Japan, Taiwan to sign investment agreement
BY TAKIO MURAKAMI CORRESPONDENT
TAIPEI--Japan and Taiwan are set to sign a bilateral investment agreement on Sept. 22, a development that both sides hope will pave the way for an economic partnership agreement at some point.
As Japan and Taiwan have no formal diplomatic relations, the Interchange Association Japan and Taiwan's Association of East Asian Relations are acting as contact organizations.
A signing ceremony is expected to be held when IAJ chairman Mitsuo Ohashi visits Taiwan this week. It will be his first visit to Taiwan since he took office.
The agreement, which is intended to promote mutual corporate investment, is not limited to investment protection, which envisions responses to disputes over investment. It also advocates the promotion and liberalization of investment.
It features provisions on "national treatment," under which Japanese enterprises that have branches in Taiwan are exempted from regulations on foreign affiliates and are entitled to the same treatment as local enterprises--and vice versa for Taiwanese enterprises that have branches in Japan.
Japan was the largest exporter ($51.9 billion) and the largest provider of direct investment ($400 million) to Taiwan in 2010, according to Taipei's statistics.
By the same token, Taiwanese enterprises use high-quality raw material and core parts provided by Japanese enterprises.
The Japanese Chamber of Commerce and Industry Taipei, an association of Japanese enterprises in Taiwan, had pushed for early conclusion of an investment agreement, saying it would give companies more freedom in deciding where to set up production bases.
The administration of President Ma Ying-jeou has concentrated its efforts on improving relations with mainland China.
It has already concluded an Economic Cooperation Framework Agreement with Beijing, which ignited opposition criticism that the administration was too focused on China.
In that context, the agreement reached with Japan could be touted as a significant diplomatic achievement and may help the ruling party in the presidential election next January.
The Ma administration hopes to add tariff reduction provisions to the bilateral investment agreement. This would allow it to be expanded into an economic partnership agreement or a free trade agreement in the future.
For some time, China and Taiwan have been holding negotiations on an investment protection agreement. Both the Japanese and Taiwanese sides initially opted to postpone the signing of a Japan-Taiwan agreement out of consideration for China.
Instead, it is going ahead because the negotiations with China have become bogged down.
On Sept. 22, Japan and Taiwan also plan to sign an aviation agreement, which will relax restrictions on opening new flight routes.
台日開放天空 東京除外 【11:50】
Pigs in China are driving the world economy
BY KEIKO YOSHIOKA CORRESPONDENT
Two-month-old pigs are being raised in the Jiumu Professional Cooperation Society of Pig Farm in Beijing on Aug. 24 on feed including corn. (Keiko Yoshioka)
BEIJING--Of the 1 billion pigs being raised in the world, about half are in China, where pork consumption is increasing as the Chinese economy develops.
As a result, pork prices are rising, a trend that is impacting the world economy.
To ease the public's dissatisfaction with the price increase, which could lead to rioting, the Chinese government is increasing pork production. However, the move is causing a growth in demand for pig feed and raising feed prices in international markets.
Around the Jiumu Professional Cooperation Society of Pig Farm, about an hour's drive from Tiananmen Square in central Beijing, the corn fields used for pig feed are about 6 feet high.
The pig farm cooperative was jointly established in 2007 by nine farmers with 8,000 pigs. Now, the numbers of farmers and pigs have increased to 29 and 20,000, respectively.
Following the rise in living standards in China, the number of people who prefer eating meat is growing. However production is not keeping up with the increasing demand. As a result, the price of one pig has increased from 600 yuan (7,280 yen, or $94) to 2,100 yuan. Still, Wang Guangyi, manager of the farm, is not happy.
"Not only the price of pork but also those of the feeds and fuels are rising," said Wang, 47. "We have also raised wages to employ more workers. We have to lower production costs by making our farm a larger-scale one."
Corn feed prices have tripled since 2007. The starting wage for migrant workers from Sichuan province and other parts of China has doubled to 2,200 yuan.
Wang is now planning to transfer the Jiumu pig farm to neighboring Hebei province or the northern Inner Mongolia autonomous region and increase the number of its pigs to 100,000 within five years.
In China, pork production has increased more than 10 percent in the past five years to 52.5 million tons. By comparison, poultry production is about a quarter of that amount and beef about one-eighth.
The consumer price index (CPI) in China in July rose 6.5 percent from the same month last year. The growth rate is the largest since June 2008. Of the 6.5 percent, 1.5 percent was attributed to pork, whose prices rose nearly 60 percent year-on-year.
As the CPI is greatly influenced by pork prices, the Chinese newspaper Economic Information poked fun at the index, saying that CPI means "China Pig Index."
China, which is called the factory of the world, is also a major world consumption center. The sharp rise in pork prices, a mainstay of dinner tables in China, is angering the public, forcing the government to take countermeasures.
In July, the government announced that it would earmark 2.5 billion yuan for expansion of pig farms and breed improvement. It also plans to release stockpiled frozen pork and import some products from the United States.
By inviting participation from foreign companies, the government is also trying to improve distribution systems and expand pig farms to raise production efficiency.
However, those measures are not expected to bring immediate relief. Small-scale pig farm operators, which account for most of the pig farm operators in the country, are withdrawing from the business one after another due to the increase in production costs.
As the Chinese government is intent on maintaining "food security," it cannot drastically increase pork imports. As a result, the rise in pork prices does not stop.
In China, pork prices have been in a three-year cycle, starting with a rise in prices leading to policies to increase production. Then, more farms start raising pigs. However, overproduction of pork arises, leading to a decline in prices. (Sometimes, diseases break out.) Then, pig farm operators withdraw from the business one after another, causing supply shortages. As a result, prices rise again. The period from a rise in prices to the next is about three years.
However, there is a growing sign that such a cycle will not reoccur.
The rise in prices of feeds and fuels is increasingly linked to overseas market moves. In addition, personnel costs are rising. As a result, there is a growing possibility that pork prices will not decline as much as expected.
Zhang Ping, a senior official of the Chinese government's National Development and Reform Commission, said in its report to the National People's Congress in late August, "There is a possibility that prices will continue to stay at high levels."
The pork production increase is also raising world grain prices. In China, corn imports that are used for pig feed increased sharply from 50,000 tons in 2008 to 1.57 million tons in 2010.
According to the Beijing office of the major Japanese trading house Marubeni Corp., the imports could increase further to 5 million tons in 2011 and 10 million tons in 2015.
In the Chicago market, the futures prices of corn per 25 kilograms rose sharply from less than $4 in the first half of 2010 to about $8 in June, marking the highest price ever.
The volume of China's corn imports is not large compared to the country's domestic production of 177 million tons.
"But moves and prospects in China are influencing the trading in the market," said Takeshi Ito, a senior Marubeni official.
Meanwhile, anticipating that pork consumption in China will increase further, companies in Japan, including Marubeni, Singapore and other countries are investing in pig farming-related businesses in China.
To improve the quality of its products, Wang's farm has imported pigs for breeding purposes from the United States and some European countries, including the Netherlands. The prices of those pigs have jumped about 60 percent in several years. The sharp rise is partly attributable to the purchase of those pigs by Chinese companies.
Wang is also inspecting pork producing centers in countries, such as the United States and France, to obtain information on pigs. He is now also sensitive to international prices of feeds and fuels.
"My company's pigs are linked to the world," Wang said.