China is still doing battle with international airlines. In April its civil aviation administration, CAAC, sent a letter to 44 of them, demanding that they specify Taiwan, Hong Kong and Macau as being parts of China when including them in drop-down menus of countries on booking websites. Fair enough for Hong Kong and Macau, which are universally recognised as being Chinese territories. But CAAC wants Taiwan to be called “Taiwan, China”, and maps to use the same colour for both the island and the People’s Republic. That is a problem. The island calls itself an independent, sovereign state.
Originally CAAC ordered the companies to comply by May 25th. However, by that date only 18 airlines had done so, despite the authority’s hint that violators would face punishment, including fines or action against their websites. Officials extended the deadline to July 25th, saying that some airlines were experiencing “technical difficulties” updating their lists. Among those that have fallen in line are Air Canada, Air France, Lufthansa and Singapore Airlines. Among the latest companies to do so is Air India, which this week began calling Taiwan “Chinese Taipei”, a term acceptable to China but viewed with disdain in Taiwan, which uses it only when access to international events requires it. Holdouts include the American carriers Delta, United and American Airlines, as well as a handful of Asian ones.
China’s spat with the airlines coincides with its stepped-up efforts to put pressure on the island itself. In the past year the Chinese armed forces have staged a growing number of exercises near Taiwan, including the flying of bombers and other aircraft around it. In May it deprived Taiwan of two members of its tiny band of diplomatic partners by establishing relations with Burkina Faso and the Dominican Republic (China does not allow countries to have formal ties with Taiwan and China at the same time). Apart from wanting to signal displeasure with Taiwan, which has been led since 2016 by a party whose members scorn the idea of eventual reunification, China wants to warn America’s president, Donald Trump, that he should not get too friendly with the island.
Both America and Taiwan have bristled at China’s attempt to strong-arm the airlines. The White House called it “Orwellian nonsense”. Joseph Wu, Taiwan’s foreign minister, says it represents “a new level of hysteria” in China’s approach to how others describe Taiwan. In theory, the island should have no objection to being called “Taiwan, China”. Its official name is the Republic of China and Taiwan is technically a province of that. But it worries that the word China is usually understood to mean the Communist-ruled entity that lays claim to Taiwan. “In essence, Taiwan is a country itself,” says Mr Wu. Informally, that is the name its officials give it.
China is digging in its heels. According to Reuters, it has refused an American government request for talks about the problem. Chinese leaders may be mindful of their image at home. In the cases involving Marriott, Gap and several of the airlines, it was Chinese netizens who sounded the alarm about the firms’ categorisations of Taiwan. Chinese social media blazed with rage as nationalists excoriated the companies. Under such pressure, the government had to take action, says Xin Qiang of Fudan University in Shanghai. Mr Xin says that, as Chinese officials see it, the risk of a domestic backlash for not acting toughly outweighs that of economic or diplomatic damage resulting from feuds with other countries. Most international airlines are likely to take the route of least resistance
Taking on Taiwan’s ruinous and partisan pension system
Economist – May 18th 2017
THE protests outside parliament got so ferocious that the 2,000 policemen defending the building barricaded it with barbed wire. That was soon festooned with angry placards. Inside, opposition politicians sought to disrupt parliamentary business: they seized the podium, and brawls broke out. In Taiwan, as everywhere else, reining in expensive pensions is not easy. But Tsai Ing-wen, the president, seems determined to press on. The current system, she said last month, is on “the brink of bankruptcy”.
The government’s liabilities have swelled to almost NT$18trn ($597bn), nine times its total annual expenditures. That is divided among funds for different professions, in which contributions from current workers help to finance payments to pensioners. The fund for civil servants is projected to go bust by 2031; the one for teachers by 2030; the one for private-sector workers in 2027; and the one for the armed forces in 2020.
The root of the crisis lies in Taiwan’s rapidly declining birth rate and growing longevity, which means that there are fewer workers to support the swelling ranks of the old. In 2015 Taiwanese women were projected to have just 1.2 children on average over the course of their lives, even as life expectancy passed 80 for the first time. A government study found that in 1996 there were nine working people for each pensioner. The ratio fell to six to one in 2015 and will be less than three to one by 2031. Sluggish economic growth and stagnant government revenues provide no way out.
Politics has made matters worse. When the Kuomintang party (KMT) fled to Taiwan in 1949, having lost China’s civil war, it filled the army and public service with mainlanders and provided them with generous pensions. Native Taiwanese worked mainly in the private sector. Taiwan began to democratise in 1987, but the KMT continued to dominate parliament until last year, thanks in part to strong support from the public sector, whose expensive pensions it continued to defend. Over 450,000 retired teachers, soldiers and bureaucrats receive an annual payment of 18% of the lump sum they built up in their pension account before 1995—a commitment that cost the government NT$78bn last year, or 4% of its spending. Benefits are not quite so generous for those who have retired more recently, but civil servants can still stop work with lavish benefits at 55.
Ms Tsai and her Democratic Progressive Party want to reduce the 18% payout to 6% over six years, subject to a minimum payment to protect poorer pensioners from poverty. They also want to cut monthly pension payments for other civil servants and teachers while raising the retirement age to 65. In addition, the president has pledged to inject an extra NT$20bn a year into the private-sector fund, which is much less generous. All this, the government reckons, will extend the life of Taiwan’s pension funds by just 10 to 15 years or so.
Lin Wan-i, the minister in charge of these reforms, says young people want even more sweeping changes. They worry that there will not be a pension for them by the time they retire. Moreover, they consider the huge payouts to the old unfair. Taiwanese workers earn about NT$39,500 a month on average. A typical monthly salary for a new university graduate is just NT$22,000. But retired high-school teachers receive a whopping average pension of NT$68,340 a month.
But pensioners see Ms Tsai’s plans as a breach of trust. More than 100,000 people demonstrated against the reforms last year. The most dogged protesters have set up a camp outside parliament. And there is the delicate matter of reforming military pensions at a time of heightened tensions with China. Ms Tsai has not yet announced her plans for that, but Mr Lin says any changes will be less drastic.
A poll by TVBS, a local broadcaster, found that 61% of Taiwanese supported pension reform in principle, though 46% were unhappy with the government’s handling of it. Ms Tsai can console herself with two thoughts. First, the fact that young and old alike are angry suggests she may be striking a fair compromise. Better still, the KMT is in too much disarray to take advantage of all the indignation.