China's New Effort to Woo Taiwan

China is building a gigantic special economic zone on a cluster of islands on the other side of the Taiwan Strait some 150 km from the port city of Taichung, for the sole purpose of enhancing cross-straits industrial cooperation.

The Taiwanese are aware that it is the latest plan to lure Taiwan into an ever-closer economic embrace, It is unlikely that the Taiwanese government will take the necessary steps to link up with the Chinese plan before national elections expected in early 2012. It is also being questioned by businessmen, who don’t believe the markets or the infrastructure are attractive in Fujian, the province across the strait.

That hasn't stopped Chinese authorities, who say they expect to spend US$4.6 billion in infrastructure alone this year for the Pingtan Comprehensive Experimental Zone, US$15.4 million a day on average, and in the next three years more than US$15 billion, reaching US$38.5 billion by 2015.

The project, named for the Pingtan islands off the Fujian coast, is part of a Western Coast Economic Zone that is aimed at integrating the coastal cities west of the Taiwan Strait to pave the way for cross-strait economic unification. And, although Beijing's political motives may send chills down the spines of many on the Taiwan side, the practical aspects appear much more alluring.

Jason Hu of the ruling Kuomintang and mayor of Taichung, Taiwan’s third city, and representatives of the Taichung City Chamber of Commerce, local engineering companies and others were given details at a “Pingtan Development Plan Exhibition” in the central city's Windsor Hotel on June 16 in which Chen Hua, Deputy Governor of Fujian Province, elaborated what she called a “common home” concept: “Planning, operating, developing, administering and profiting – five steps carried out jointly by both sides of the Taiwan Strait.”

Chen added that Taiwanese, especially from the island's center and south, are invited to set up bases on Pingtan, and that Fujian Province's warmest welcome would be extended to SMEs and family-owned enterprises.

Brand-new ro-ro passenger ferries, said to be the world’s fastest, have been raring to go since April, awaiting the nod from Taipei to launch direct cargo and passenger shipping services between Pingtan and Taichung. Very much unlike their peers in the Yangtze River Delta or the Pearl River Delta, where most Taiwanese manufacturers cluster, Taichung residents could simply commute as the ferry would take a mere 2-1/2 hours. By striking comparison, a car drive from Taichung to Taipei takes longer.

To ensure that the Taiwanese would feel homey, and even more important are connected to China's domestic market, the construction of a 100-km road around Pingtan island is about to begin. A bridge was opened in late 2010 with a second planned, ending the need to use ferries to set foot on the mainland. Last December, the Chinese completed an expressway that shortened the travel time between Pingtan and Fuzhou, the provincial capital city, to 1-1/2 hours from 2-1/2, whereas on the sea side, up to five ports, including a 200,000-ton-capacity port and two of 300,000 tons, are being planned.

After the establishment of a free trade zone, people, ships and cargo from Taiwan would enter and leave Pingtan freely, “as if it were their own home,” Deputy Gov. Chen told the Taiwanese officials.

The preparations don't just include Pingtan's raw infrastructure. An area of 18 sq.km. has been designated by Fujian authorities to accommodate a cross-strait financial service center for banks, insurers and securities. Exclusively for the taishang, or Taiwanese businesspeople, restrictive state regulations on certain products such are to be lifted, giving the Taiwanese an edge over their foreign competitors in China. Additionally, taishang with less than US$500 million to invest can expect that Taiwanese exam certificates will be accepted. Taiwanese lawyers and doctors would be allowed to establish their own businesses. Tax benefits are to be granted, and bank loans generously given.

Beijing has thus decisively thrust the ball into Taipei's court. Although Taiwanese businesses are already free to invest on the other side of the Strait as long as they keep a certain share of investments in Taiwan and refrain from dealing in strategically restricted high-tech products, government-to-government cross-strait agreements must be signed.

“Physically, the Pingtan project, which plays a central role in China's attempt to lure Taiwanese citizens into unification, is a done deal as the infrastructure is being built,” Chen In-Chin, a professor of law and governance at Taiwan's National Central University, told Asia Sentinel. “But formally, the Taiwanese government first has to ease restrictions, and they won't do anything before the Taiwan elections in early 2012.”

The KMT will be wary of starting negotiations during the remainder of this year because the plans touch on a topic the KMT during its campaign will want to forgo under all circumstances – the issue of Taiwan's status.

“It's not good for the KMT if Taiwan's status becomes an issue before the elections,” Chen said. “Unless the KMT concedes Taiwan is a province of China, a free trade zone must be approved by the World Trade Organization, a process that would create an unwanted sensation.”

The Pingtan project, Chen added, “is not only of political and economic importance but also of strategic importance. Beijing wants to build a high-speed rail connecting Pingtan and Taipei, effectively extending China's territory to Hualien on Taiwan's east coast. Then the Taiwan Strait becomes a Chinese inland lake and Hualien will be turned into a major People's Liberation Army Navy harbor from which power can easily be projected into the South China Sea.”

That Beijing chose Taichung as a potential bridgehead is no coincidence, Chen said. With the central city's mayor Jason Hu politically weaker than other KMT mayors, Beijing is seeking to shore up local support for him.

“Beijing dreads that the Democratic Progressive Party could win the 2012 elections,” Chen said. “Taichung will play a key role, and many observers predict that the party which wins central Taiwan will become Taiwan's next ruling party.”

The somewhat flamboyant Hu was once the KMT’s rising star, tipped by the bookmakers as to be President Ma Ying-jeou's successor. He took office in early 2002, gave the city a thorough overhaul, and at one point was even close to bringing a branch of the Guggenheim Museum to his city. That project was sunk, nearly along with his political career, when he reportedly put out a campaign poster featuring Saddam Hussein and Osama bin Laden warning the public against voting for President Chen Shui-bian.

That put Hu's career on a roller coaster. His style first gave him dreamlike approval ratings. In mid-2010, international media listed him among the world's top urban leaders. But then his approval ratings dropped from 56 percent to 36 percent within two weeks, after gunmen walked into a Taichung shop, killing a local gang leader while four police officers cowered under a table, exposing connections between the underworld and Taichung's police force.

Hu only narrowly won re-election that November in a city the KMT had long taken for granted. Earlier this year, the speed of his downfall accelerated after droves were killed in a nightclub fire.

Hu has gone to great lengths to regain his popularity, not only by his espousal of the hugely ambitious Pingtan-Taichung plan. On the same day he met with Fujian Province's representatives, he declared that July 3 would be Taichung's “Lady Gaga Day” the day, the American pop idol visits with a free concert for central Taiwan's young voters.

Dr Chen believes that at least for now the massive Pingtan project isn’t overly popular with Taiwanese entrepreneurs. Taiwanese, he said, see the opportunities as somewhat limited, given that only 400,000 people live on the island cluster.

“Although the Chinese government says that Pingtan will have a special status, it's far from certain to Taiwanese investors that the zone will be able to compete with the other Chinese special economic zones,” Chen said.

Tung Chen-yuan, professor at Taipei's National Chengchi University, who did extensive research on the topic in 2005 and 2006, doesn't see a promising future for the project either.

“The project has been desperately promoted since 2004 by Fujian Province,” Tung said. “Nevertheless, based upon current statistics, Taiwan's investment to Fujian did not increase in terms of share so much.”