Cross-Straits investment needs boost
By Zhu Lei (China Daily)
Updated: 2004-05-13 09:10

Thanks to vigorous economic growth on the Chinese mainland, economic and trade exchanges with Taiwan have reaped a bumper harvest over the past year.

Although this year's controversial "presidential" election on the island added some uncertainties to cross-Straits political relations, it is expected the well-based economic and trade exchange between the mainland and Taiwan will continue making headway.

In 2003, the total trade volume between the mainland and Taiwan for the first time surpassed US$50 billion, making the former the latter's largest trading partner in place of the United States.

According to statistics released by the mainland's Ministry of Commerce, cross-Straits trade volume topped US$58.4 billion last year, showing an increase of 31 per cent over the previous year. From its trade with the mainland alone, Taiwan gained a surplus of US$40.4 billion, increasing by US$8.9 billion from the previous year.

The mainland has already become Taiwan's largest export market and surplus-gaining source as well. Cross-Straits trade exchanges have assumed an increasing role in the island's foreign trade status.

Currently, Taiwan's degree of dependence upon the mainland in terms of export and trade is 34.3 per cent and 21.5 per cent respectively.

Last year, for example, the island would have suffered a trade deficit of US$23.5 billion without as much as US$40.4 billion in trade surplus with the mainland.

Statistics from Taiwan show that its trade with the mainland and Hong Kong accounted for 96.69 per cent of the island's total GDP growth last year. In other words, the island's economic growth in the year came almost completely from trade with the mainland and Hong Kong.

The mainland's soaring foreign trade industry remains the main driving force behind continuous advancement of cross-Straits trade relations.

Last year the mainland's total trade volume amounted to US$851.2 billion, with an increase of 37.1 per cent over 2002, replacing France as the world's fourth largest trading power.

Due to dramatic increases in its import and export volumes in recent years, China has become the world's economic engine that contributes most to global economic growth.

In 2003, for example, China's import increased by 40 per cent from the previous year, three times the world average, which stood at 13 per cent. China also contributed 14.3 per cent of market shares to the global export growth.

According to the International Monetary Fund (IMF), China's economic growth accounted for 25 per cent of the global economic growth from 1995 to 2002 in terms of the purchasing power parity (PPP) criterion, surpassing that of the United States and the European Union, at 20 and 15 per cent respectively.

The booming economy and foreign trade of the mainland have attracted the further deepening of investment from Taiwan business.

In 2003 alone, 4,494 new Taiwan-funded enterprises were set up in the mainland, with a contracted value of US$8.6 billion - an increase of 28 per cent over the previous year. And the strong investment enthusiasm is growing.

According to the Ministry of Commerce, by the end of last year the amount of actually used investment from Taiwan investors in the mainland was US$36.7 billion and the contracted value was US$70.1 billion.

In terms of investment structure, Taiwan businessmen have also gradually shifted eyes from the mainland's southeastern coast to its vast hinterland and from labour-intensive sectors to capital and technology-intensive ones like real estate and financial industries.

Facing the increasingly booming cross-Straits economic and trade exchanges, Taiwan authorities are under enormous pressure to relax rigid trade barriers against the mainland.

The first possibility is the island's leaders may suspend some limits on the mainland's investment in the island.

The island's "mainland affairs commission," "ministry of economic affairs," "ministry of finance" and other related departments have also decided to open the island to investment from mainland enterprises in three stages.

To curry favour with mainland-based Taiwan investors, incumbent Taiwan "president" Chen Shui-bian has taken measures to relax strict restrictions on the island's business exchanges with the mainland. For example, Taiwanese carrying less than 6,000 yuan (US$730) do not have to register with related departments when returning to the island.

Chen also promised Taiwanese businessmen that he would expand the application scope of the mini-three links (trade, transportation and postal service) with the mainland, and adopt necessary measures to facilitate cross-Straits commodity transportation.

In the eyes of most Taiwanese businessmen, it is impossible for Chen Shui-bian, a pro-independence leader who regards the absence of direct three links with the mainland as an effective means to edge toward facto independence, to completely open such links in the near future.

But it is still likely he will partially open cross-Straits connections, especially in the economic and trade fields in his second term.

Chen can not afford to long ignore Taiwan businessmen's strong desire to share enormous economic benefits with the mainland.

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