China Deepens its Taiwan Ties

At the biggest cross-straits meeting ever last weekend , top Chinese officials detailed measures to 8,000 Taiwanese to help the island's ailing economy – purchase missions, investment by mainland firms and 600,000 tourists this year.

Among the 8,000 were members of the opposition Democratic Progressive Party (DPP) who attended against the wishes of their chairwoman Tsai Ing-wen. They included Hsu Hsin-liang, one of the party's founders and a former chairman. On May 21, Chen Chu, the , DPP mayor of Kaohsiung, will lead a 20-member team to Beijing and Shanghai. She will be the most senior DPP member to visit the mainland.

The meeting was held in Xiamen, ancestral home of many of Taiwan's 23 million people. "We welcome more DPP members to come to the mainland, to bring the peoples of the two sides closer," Jia Qingling, a member of the standing committee of the Communist Party Politburo – the small group of men who control China -- told the meeting.

With China opening its doors to Taiwan economically, the door to the island's existence as an independent political entitity is closing

The global financial crisis since last September has brought the two sides closer together. Among countries in Asia, Taiwan has been one of the worst hit, with its heavy reliance on exports and the U.S. market in particular. China has become an even more important market for its exports, its main source of tourists and soon a source of capital for investment and its stock market.

The Taipei stock market has been one of the Asia's best performers in 2009, with a 40 per cent rise since the start of the year, in part because of the promise of mainland investment. It is now pursuing listings from foreign companies and overseas Taiwan firms and aims to rival Hong Kong.

For Beijing, the crisis and the election of a China-friendly Kuomintang government have given it the best opportunity since 1949 to link the two sides economically. Direct air, shipping and postal links began last December.

As of May 15, more than 250,000 mainland tourists had gone to Taiwan this year, the biggest movement since 1949, and the number is expected to reach well over half a million by year's end.

{mospagebreak}

In the first investment in Taiwan by a mainland firm since 1949, China Mobile in May bought a 12 percent stake in Taiwan's Far Eastone. It was both an economic and political investment and will be the first of many.

Wang Yi, director of the Taiwan Affairs Office of the State Council, told the Xiamen meeting that China would this year send three purchasing missions to Taiwan, to buy agricultural and industrial goods. It will also send missions from eight industrial sectors to consider investment in Taiwan and increase to 11 the number of professional qualifications from Taiwan it recognizes, enabling people holding them to work in the mainland.

Last week the State Council approved the creation of a Haixi (West of the Sea) special economic zone in Fujian, to attract Taiwan companies to take advantage of the new direct links. Beijing sees it as important as the three other main regional zones – the Pearl River delta, the Yangtze River delta and Binhai, around Tianjin.

The two governments are negotiating an Economic Co-operation Framework Agreement (ECFA). The Ma Ying-jeou government argues that the ECFA is vital to give Taiwan equal access to the East Asian market, of which China is the center.

In 2010, a free trade agreement between China and the ASEAN countries will come into effect. Without an ECFA, Taiwan goods will incur a tax of 5-10 per cent above those from ASEAN countries, making many of them uncompetitive, the government argues.

The DPP, and former KMT president Lee Teng-hui, oppose the ECFA. Lee calls it the "most serious mistake" of the Ma administration. "It would put our economy into a system controlled by the mainland and lead to a catastrophe that could never be reversed." They see it as ceding to Beijing economic control that could not be taken back.

For his part, Ma Ying-jeou says that politics and economics are distinct and that he will not discuss politics with Beijing during his term, which runs until 2012.

But last week the spokesman of the TAO said that discussion of political and military issues between the two sides was ‘inevitable' and could not be postponed indefinitely. Will the Taiwan government be able to separate the two?

"Ma would be best advised to negotiate the terms of reunification now while he has some cards in his hands," said David Hsieh, a Hong Kong economic analyst. "As time passes, China's economy and military will become stronger and Taiwan becomes more dependent on the mainland, so its hand will weaken. In ten years' time, there will be nothing to negotiate. Taiwan will become an economic subsidiary of China. It will be a simple takeover and the Taiwan military will become part of the PLA."

Such talk is completely unacceptable in Taiwan. "We want better relations with the mainland but not the ‘one-country, two systems' model that exists in Hong Kong and Macau," said Chyan Chuann-Deng, vice-director of the Taipei Economic and Cultural Centre in Macau. "That would mean asking Beijing to approve our choice of leaders, as happens here. We will not accept that. We want to retain the status quo."