Taiwan is mainland China's first source of foreign capital. Trade and air links grow as pragmatism leads to greater ties.

Taipei (AsiaNews/SCMP) – Taiwanese investments in mainland China are rising despite President Chen Shui-bian's order to hold back, and in June a new air route should become operational.

In March of this year, Taiwanese nationals and companies have invested some US$ 853.4 million compared to "only" US$ 483.2 million elsewhere. This represents a 65.7 per cent rise over last year. In the first quarter of 2006, Taiwanese authorities have approved 238 direct investments in the mainland for a total of US$ 1.76 billion (an increase of 46.31 per cent in a year).

Capital flow from Taiwan to mainland China over the past 14 years has increased rapidly, with the ratio of mainland-bound investments to Taiwan's overall outbound investments growing from 9.5 per cent in 1991 to 53.7 per cent in 2003.

This is happening in spite of President Chen Shui-bian attempt to restrain investments out of fear they might affect Taiwan's de facto independence. His peroration has however fallen on the deaf years of the business community, which has been more inclined to follow economic rather than political muses.

Although Taiwanese investments in the mainland must be pre-approved by the authorities, many investors have found ways to go around the rules. Between 1991 and 2005, investments worth some US$ 47.2 billion were approved but, by Beijing accounts, they were actually 89.6 billions with some island companies moving lock, stock and barrel to the mainland.

Officially Taiwanese exports totalled US$ 51.8 billion against US$ 19.9 billion in imports (Hong Kong excluded) in 2005, which leaves a surplus of US$ 31.9. However, figures released by Beijing suggest that two-way trade reached US$ 92 billion with a surplus of US$ 58 billion.

With China's fast-growing economy, Taiwanese investors do not want to miss the opportunity to consolidate their place in that economy, said Thomas Lee Tung-hao, professor at National Chengchi University.

For Prof Chiang Min-ching Taipei University, this explains why top business leaders attended an economic forum on April 14-15 Beijing co-sponsored by Taiwan's Kuomintang and the Communist Party of China. Business leaders like Tai Sheng-tung, chairman of Taiwan's Association of the Small- and Medium-Sized Enterprises, and Chao Teng-Hsiung, chairman of the Far Glory Group, accompanied KMT honorary leader Lien Chan.

Mr Tai, who heads the San Sun Hat and Cap Co., the world's leading hat maker, moved his Taiwan operations to the mainland and last week signed a letter of intent with Jiangxi to invest 300 million yuan to that mainland province.

At the end of the forum, Beijing offered 15 incentives to Taiwanese investors, including tax breaks on island agricultural products, recognition of university degrees, and possibility for island physicians to practice for brief periods of time on the mainland.

Taiwanese Prime Minister Su Tseng-chang announced yesterday the opening of a new route between the Taiwanese-held island of Quemoy and the mainland city of Quanzhou. For many experts, such signs of good show the two countries want to improve de facto ties.

Despite political differences between the two sides, three direct mini-linkages—mail, transportation, and trade—have existed since January 2001 between Taiwan's frontline islands and China's ports. In 2001 25,000 people took advantage of the opportunity to cross the strait; since then however, that number has risen to 671,297. (PB)

• taiwan
• china
• taipei
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• quemoy
• quanzhou
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• investments