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Start Of Cross-Strait Mini-Links: China boosts trade hold on Taiwan

The Straits Times, 4 January 2001

The opening of direct links enables China to gain greater influence over Taiwan's economy without having to resort to the use of force

BEIJING - With the launch of unprecedented direct travel between Taiwan's two outlying islets and China's Fujian province, Beijing will have even more strings to pull on the Taiwan economy without having to resort to the use of force.

The landmark move has already set Taiwan well on the road of reunification.

On Tuesday, for the first time in more than 50 years, three Taiwanese ships set sail from the Taiwan-controlled islets of Kinmen and Matsu, and docked legally at the Chinese ports of Xiamen and Fuzhou.

The so-called 'mini-links' in trade, transportation and postal services were approved by Taiwan last month on a one-year trial basis.

Such links are limited for now, but there is no doubt that commerce will soon require more substantial legal direct links.

The trend is there.

According to Taipei's data, Taiwanese investment in China nearly doubled in the first 10 months of last year, swelling by 98 per cent to reach US$2 billion (S$3.5 billion).

This is the result of a law which China passed at the start of last year granting special privileges to Taiwan's investment.

Furthermore, last month, Mr Jiang Mianheng and Mr Winston Wang signed a landmark agreement to build a US$1.63-billion chip foundry in Shanghai.

The pact was important not only because of the power of their respective fathers - Chinese President Jiang Zemin and Mr Wang Yung-ching, chairman of Taiwan's largest conglomerate, Formosa Plastics.

But it was important also because Formosa Plastics pledged to forfeit the threshold on Taiwanese investment in China and it did so with Taiwan's strategic production of microchips, the dynamo of Taiwan's economy.

In other words, when the foundry is in place, Taiwan's welfare will be unshakably tied to China.

More or less production from the foundry could play Taiwan's economy like a yo-yo, without China having even to threaten to fire a missile.

Beijing achieved this because it applied the same strategy it has used successfully with Hongkong.

It managed to convince local tycoons about its commitment to market reforms.

The tycoons, in turn, felt that siding with Beijing would help them win a good chunk of the huge Chinese market.

Furthermore, the direct links between Fujian and the two islets will boost local trade and thus even smaller businesses look to Beijing for their welfare.

Entrepreneurs big and small have no reason to doubt Beijing's intentions.

If China has offered opportunities to US companies, why should it not do the same for what it considers Chinese companies?

Therefore, China has now no interest in an armed confrontation with Taiwan.

If Taipei were to misbehave in Beijing's eyes, the Chinese authorities could resort to economic blackmail against the island.

Some people in Taiwan and China, with their own political agenda, could well push for military confrontation.

But, certainly, if Beijing wants reunification, it has an interest now more than ever in not rocking the boat.