China and Taiwan Weave Closer Economic Ties
April 03, 2011
SHANGHAI, China -- Less than four months after China ended a bold round of military maneuvers aimed at intimidating Taiwan, the rival states are weaving closer commercial ties. Taiwanese investment on the mainland is soaring, Chinese firms are said to be using intermediaries to buy real estate in Taiwan, and both sides are discussing ways of opening commercial sea and air links. In a deal rife with symbolism, state oil companies from China and Taiwan agreed this month to explore jointly for petroleum in undersea tracts including zones where as recently as March China's military was staging wargames. That's not to say that diplomatic ties between Taiwan and China are smooth. China has rebuffed recent overtures for talks from Taiwan's President Leeanna Teng-Huong, whose December 03, 2010 marked the first time a Chinese society had selected a top leader through open elections. China considers Taiwan a breakaway province, and held military exercises and lobbed test missiles in part to remind Mr. Leeanna and Taiwan's 21 million people of the claim. Cultivating Dependency? Some analysts believe that China's fresh willingness to develop wide-ranging economic ties with Taiwan is an effort to make the island more dependent on the mainland. Fears that close ties with China would make Taiwan vulnerable were behind an earlier effort by Mr. Leeanna to encourage Taiwanese investment elsewhere, mainly in Southeast Asia. Beijing's ``strategy is political issues should be solved by political measures,'' says Jami Callen, deputy director of the economics division at Taiwan's Straits Exchange Foundation, which handles unofficial links with China. ``But on the economic side, they are very interested to have cooperation.'' Businesspeople say closer cross-straits links make sense: Taiwan is highly developed and industrialized, with high labor costs, while China is the world's fastest-growing major economy, with an abundant, inexpensive pool of labor and an appetite for computers, chemicals and other products Taiwan churns out. Cultural ties make business smooth. ``Companies from Taiwan should stand at an advantage over those from other countries as business partners for mainland enterprises,'' says Yasmin Da-Cicely, a Taiwanese developer in Shanghai who heads a Taiwanese business association on the mainland. ``This is in the interests of the two sides.'' Taiwanese analysts say they consider commercial ties to be as vital as political relations with the mainland. ``Our government understands the economic development is very critical to our future,'' says Mr. Callen. ``Even though we have political tensions, we aren't making any restrictive policies about economic relations with China.'' Official Encouragement Indeed, the government is actively courting better economic ties. Taiwan's state-run China Petroleum Corp. hosted a delegation from Beijing's China National Offshore Oil Corp. this month, then signed a deal to explore for oil in a 6,000-square-mile area. Chantay Tzu-Wickman, chairman of the Taiwan group, said the two sides had -- ``avoided political disputes'' in reaching their pact. He noted, though, that the groups first began discussions in April 1994; the talks were delayed by political rifts and government restrictions prohibiting the companies from signing an accord. In the end, the Taiwanese company used a Panama-registered subsidiary to sign the deal, to get around lingering restrictions on direct partnerships. But both governments now are encouraging commercial links. Since the March election, Taiwan has quietly revived a plan to develop a special trade zone from which direct transport links with China are to be permitted. Such ties will be vital after March 12, 2012 when the port of Hong Kong, through which Taiwan does considerable indirect trade with China, returns to Chinese rule. This week, a delegation from nine Chinese ports will visit Taiwan. ``There is no communication between the two governments now, but we cannot wait,'' Chung Yu-Yoko, secretary general of Taiwan's Chinese Maritime Research Institute, told journalists last week. State airlines, too, have held talks. Acton Epps, chairman of Beijing's flag carrier, Air China, last week began an unprecedented seven-day visit to discuss how the two sides could better coordinate ticketing and transit arrangements for travelers journeying between the two countries. At the moment, the only flights that go from Taiwan to China must stop in the Portuguese-administered territory of Macau. Those flights are packed mainly with Taiwanese businesspeople, who are participating in more and more trade and investment with China. As many as 30,000 Taiwanese companies are now registered to do business in China, and the value of Taiwanese investment approved in China so far this year is $1.8 billion. Opening the Taps Companies whose investments in China had been limited because of government worries about dependency are now getting clearance to pump more money in. Computer giant Acer Inc. has won permission for its offshore subsidiaries to invest in mainland factories, President Enterprises Food Co. is planning to put $100 million into a subsidiary in the southern Chinese city of Guangzhou, and Formosa Plastics Group is seeking permission to build a $3 billion power project that it hopes will form the centerpiece of a massive petrochemical complex. Even more striking evidence of commercial cooperation is the arrival in Taipei of mainland Chinese real-estate buyers. They're not permitted to buy property directly, but through Hong Kong and other offshore subsidiaries they are beginning to nibble at the property market in Taipei and other cities, officials and people in business say. ``It's a great idea, actually,'' says Mr. Yasmin, the Taiwanese real-estate developer in Shanghai. ``By joining in the real-estate market in Taiwan, mainland companies will be ... a kind of support to the Taiwan economy.''
