Soon after her inauguration, Tsai commenced a reform of the pension system to preserve the government’s fiscal health, with the new system coming into operation on 1 July 2018. The first wave of reforms concern the pensions of military personnel, civil servants and teachers. They are provoking considerable controversy and social upheaval. The next wave will involve Taiwan’s 10 million labourers.

Relations with China have fallen into disarray because of cross-Strait disputes over the 1992 Consensus. The drop in the number of tourists coming to Taiwan from China is having a direct impact on Taiwan’s tourism industry. There was a sudden rush of sales of hotels in southern Taiwan, and hospitality and tourism industry workers are losing what had looked like a stable source of income.

Although the Taiwanese government is promoting the New Southbound Policy to counteract Taiwan’s over-reliance on trade and tourism income from China, the policy has not yet been able to plug the gap.

Support for the Tsai administration is waning. In a survey conducted by the Taiwan NextGen Foundation, 51.5 per cent of respondents are dissatisfied with Tsai’s performance, while another survey by the Taiwan Public Opinion Foundation indicated that 56 per cent are unhappy with Tsai’s cross-Strait policies. These surveys show that more than half of the public in Taiwan are dissatisfied with Tsai’s overall performance.

At the same time, Beijing is offering preferential policies to the people of Taiwan, fostering feelings of goodwill toward the Chinese Communist Party while stirring up further dissatisfaction with the Tsai administration.

Loss of confidence in Taiwan’s economic future is reflected in the large numbers of professionals who have left Taiwan to work in China. Of the 720,000 Taiwanese citizens working overseas, around 60 per cent of them are in China. And surveys conducted by Taiwan’s news media indicate that about 53 per cent of respondents would be willing to go to China as a student or tourist, or to do business.

On 28 February 2018, China announced its ‘31 incentives’ initiative, aimed at attracting Taiwanese individuals and businesses to relocate to China. This package is likely to have a major impact on all sectors of the Taiwanese economy.

Some industries and individuals are indeed finding these incentives quite attractive. Recognition of Taiwanese qualifications is encouraging many professionals such as lawyers and accountants to practice in China, for instance.

Pension reform in Taiwan may also encourage teachers to seek career development in China. This brain-drain, plus a low birth rate, is a concern for Taiwan’s national development.

A depressed economy and low wages are providing the ‘push’ factors for Taiwanese businesses and professionals, while China’s vast market and incentives provide the ‘pull’. But while people-to-people relations between the two sides of the Taiwan Strait have grown closer, there is zero interaction between their governments.

Beijing is bypassing the Taiwanese government and attracting Taiwanese citizens directly by offering them ‘quasi-national treatment’ as part of a new public policy system. The ‘31 incentives’ initiative involves 29 government departments in China and is specifically aimed at overcoming the difficulties encountered by Taiwanese in China. This includes measures such as recognising Taiwanese teachers’ academic qualifications and allowing Taiwanese to use self-check train tickets.

China also recently announced that from 1 September 2018 Taiwanese people who live in mainland China for more than six months can apply for smart cards that give them the same access as holders of Chinese ID cards to a range of social and public services. The purpose of this move is to eliminate social barriers and allow Taiwanese residents in China to integrate more closely into Chinese society.

This cross-border flow of talent is a normal phenomenon in the era of globalisation. Aside from the new incentives Beijing is offering, China is proving attractive to Taiwanese on account of its vast market and expected economic opportunities, as well as the fact that the two sides share the same language and a similar culture.

But there are downsides to living in China, such as the lack of democracy and freedom that will likely still discourage some professionals from relocating. Academics in certain sensitive fields such as political science might need to change their specialty to, say, municipal administration to avoid going against Party doctrine. Further, the ‘rule of man’ rather than the rule of law prevails in China, making career planning much more difficult as no one can tell what will happen in the long term.

Compared to this, Taiwan’s legal system and social environment inspire more confidence. Taiwan was ranked 18th in the 2018 Global Entrepreneurship Index while China was ranked 43rd. This indicates that Taiwan has sound institutions, an effective government and a good social environment.

What the Taiwanese government should do now is adopt comprehensive structural reforms that remove obstacles to employing the best talent, provide policy incentives to young entrepreneurs and encourage cooperation between academia and industry. Academia and industry share a symbiotic relationship: academia produces graduates who are absorbed by industry. Research work in universities is taken up by the industry and turned into products and services, and industry looks to academia for solutions to their concerns. It would like universities to tailor their courses to turn out graduates whose skill-set are aligned to industry requirements. This would enable talented individuals to fulfil their potential in Taiwan.

Jean Yu-Chen Tseng is Assistant Professor in the Department of Public Affairs, Fo-Guang University, Taiwan.