Taiwan’s Security: Beyond the Special Budget

Dr. Chang Ya-chung is a professor of political science at the prestigious National Taiwan University who carries a powerful message: America has lost touch with popular sentiment on Taiwan. Professor Chang leads a growing movement called the Democratic Action Alliance (DAA, minzhu xingdong lianmeng) that has been dead-set against appropriating a $15-billion special budget for the procurement of three major weapon systems from the United States. For Chang, the debate over the use of a special budget or increased annual budget to fund weapons is irrelevant. He opposes any increase in defense spending in light of more pressing domestic needs. Though Chang may be an outlier in Taiwan’s defense policy circles, his influence illustrates the profound debate that America’s offer of a large package of weaponry sparked over the island’s national security.

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Sara Segal-Williams
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Progress in China's Banking Sector Reform: Has China's Bank Behavior Changed?

Substantial effort has been devoted to reforming China's banking system in recent years. The authorities recapitalized three large state-owned banks, introduced new governance structures, and brought in foreign strategic investors. However, it remains unclear the extent to which currently reported data reflect the true credit risk in loan portfolios and whether lending decisions have started to be taken on a commercial basis. As evidenced through lending growth, credit pricing, and regional patterns in lending from 1997 through 2004, large state-owned commercial banks (SCBs) have slowed down credit expansion, but the pricing of credit risk remains undifferentiated and banks do not appear to take enterprise profitability into account when making lending decisions. Large SCBs have continued to lose market share to other financial institutions in provinces with more profitable enterprises. The full impact of the most recent reforms will become clear only in several years, however, and these issues should be revisited in future research.

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Sara Segal-Williams
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Economy
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