Taiwan Is Suffering From a Massive Brain Drain and the Main Beneficiary is China

Money talks. At least it did for Eddie Chen and, presumably, for many of the 420,000 of his Taiwanese compatriots who opted to earn a higher salary by working in mainland China.

Chen, 26, moved from the Taiwanese capital, Taipei, to Beijing in 2014, first to study a Masters on a full scholarship, and then to work in PR for a major international company.

He earns double what he would in his native Taiwan, where starting salaries for graduates have barely risen since the late 1990s. “China has a bigger market and there is more globalization here,” he explains. “Taiwan does not offer many opportunities for young people.”

Official government statistics reveal that by 2015 over 720,000 out of Taiwan’s roughly 10-million strong workforce, 72.5% of them with an undergraduate degree or higher, had moved overseas for better job opportunities.

Unsurprisingly, neighboring China, with its common language, has absorbed the majority.

But it is also actively luring Taiwan’s best talent, contributing to an acute brain drain that not only threatens the Taiwanese economy, but has prompted fears that Beijing, which claims the island as its own territory, is using its economic clout to try to buy political influence.

A recent flow of mainland initiatives to recruit Taiwanese students and entrepreneurs has jangled nerves in the self-ruled democracy that China is expanding efforts to win the loyalty of the younger generation with financial sweeteners, taking advantage of Taiwan’s sluggish economy.

China has targeted Taiwan’s educated elite for years, but a recent uptick in job and education incentives suggests a shift in tactics since cross-strait relations soured over Taiwanese President Tsai Ing-wen’s refusal to accept Beijing’s policy that the island of 24 million is part of ‘One China’.

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Its attempts to punish Taiwan through international isolation, blocking it from United Nations meetings and poaching from its small remaining pool of diplomatic allies, appears only to have fortified Taiwanese resolve to forge their own identity.

The young in particular identify more acutely with Taiwan as their home country and China as a giant neighboring state. But the long term impact of offering millennials a higher standard of living is hard to predict.

China has made no secret of its belief that financial benefits can, over time, dilute, and eventually displace national identity and advance its unification agenda.

Reports emerged in April that Beijing would appeal to business grass-roots through the All China Federation of Taiwanese Compatriots, led by Wang Yifu, a former advisor to President Xi Jinping on Taiwan.

The plan to offer attractive study and work opportunities was followed this summer by invitations to Taiwanese local leaders and youth groups to mainland camps and cultural activities.

Last month, China’s education ministry announced it would halve the quota of Chinese students in Taiwan while relaxing entrance rules for Taiwanese at mainland universities, fueling suspicion of attempted social engineering.

Taiwan’s Mainland Affairs Council, which oversees cross-strait relations, urged China to “cherish and maintain” educational exchanges, warning against “interference or restrictions.”

It reminded Taiwanese students of “major differences” between the two countries’ education systems.

But politics is the last thing on Ling Kuang-hsuan’s mind as the postgraduate student, 22, excitedly prepares to start a two year Masters course in human resources at Peking university this September.

She believes Peking’s top reputation will improve her job prospects and, like Eddie Chen, she sees her future in China.

“I hope I can stay in China and find a job…Most of my friends also hope that they can work there after they graduate,” Ling adds. “There are many international companies that don’t have a franchise in Taiwan but they do have one in China.”

Her chances are good. China’s major cities offer a thriving scene of multinational companies and lucrative incentives for start-ups.

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In 2015, Chinese e-commerce magnate, Jack Ma, announced a $330 million fund for Taiwanese entrepreneurs.

Just last month, the Taipei-based China Times reported an award of almost $400,000 for a business start-up contest for Taiwanese youth in Shanghai.

Chen admits that China’s vibrant business climate lured him back after his studies when he struggled to start a PR company in Taiwan.

“It was easy to start, but not to survive,” he says. “In Taiwan they play more a short term game. They want their investment back soon.”

The Chinese, however, treated him like a “star”, offering an office and financial incentives. “The Chinese government want people to start-up. They want this trend,” he says.

Chen sold his stake in his company to advance his career in a large international firm.

In China, ambitious Taiwanese professionals also find they can progress quicker than they would at home. “Our company is willing to give younger people more of a chance,” says Chen.

China may feel like a foreign country where “we still understand that we are different culturally and politically”, but for now it is Chen’s home. “Taiwan is much more a place for retirement,” he adds.

The roots of Taiwan’s talent deficit lie in its slow export-reliant economy and the failure to make tough reforms to attract foreign investment and to shift from previously successful labor-intensive industries towards high technology and services.

Meanwhile, neighboring China enjoys high growth. In July it reported an annual pace of 6.9% while Taiwan hovers at around 2%.

To add to Taiwan’s woes, graduate salaries have stagnated. In 1999, a university graduate could expect an average monthly salary of around $900. By 2016, this had risen to just $925.

“If China is growing at 6 percent a year and Taiwan is growing at 2 percent a year, which is going to be the most attractive place to go to stake out your career?” asks Michael Zielenziger, Asia expert and a managing editor at Oxford Economics, a U.K.-based economics and research consultancy.

“It’s very difficult for a young, bright Taiwanese student to ignore the bright lights, big city appeal of either China or the States. It’s a challenge to the government to make the country more attractive, to keep people at home and bring them back,” he says.

In 2012, Oxford Economics produced a survey that made the dire prediction that by 2021, Taiwan would have the biggest talent deficit in the world.

“Taiwan comes in poorly for a number of obvious factors. The population is not increasing…It’s getting older,” says Zielenziger.

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Caught in a vicious cycle, low wages have left young people less inclined to start a family, contributing to declining birthrates.

Youth are resentful that Taiwan’s generous state pension system leaves, for example, retired high school teachers on a monthly stipend of around $2,250, while they struggle to make ends meet.

The resulting exodus leaves less workers to support the swelling ranks of the old, pushing the pensions system towards the brink of bankruptcy.

Gordon Sun, director of the forecasting center at the Taiwan Institute of Economic Research, says the nature of the brain drain is exacerbating Taiwan’s economic troubles.

“They are high level managers, engineers, they are rich, their income is high,” he says.

“Most of their spending or consumption is in China. So in Taiwan our consumption cannot grow,” he argues. “We need them to come back and live here and spend here.”

But the notion of China presenting itself as the land of opportunity in exchange for Taiwanese loyalty is misguided, believes Taipei-based analyst Michael Cole, a senior fellow at Nottingham University’s China Policy Institute.

Firstly, China has no clear strategy to win over Taiwan. “Right now, they don’t know what to do,” he argues.

“They’ve long been infatuated with notions of economic determinism. They tried that with Tibet and they tried that with Hong Kong to an extent,” Cole says.

“They still don’t seem to realize the pragmatism with which people are dealing with China, in which they recognize the opportunities for their career or for investment, but very rarely does that translate into a shift in self-identification or support for unification.”

Lo Chih-cheng, a legislator with the ruling Democratic Progressive Party (DPP), agrees that young people will see through attempts to politically manipulate them.

“They want to show especially to young people, that China is their future, and Taiwan has nowhere to go to but to turn to China. That’s their strategy: Taiwan has to depend on China for economic development,” he says.

“I don’t know whether it works or not but I don’t think it will change their identity,” Lo adds. “There is a huge difference between the way of life in Taiwan and China that will reinforce their views about themselves being Taiwanese not Chinese.”

Others are more concerned that the long term impact of offering financial security to an entire generation, could slowly erode resistance to China’s political ambitions.

Unlike Hong Kong, freedom of speech and democracy is not directly under threat for now in Taiwan, giving the young fewer reasons to push back. Taiwanese identity is strong, but willingness to advocate independence less so.

Rex, 36, a Taiwanese banker, moved to Guangzhou, southern China, two years ago as he did not want to lose his job in Taiwan in middle age. “I don’t see a future for my work in Taiwan,” he says.

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He now prefers the dynamism of China compared to the more regulatory business culture at home.

Politics plays little role in Rex’s personal life, but he believes that “Taiwan and the Chinese are going to merge some day in the future, 50 or 100 years from now” for more practical reasons.

“China is just too big and in Taiwan you cannot live without China being involved in your business,” he explains.

For many who opted to stay home, the steady drip of China’s economic influence over those who left has become a touchy subject.

Earlier this year, a Taiwanese man, Jeremy, 25, who works in Shanghai was denounced online as a “communist bandit” after he urged young people to leave and seek a better life overseas.

“I have friends in Taiwan who work inconceivably hard every day. They’re up at 5am and don’t finish up with work until 9 or 10pm at night. And what for? They have no future and no hopes,” he said in a video that went viral.

Dr Yang Tzu-ting, a research fellow at the Institute of Economics at Taiwan’s Academia Sinica, believes that a large Taiwanese labor force in China could “threaten our national security” and encourage some to become advocates for unification.

The best way for the Taiwanese government to counter this is to create better jobs and to boost the services industry, he argues.

An example would be to remove stifling annual quotas on medical training to create a health tourism sector, he says. Another would be to make universities more competitive to prevent academics escaping centralized, and low, wages.

Ross Feingold, a Taipei-based lawyer and public policy analyst, agrees that the Taiwanese government is not doing enough to stem the brain drain.

“One way to look at it is if China succeeds in getting young people to remain there during election time and not return home to vote for the DPP, that that would also work to China’s advantage,” he says.

“I think it’s just a transactional relationship where people want to have jobs that pay better and offer opportunities for promotion. Whether it builds personal affinity remains to be seen.”