Building Bridges to China

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Strait ahead: Ma hasn't wavered in his mission to make it easier for China and Taiwan to do business

Jameson Wu / Eyepress News / Eyepress

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Indeed, direct links appear to be boosting profits. Eric Kuei, general manager of Fruit Taiwan Corp., says the time to transport his pineapples and other produce to Shanghai from Taiwan has been cut from seven days to three, which means more time on Chinese store shelves and a 20% increase in profits. "After Ma got elected, everything's more convenient for businessmen," says Kuei. In a recent survey conducted by Taiwan's CommonWealth magazine, 60% of the CEOs questioned said that liberalized cross-strait relations were improving Taiwan's economic competitiveness. This positive outlook has helped fuel a 40% surge in Taiwan's stock market this year, making it one of the best-performing in Asia. "A positive relationship across the strait can help recover some of the competitive advantages we have lost in the past 10 years," says J.T. Wang, chief executive of computer maker Acer.

Still, many restrictions on cross-strait business remain. Taiwan banks, for example, can't operate on the mainland because the necessary agreements aren't in place to allow regulators from the two sides to cooperate, cutting off a key source of growth. Victor Kung, president of Fubon Financial Holding Co., says Taiwan's isolation from a burgeoning China has stunted the development of the entire economy. As costs at home have risen and the island's manufacturing has moved offshore, Taiwan has needed to foster new industries, especially in the service sector, to generate growth and jobs, but a lack of access to China has hindered those efforts. "The transformation from a manufacturing base to more of a services base is still experiencing labor pains, and it still has a lot to do with cross-strait difficulties," Kung laments. (Read "Taiwan's New Head Seeks Change.")

Ma is promising more reform. In April, China and Taiwan inked an agreement that will start the process of liberalizing cross-strait financial services. More broadly, Ma intends to forge a comprehensive economic-cooperation agreement with Beijing that would reduce tariffs on Taiwan exports to China as well as provide investment guarantees and protect intellectual property. There is a reason to hurry. In 2010, China is slated to slash tariffs on goods from nations in Southeast Asia, potentially putting Taiwan's products at a greater disadvantage in the China market. Through a bilateral trade agreement, Ma says, "We hope we can avoid the marginalization of Taiwan as a result of regional economic integration in East Asia."

But this seems about as far as Ma is prepared to go. He is holding off on China's offer to negotiate a peace treaty, insisting that Beijing must remove missiles pointed at his island as a precondition to talks. Relations between the two have improved so much, he believes, that the security threat has been significantly alleviated. "Taiwan is no longer a flash point in East Asia, and that's what we want," Ma says.

Even more importantly, Ma rejects the possibility of negotiations with Beijing that touch upon Taiwan's political status or raise the issue of unification. People in Taiwan "still have a lot of doubts about China," Ma says. "They fear [the mainland Chinese] way of life is not something they can accept." Though Ma may be bridging the gap with China faster than anyone could have expected, one year — even one of great progress — can't erase 60 years of animosity.

— with reporting by Austin Ramzy / Beijing and Natalie Tso / Taipei

Read "Talking to Taiwan's New President.

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