Nov. 16 (Bloomberg) -- Quick, when did the Cold War end? One obvious choice: June 1987, when U.S. President Ronald Reagan stood in front of the Berlin Wall that separated communist East Germany from capitalist West Germany and famously challenged the Soviet leader Mikhail Gorbachev to “tear down this wall.”
Yet at about the same time as Reagan’s telegenic dare, far from the glare of the cameras, a less sensational but perhaps more significant barrier was crumbling: the one separating communist China from capitalist Taiwan.
Nowhere, perhaps, was the Cold War better represented than in the division of the Chinese nation into two blocs separated not only by water but by ideology -- by communism and capitalism at their most strident.
Starting in 1949, more than a million mainland Chinese retreated to Taiwan with Chiang Kai-shek, leader of the Western-backed Nationalist Party, leading to a long-running civil war with the Chinese Communist Party. Military tensions between the countries ran high well into the 1980s. In the center of Taipei, giant placards proclaimed the national goal: “Retake the mainland!”
But starting the same year as Reagan’s memorable speech, shared economic interests and history would lead to a gradual thaw between the two places that would dramatically accelerate China’s economic reintegration with capitalist countries.
It wasn’t the Taiwanese military but rather a political decision that transformed Taiwan-China economic and cultural relations. In 1987, Taiwan’s Nationalist government lifted martial law and eased restrictions on contact with the mainland. Many of the exiles who helped Taiwan prosper and grow had been forced to leave families and friends behind when they fled the mainland. As these restrictions were lifted, a massive increase in flows of capital, products and eventually people between Taiwan and China resulted.
Political decisions on both sides hastened the reunion. Taiwan’s comparative advantage in human and material resources and Chinese demand for those resources created strange bedfellows. As China’s economic reforms advanced in the 1980s, more and more mainland consumers demanded goods -- such as fast food and pop music -- that the Taiwanese were best able to provide. As Taiwan’s industrial sector became less competitive internationally, its de-industrializing economy needed to find new markets and its workers new jobs.
The profit motive led the way; manufacturers and business owners followed. As a consequence, China has since received more than $100 billion in Taiwanese investment. This has funded tens of thousands of projects all over China, even in Nanchang, the birthplace of the communist state. Today, more than 70,000 Taiwanese companies have investments in the mainland. Trade between the two countries now breaks records yearly and has amounted to more than $2 trillion since 1987. In 2002, China replaced the U.S. as the top market for Taiwanese goods. This is all the more remarkable considering the size of Taiwan and that the two nations remain technically at war.
These figures represent not simply commodities traveling back and forth but a transformation of ordinary lives. Girls who once lined up by the millions in identical Mao suits to shout Communist Party slogans now wear the trendiest fashions and sing the latest pop tunes from Taipei while walking down streets full of restaurants and clubs.
Perhaps as important as this resumption of trade was Taiwan’s partial lifting of a travel ban to China upon the death of Chiang Kai-shek’s son, Chiang Ching-kuo. This led to an informal cultural exchange as families, divided for decades, reunited and shared a tide of cultural influences. Those Taiwanese driven into exile by the Civil War of the 1940s and their children now became agents of new consumer lifestyles as they traveled back and forth between the two countries, taking new customs and tastes with them.
When the father of one of my former Taiwanese students traveled to see his relatives in rural Henan province, he didn’t arrive empty-handed. Like tens of thousands of other Taiwanese visitors, he returned to China with lavish presents. He had intended to give his relatives a color television, one of the most coveted products in China at the time -- but they begged him not to. Not only would it elicit envy, they feared, it would force his relatives to host TV parties for family, friends and hangers-on. Many others, of course, were less cautious and eagerly accepted not only TVs but washing machines, motorcycles and cash. Such gift-giving became so common that enterprising Taiwanese stores streamlined the process by allowing travelers to buy the gifts in Taiwan and then pick them up in China.
After decades of separation, Taiwanese travelers taught the Chinese much about being consumers through everyday interactions, arguably doing more than any other group to directly transform Chinese consumer culture. Although their visits usually lasted only a few days or weeks, their gifts and their attitudes stayed behind.
The fall of the Berlin Wall was celebrated as the triumph of capitalism over communism, with clear winners and losers. But in East Asia, the struggle between these ideologies hasn’t had such a clear or dramatic resolution. Rather, the introduction and spread of capitalism and consumerism into China has occurred in countless small ways. The effects are still unfolding.
(Karl Gerth teaches modern Chinese history at Merton College of the University of Oxford and is the author of “As China Goes, So Goes the World: How Chinese Consumers Are Transforming Everything.” The opinions expressed are his own.)
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