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Taiwan business in China supports opposition
By Peter Morris

Taiwan's close presidential election, scheduled for March 20, may now hinge on the votes and campaign funding of China-based Taiwanese businessmen who say President Chen Shui-bian is not actively protecting their mainland investments of more than US$100 billion. As a result, the business community is supporting the pan-blue opposition ticket and pledging to mobilize 200,000 Taiwan businessmen in China - bringing them home to vote.

After shying away from Taiwan politics for years, the business community collectively has decided to play an active role in the island's convoluted politics in order to safeguard their mainland economic interests. The Taiwan Chamber of Commerce in China last week openly endorsed Kuomintang (KMT) presidential candidate Lien Chan, who heads the ticket, with vice-presidential candidate James Soong of the People First Party (PFP). Their coalition is known as the pan-blue opposition, after the blue color of the KMT emblem.

Many analysts describe the election as a horse race between the pan-blues and Chen's Democratic Progressive Party (DPP). The latest polls show Chen trailing by a slim margin.

In an unprecedented move, Chang Hanwen, chairman of the Taiwan Business Association, said the business community would bring 200,000 members back home to cast their votes on March 20. Chang, along with hundreds of other Taiwanese businessmen in mainland China, publicly backed Lien's presidential bid last week, calling his Beijing-leaning policies more pragmatic and business-friendly than those of the Chen government.

The Lien-Soong ticket has promised immediately to reopen long-stalled talks with Beijing on improving relations and set up direct shipping services between both sides within a year, followed by direct air links within two years. Chen's measures on travel and shipping links are regarded as too little, too late.

The Taiwan Institute of Economic Research estimates that about 50,000 Taiwanese firms are operating on the mainland. With bilateral trade between the two sides of the Taiwan Strait registering a 23.2 percent year-on-year rise in the first 11 months of last year, the business community said there was too much at stake to support a president whom they see as not only recklessly provoking Beijing with his "defensive" referendum but also pursuing anti-business policies.

Despite furious warnings from Beijing and great displeasure from Washington, Chen has scheduled a referendum on the same day as the presidential election. Voters will be asked whether China should redirect nearly 500 missiles currently pointed at Taiwan, and if China refuses, whether Taiwan should try to acquire advanced anti-missile weapons and technology. Voters will also be asked whether Taipei should start negotiations with Beijing on establishing a "peace and stability framework" for relations across the Taiwan Strait.

Exports to mainland nearly $32 billion last year
On Monday, Taiwan's Board of Foreign Trade (BOFT) reported that during the 11-month period last year, Taiwan's exports to mainland China amounted to $31.91 billion, up 19.5 percent from the year-earlier level, while imports from the mainland totaled $9.78 billion, up 37.3 percent. Taiwan's exports to China will continue to rise this year because of rapid growth in mainland exports and increasing domestic demand, as well as a strong recovery in the global information-technology (IT) industry.

The business community says Chen has been slow in fulfilling his promises to liberalize current restrictions on travel to and from mainland China and regulations prohibiting Taiwanese from raising capital for their China businesses on the Taiwanese stock exchange, the Taiex. Last year, Chen promised to open direct air passenger and cargo links by the end of 2004 to strengthen trade ties, but critics call this lip service. Indeed, many businessmen perceive Chen's pronouncements and efforts as election-year grandstanding aimed at satisfying potential voters rather than a concrete policy change.

Chen's policies have been shaped by fears among some Taiwanese that the island's economy will become increasingly dependent upon and eventually absorbed by China, thereby losing its de facto independence. And Chen's political career is predicated on reaffirming the unique, independent identity of the Taiwanese people in relation to their mainland counterparts.

Taiwanese investors in China, on the other hand, want to maintain the status quo while they get down to business. Much of the $100 billion-plus that they have poured into China is concentrated in manufacturing - an extremely competitive market segment that has seen profit margins plummet in recent years. As such, Taiwanese can no longer afford to be hamstrung by government regulations prohibiting the free flow of goods and people across the Taiwan Strait.

Moreover, China's entry into the World Trade Organization (WTO) in 2001 established an open, non-discriminatory and rules-based trading environment, thereby reducing the benefits that Taiwanese have enjoyed by virtue of their close cultural ties with the mainland. While Taiwanese executives may still have the advantage of speaking the same language as their mainland counterparts and being familiar with Chinese business culture, the level playing field ushered in by the WTO has made it a lot easier for foreign competitors from Europe, Japan and the United States to do business in China.

Lien Chan's and James Soong's China policies are considered by the business community to be more pragmatic and business-friendly than Chen's, but they also face the problem of being perceived by many independence-minded Taiwanese as too cozy by far with the autocrats in Beijing.

Chen's last-ditch effort to woo business
Realizing that the issue of economic ties with the mainland could cost him the election, Chen gave the go-ahead last week to expanded direct cargo and passenger links between China and Taiwanese-controlled Kinmen and Matzu islands off the coast of China's Fujian province. The expanded transportation service will cut travel costs and time for Taiwanese working in Fujian and other parts of southeastern China, but it is also seen as an incomplete measure, a half-hearted gesture, offering little help to businesses operating in other parts of China.

Experts estimate that only 150,000 people use Taiwan's outlying islands to travel between the two sides of the Strait each year, a relatively low figure when compared with the total number of businessmen and their families living in China, estimated at more than a million people.

Chen also promised to expand government health and educational programs to include Taiwanese investors and their families living on the mainland. Finally, Chen offered to hold talks with China on opening up direct charter air cargo service between the island and the mainland, as long as China doesn't attach any political preconditions to the negotiations.

However, unless Chen wins the election - and that is far from certain - it is unlikely that Beijing will agree to such discussions. Chinese President Hu Jintao and the collective leadership in Beijing have had a long-standing policy of trying to isolate the Taiwanese president by avoiding all direct contact with Chen and his administration. After all, despite his talk of improving relations, Chen is regarded by many as perhaps the most adamant supporter of a free and independent Taiwan.

His referendum plans - which the Taiwan opposition is trying to thwart - are also making Chen appear to some in Washington as a loose cannon who could dangerously disrupt the status quo in the Taiwan Strait. And a disruption of the status quo could provoke Beijing militarily and draw the US into a conflict. Still, the dangers of such a scenario are so manifest that some analysts believe it simply won't happen.

China successfully woos Taiwan businessman
Chinese President Hu also has been trying to influence Taiwanese voters, particularly the influential business lobby. Besides encouraging business leaders to vote for the opposition, Hu has an interest in making sure Taiwanese investment keeps flowing into China. To be sure, Taiwanese capital, technical expertise and know-how have been crucial to China's extraordinary economic growth over the past 20 years. China needs the estimated 50,000 Taiwanese firms already on the mainland to stay there, to invest more and attract new firms that will promote economic development.

Hu also needs to soothe rattled nerves after the arrest of 24 Taiwanese, allegedly spies masquerading as businessmen, on the mainland in December. According to Chinese authorities, state security officers were tipped off to the existence of an extensive Taiwanese spy network after Chen announced the precise location of 496 missiles pointed at Taiwan. Chen has long argued that these missiles pose an unnecessary threat and are tantamount to holding the island hostage.

Taiwan observers speculate that Beijing conjured up the spy ring to embarrass President Chen ahead of the elections. Soon after news of the espionage scandal broke, Hu invited the heads of Taiwan Chambers of Commerce in China to an impromptu closed-door meeting at the Great Hall of the People in Beijing. It was a rare opportunity for the businessmen to gain access to China's top leader, and the session reassured the Taiwanese business community that its investments would be safe in China.

Hu also may have used the occasion to encourage investors to fly back to Taiwan for the elections and vote for the opposition ticket. Many Taiwanese businessmen may not need to be reminded, however, as they have already given up on Chen.

The KMT candidate, Lien, also is wooing Taiwan businessmen and last week he promised to allow China-based Taiwan companies to raise funds on the Taiex, allow more mainland tourists into Taiwan and ease curbs on mainland Chinese investment in the local real estate market. Last year, mainland tourists were a boon to Hong Kong's economy, since they are big spenders, keen to show off their newly acquired wealth. They could do the same in Taiwan.

The heat over Chen's planned referendum is intensifying this week, as China's top official handling Taiwan affairs, Chen Yunlin, is visiting Washington. On Monday, in a highly publicized effort to promote the referendum, Chen and his DPP allies mobilized 70,000 people to form a human chain across Taiwan's southern city of Tainan, one of Chen's political strongholds. They shouted slogans such as "peace referendum to save Taiwan". It was just a warmup, however, for a larger human chain planned for February 28. Organizers say that chain will span the length of the island, about 400 kilometers.

One thing is certain - the parties on both sides of the Taiwan Strait will be falling over themselves in order to woo Taiwan's business community, whose political influence will continue to burgeon along with China's economy.

(Copyright 2004 Asia Times Online Co, Ltd. All rights reserved. Please contact for information on our sales and syndication policies.)
Feb 4, 2004

More tangled tales of Taiwan politics
(Jan 30, '04)

Beijing's rants boost Taiwan referendum and Chen
(Jan 23, '04)

Taiwan's pan-blues sing the blues
(Jan 13, '04)


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