A Greater China

1
A Greater China?

• between Chinas mainland, Hong Kong, and Taiwan

2
Economy or Politics?

• Increasing complex economic interests between the
  3 Chinese societies
  
• flying geese pattern of development
• movement of capital and industries
• convergence of economic structures
• utilization of market and labor
• interdependence on trade
• political tensions

3
Political tension

• Mainland and Taiwan have been technically at war
  since 1949
  
• before Chiang Kai-Shek died in 1975
• Republic of China on Taiwan
• gloriously retake the mainland

4
Political tension

• Before Mao Zedong died in 1976
• Peoples Republic of China on mainland
• liberate Taiwan
• U.S. shifted diplomatic recognition from R.O.C.
  on Taiwan to P.R.C. in 1979
  
• P.R.C. started economic reforms in 1979
• R.O.C.s 3-no policy in 1979
• no contact, no negotiation, no compromise

5
New Realities in 1980s

• flying geese pattern of development

6
New Realities in 1980s

• Mutually reinforcing dynamic
• Taiwan business community
• lobbied for lifting restriction
• bypassed regulations to satisfy commercial
  demand
  
• Taiwan government
• regulated exchanges
• legalize what is already taking place
• expansion of trade and investment

7
New Realities in 1980s

• In 1983, Beijings Guidance on Taiwanese
  Investment in Special Econo. Zones and Related
  Favorable Policies
  
• in 1988, Beijings Regulations for Encouraging
  Investment by Taiwan Compatriots
  
• in 1989, 2 investment zones in Fujian Province,
  across from Taiwan

8
People-to-people contacts

• In mid-1980s, Taiwan visitors traveled illegally
  to the mainland via Hong Kong
  
• in 1987, Taiwan government allowed citizens to
  visit relatives on mainland

9
Semi-official contacts

• Straits Exchange Foundation was established in
  Taipei in 1991
  
• Association for Relations Across the Taiwan
  Straits was established in Beijing in 1991
  
• meeting between the 2 organizations in Singapore
  in 1993
  
• one China expressed differently

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Regulations on investment

• In 1990, Taiwans Regulations on Indirect
  Investment or Technical Cooperation in the
  Mainland Area
  
• mostly in labor-intensive industries
• investment projects worth over 1 million US
  required prior approval
  
• investment projects worth over 50 million US are
  prohibited

13
Restrictions on investment

• Then Taiwan president Lee Teng-hui
• go south policy in 1993
• attempt to divert investment away from mainland
  China to Southeast Asia
  
• be patient, go slow policy in 1996
• prohibited investment in certain sectors
• capped investment projects at 50 million US
• reduced Taiwans equity in mainland joint
  ventures to 30

14
Investment fits mutual needs

• Taiwan needs to relocate manufacturing
• to lower labor cost
• to take advantage of the huge market
• to gain higher returns on capital
• mainland needs capital, technology, and
  management expertise

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Both joined WTO in 2001

• Growing business pressures and WTO commitments
• pressure on establishing direct links and
  reducing barriers to trade and investment

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three links

• direct mail, trade, and transportation
• mini-links between mainland and offshore
  islands under Taiwans control

19
Future development

• Taiwan may lift strict restrictions on investment
  and imports from mainland
  
• concern over Taiwans security
• interdependence and independence
• mainland Chinas coastal regions and Taiwan
• may become indistinguishable
• may become further integrated economically

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