Amid predictions of growing overall trade and Taiwan's investment in the mainland, trade imbalance across the Taiwan Straits is set to accelerate in 2004, say officials and analysts.

Many say Taiwan authorities should lift import and investment restrictions to benefit industries of both sides.

"The mainland's trade deficit with Taiwan was near US$40 billion in 2003," Wang Liaoping, director of the Taiwan, Hong Kong and Macao Affairs Department of the Ministry of Commerce, said in early January.

"As the bilateral trade and Taiwan's investment on the mainland continues to rise, the mainland will still remain at deficit with the island. And the figure is likely to increase," said Liu Xueqin, senior researcher from mainland-based Chinese Academy of International Trade and Economic Co-operation.

An initial estimation form Liu put the deficit at about US$45 billion by the end of this year.

As Taiwan's biggest trading partner, the mainland has contributed considerably to the island's trade earnings, said Li Fei, a professor from Xiamen University in South China's Fujian Province.

Trade experts also said growing exports from Taiwan to the mainland play an important role in the island's economic development.

However, the mainland has seen trade deficits with Taiwan since 1980. Those deficits have widened steadily over the past few years.

Taiwan's reluctance to implement a "direct trade link" and restrictions on mainland products and investment are the major reasons leading to the trade imbalance, Wang said.

Currently, most trade between the two sides goes through Hong Kong, Macao or other areas.

And Taipei still bans imports of more than 2,000 kinds of mainland goods, although the mainland market has been completely opened to Taiwan's enterprises and commodities.

Many mainland commodities are in high demand in Taiwan -- such as household electrical appliances, clothes, rice, fruits and vegetables -- can't make it to the island.

Meanwhile, mainland enterprises can neither invest in the island nor set up business agencies there.

Taiwan is imposing a set of trade policies discriminatory against the mainland, violating the principles of justice and openness as a World Trade Organization member, Liu said.

"We wish Taipei could scrap restrictions in a bid to end the current indirect, one-way and partial state of cross-Straits economic exchanges," said Wang Liaoping.

Meanwhile, Taiwanese investors in the mainland are also hoping for a direct trade link.

Chen Jianyong, director of the association of Taiwan-invested enterprises in Fuzhou, said it would help them slash costs and save time, and thus to enhance the competitive edges of their companies.

Trade volume between the mainland and Taiwan reached a record US$58.37 billion in 2003, up 31 per cent from the previous year, said Li Weiyi, spokesman for the Taiwan Affairs Office of the State Council.

The mainland approved 4,495 projects funded by Taiwanese investors last year, which involved US$8.56 billion of contractual capital.

Trade volume between Chinese mainland and Taiwan: (Unit: US$billion)

2000:30.5 2001:32.3 2002:44.7 2003:58.4

Mainland's trade deficit with Taiwan: (Unit: US$billion)

2000:20.5 2001:22.3 2002:31.4 Nov 2003:36.4

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