan Strait are too tangled up economically to sever their ties completely – but the era of breakneck integration and mutual benefit has come to an end” (p. 195).
