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China reaches across the
Strait
By Tsering Namgyal
TAIPEI - After playing hide-and-seek for the
past two years, Taiwan and China may finally begin to
talk about direct cross-Strait transportation links. Or
so the political and financial grapevine has it these
days in Taipei.
The recent statement by Chinese
Vice Premier Qian Qichen that the proposed cross-Strait
transportation links need not be called a "special
domestic route" as previously demanded reflected a shift
in Beijing's attitude toward direct links between the
two politically estranged but economically tied rivals.
Qian told journalists from the United Daily Newspaper
Group on Tuesday that direct links between the two sides
may be dubbed "cross-Strait links", in effect pushing
the ball into Taiwan's court. Taipei believed that
agreeing to Beijing's previous demands would be
tantamount to surrendering to the People's Republic of
China's (PRC's) so-called "one China" policy.
Taiwan greeted the PRC statement warmly, calling
it "friendly" and "positive". Lee Yuan-tseh, the Nobel
Prize-winning chemist who will represent Taiwanese
President Chen Shui-bian at the upcoming Asia Pacific
Economic Cooperation (APEC) summit in Mexico, went so
far as to predict that the direct links "may likely
happen very soon". Lee said Taipei and Beijing now hold
increasingly similar views. Despite the goodwill from
both sides, Taipei and Beijing only lack "mutual
understanding", said Lee, who is widely respected in
mainland China, where he taught during his days as a
scientist in the United States.
Taiwan is yet to
respond officially to the latest statement. But
President Chen Shui-bian's chief of staff, Chen
Hsih-meng, said that the president is not against
"direct links" but Taiwan must consider "Taiwan's
national security interests" before coming to a
conclusion. President Chen, however, is not seen as a
great fan of mainland investment. Last year, his
suggestion that Taiwan impose a national-security tax on
businesspeople who invest in the mainland rattled the
island's famously entrepreneurial private sector, which
considered his views radical.
Not surprisingly,
the latest news delivered a much-needed boost to the
otherwise depressed private sector. A leading shipping
executive who has participated in the negotiations, Lin
Ling-sheng, former head of Evergreen Marine, the world's
largest shipper, remarked that Qian's statement reflects
an "improvement" from China's previous stance. The
island's stock market, often seen as a key barometer of
confidence, also jumped, boosting most of the companies
with investment in China and transportation shares.
In fact, speculation has abounded in Taipei over
the past few weeks about a potential improving of the
ties between the two sides given the increasing pressure
from the private sector, which is bearing the brunt of
the technology downturn. Two top tycoons, Y C Wang of
Formosa Plastics Group and Jeffrey Koo, the head of
Chinatrust Bank, trumpeted the virtues of direct links
in the major newspapers.
Wang, the rags-to-riches
plastics manufacturer who is now investing in everything
from oil refineries to hospitals in China, said that
Taiwan should hurry up, as it has only five years left
if its companies are ever to make their presence felt in
the mainland economy.
Koo, who also acts as
Taiwan's ambassador-at-large and is often tapped as a
potential negotiator with Beijing, said the opening of
direct links will help Taiwan boost its faltering
domestic demand by bringing in PRC tourists. (C F Koo,
Jeffrey's patrician uncle, was Taiwan's first negotiator
with China.)
Meanwhile, high-ranking mainland
officials voted with their feet. On Wednesday, Lee
Ruogu, the PRC's second-highest-ranking central banker,
visited Taiwan, meeting with the island's finance
minister, Lee Yung-san. The two officials talked about
how to monitor capital flows between the two sides and
the scope for future banking cooperation. (China became
Taiwan's largest export market this year, surpassing the
United States, and is also the most favored destination
for foreign direct investment.)
Local reports
said that Taiwan may actually agree to Lee's suggestion
that Taiwan allow interested Chinese banks to set up
branches in Taiwan. This reflects a major about-turn in
Taiwan's erstwhile conservative banking policy.
Given the positive signs, analysts are
predicting a major breakthrough on direct links before
the end of October, adding that the Taiwan issue, with
global terrorism, will top the agenda during Chinese
President Jiang Zemin's summit with US President George
W Bush at his Crawford, Texas ranch.
While it is
difficult to predict how cross-Strait relations will
evolve given the repercussions on Taiwan's national
identity (if it were to be exposed so fully to the
mainland), some economists do believe Taiwan's economy
may benefit from closer links with China.
A
study conducted by Taiwan's Chung Hua Institution of
Economic Research, a government-affiliated think-tank,
shows that the direct links will be a win-win situation.
Transportation costs between Taiwan and the mainland
will drop by as much as 14.42 percent, encouraging
cross-Strait travel and thus increasing consumption in
Taiwan. Overall, Taiwan's real gross domestic product
(GDP) will grow by 0.15 percent, while China's will
increase by 0.06 percent and Hong Kong's real GDP will
fall by as much as 0.2 percent.
As trade
increases, the terms of trade will also improve. Taiwan
will see its terms of trade rise by 0.24 percent, while
China's will grow by 0.16 percent and Hong Kong's will
fall by 0.02 percent, says the report by economist Chen
Lee-Ing. The result is not surprising, as all goods and
passengers are currently rerouted via Hong Kong. If the
two sides were actually to open the floodgate of traffic
between the two sides, Taiwanese shippers and airlines
are likely to be the biggest beneficiaries. Taiwanese
consumers will benefit as the direct links provide
cheaper PRC goods to the increasingly cost-conscious
Taiwan. "Hong Kong will be hurt," says Andy Xie of
Morgan Stanley. "It is a zero-sum game."
While
benefits to Taiwanese consumers will be broad-based,
damages will likely be dealt to a few select sectors,
notably agriculture.
At the moment, however,
predicting the timing of such links seems premature.
Given the differing political stance of the Chinese
Communist Party and Taiwan's ruling Democratic
Progressive Party, the two sides are unlikely to come to
an abrupt announcement on the issue of direct
transportation links. "It is not a matter of economics,
it is about ideology," says Xie.
(©2002 Asia
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