Trade Links
	China's Economic Embrace
	By Joyce Huang Taipei and Michael Schuman Fuzhou

Posted Monday, March 8, 2004; 21:00 HKT
Stanley Hsu sees Taiwan's March 20 presidential election in a different light from his compatriots back home. While they wrangle over issues such as independence and national identity, the Taiwan-born president of Wintex Textile Corp. stands in his factory in the industrial city of Fuzhou in China worrying about financial survival. Hsu, 61, moved operations to the mainland a decade ago, enabling his firm to sell sweaters to retailers such as Liz Claiborne and The Limited at low prices. He pays his young female employees, who scurry around him in white smocks, about $100 a month each—one-tenth of what textile workers on the island earn. "If my company still remained in Taiwan, I'd have to close my doors," says Hsu. "We need very good working conditions. We need stability between Taiwan and China."

That concern is expressed by many of the estimated 1 million taishang: workers and businessmen from Taiwan who, like Hsu, live full-time in mainland China. For more than a decade, this burgeoning community of expatriates has been busily knitting economic ties between the island and the mainland, despite cross-strait political tensions and Taipei's restrictions on investments in China. The two economies are already irrevocably intertwined. Beijing encourages investment, hoping that closer economic links will lead to political reunification. Taiwan's government acknowledges that some 50,000 companies from the island have invested $35 billion in the mainland since 1991. Some experts estimate the amount may actually total more than $100 billion if investments by offshore shell companies, set up by Taiwan businessmen to skirt regulations, are taken into account.

With the success of their firms riding on volatile cross-strait relations, Hsu and other taishang tend to be a skittish bunch. After China fired a missile in the Taiwan Strait during the run-up to Taiwan's 1996 presidential election, many temporarily raced home, fearing war was about to erupt. The cost of another upheaval could be huge. Taiwan's economy is starting to improve after several years of subpar performance. Goldman Sachs has forecast growth of 6.3% in Taiwan this year, the highest since 1997—but that could easily be derailed if tensions worsen. Steve Lin, an economist at National Chengchi University in Taipei, says investment and trade with the mainland accounted for nearly all of Taiwan's economic growth over the past two years. Were it not for restrictive cross-strait trade policies favored by President Chen Shui-bian and the Democratic Progressive Party (DPP), Lin says, expansion would have been faster.

It's no surprise, then, that many people from Taiwan doing business on the mainland say they plan to vote in the upcoming presidential election for Chen's challenger, Lien Chan of the traditionally pro-business Kuomintang (KMT). "Lien will put cross-strait ties on a better path," says Hsu. If he wins, Lien is expected to lubricate commerce by expanding direct transportation links between China and Taiwan. (Current travel restrictions force most people and products from both places to pass through entrepôts such as Hong Kong and Macau en route, which increases costs.) Chen, meanwhile, is viewed by many as a loose cannon who could blunder into war with his pro-independence rhetoric. Looking to cash in on such fears, the KMT has been chasing votes by sending representatives to the mainland. The Guangdong office of a Taiwan business association is organizing transport for hundreds of thousands of expatriates from Taiwan to return to the island to cast their ballots.

Of course, the Chen camp also has its backers in China. But proclaiming oneself a DPP supporter can be dangerous in the mainland. In 2001, Chinese authorities reportedly ordered 40 tax inspectors to audit the China operations of LCD-screen maker Chi Mei Optoelectronics and tried to shut one of its factories after it was revealed that the company's chairman favored independence for Taiwan. (A Chi Mei spokeswoman declined to comment on the incident, saying only that the company faced "unreasonable harassment" from Beijing.) Chen supporters "better keep low-key," says a Taipei-based manager who has a factory in China. "Otherwise, Chinese authorities will wait for the right moment to kick you."

Regardless of the election's outcome, the gravity of economics should continue to pull Taiwan and China closer. Chen's pro-independence stance notwithstanding, the President has been quietly easing cross-strait controls. Over the past three years, businessmen from Taiwan have been allowed to travel home through the Taiwan-controlled islands of Quemoy and Matsu, a short hop from the mainland coast, near Fuzhou. Beijing, meanwhile, continues to lobby for closer commercial links with the island. Manufacturers from Taiwan operating on the mainland provide key technologies for budding Chinese industries such as semiconductor manufacturing. Economic partnerships "have been a very strong factor that makes the two sides calm down a little bit," says Brian Chuang, managing director of jewelry maker Taifu Co. in Fuzhou. "We both need each other." China's leadership is banking on that pragmatic awareness, betting that money will ultimately trump less tangible aspirations.

	Stuck in the Middle [December 16, 2003] President Chen Shui-bian's calls for a referendum on Taiwan-China affairs may be pushing the U.S. away Taking It to the Brink [December 11, 2004] Ahead of next March's presidential election, President Chen Shui-bian is fanning flames across the Taiwan Strait. Is he going too far? History's Lessons [October 21, 2003] China's rulers would be wise to remember the fall of Chiang Kai-shek Itching for a Fight [September 16, 2003] Beijing may have learned not to meddle in Taiwan's affairs around election time More Related Items | Search all issues of TIME Magazine