Taiwan spurns new economic overture from China

[March 21, 2012]  TAIPEI, Taiwan (AP) -- A Chinese attempt to develop a special economic zone with joint Taiwan management has run afoul of the government in Taipei, which sees it as an attempt by Beijing to make political inroads on the democratic island.

The Pingtan Experimental Zone, an industrial park to be built on a fishing village in China's Fujian Province, faces Taiwan across the 100-mile (160-kilometer) Taiwan Strait. Beijing is touting it as an opportunity for Taiwan businesspeople to stand shoulder to shoulder with their mainland cousins, developing, managing and operating the project on a joint basis.

That has raised the ire of Taiwan's Mainland Affairs Council, the Cabinet level body responsible for relations with China, from which Taiwan split amid civil war in 1949.

"Pingtan can't possibly be a cross-Strait experimental zone," said MAC deputy head Liu Te-shun. "No agencies in the public sector would coordinate with them."

He said the government won't stop Taiwanese businesses from investing there, but they would operate at their own risk since infrastructure at the park could well be inadequate.

Pingtan would require substantial investment in building dock facilities and highways linking the town with the capital of Fujian province.

Liu's comments underscore Taiwan's sensitivity about having direct government-to-government contacts with the mainland. It sees such contacts as paving the way for Beijing's "one country two systems," model -- currently in practice in Hong Kong -- which Taiwanese spurn as a renunciation of their sovereignty.

Despite the civil war split six decades ago, China continues to regard Taiwan as part of its territory and is committed to bringing the island of 23 million people back into the fold.

Taiwan's rejection of the Pingtan initiative comes amid booming economic relations between the sides, including more than $100 billion of Taiwanese investment in the mainland -- much in high-tech assembly line production.

Since taking office four years ago, newly re-elected Taiwan President Ma Ying-jeou has made improving relations with China the centerpiece of his administration, sanctioning a series of initiatives like hundreds of weekly cross-strait flights and a partial free trade agreement.

As a result tension between the sides dropped to its lowest level in more than six decades.

But even for the China-friendly Ma government, Pingtan seems a bridge too far.

Economics professor Chao Chien-min of Taiwan's National Chengchi University said that in addition to its political ramifications, the project was troubling because of China's attempt to lure mainland Taiwanese talent -- in vital fields like banking and flat screen panel technology -- with big salaries.

"Taiwan fears the Chinese are trying to weaken its economy, even though closer trade exchanges are generally welcome to help ensure peace and stability," Chao said.

Taiwanese businesspeople have also expressed skepticism over the industrial park's infrastructure and operation.

"Tax incentives are not enough," said David Liu, an official with the Taipei Computer Association. "If they could attract Lenovo, Haier or other global makers to the park, it might provide some incentive for Taiwanese to build factories there."

"Big salaries may be appealing, but you must get job opportunities first," he said.

The opposition Democratic Progressive Party warns that China is expanding its contacts with Taiwanese in all walks of life, largely to smooth out opposition to political talks.

It sees these efforts as a logical follow-up to the lucrative contracts the Chinese have placed with Taiwan farmers and fishermen over the past two years to try to win their political support.

Still, few analysts believe that there will be any appreciable setback to the many new deals now being negotiated to deepen cooperation between the sides in the manufacturing, banking and other service sectors.

These include ironing out the wrinkles in an existing banking initiative which allows Taiwanese and Chinese banks to set up branches in each other's territory.

Taiwan banks want the opportunity to gain a substantial foothold in the massive mainland market without being taken over by much larger Chinese lenders, and are pressing the government to raise the 10 percent cap on total Chinese equity investment in a Taiwanese lender as a sign of their goodwill.

Also on the cross-strait agenda is a currency swap and currency settlement deal and a Taiwanese effort to attract mainland capital by establishing the island as a wealth management center.

These deals are negotiated by quasi-governmental agencies, rather than the governments themselves -- a crucial distinction for the wary Taiwanese.

"Each side has its own political considerations, and that has complicated the negotiations of economic matters," said Norman Yin, professor of banking with Taiwan's National Chengchi University. "But with political give-and-take, it's not impossible that those obstacles could be removed overnight."

[Associated Press; By ANNIE HUANG]

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