Seeking to reassure investors spooked by the prickly cross-strait situation, the Mainland Affairs Council said yesterday that Beijing will only hurt itself if it imposes economic sanctions against Tai-wanese investments in China.
The comments came after Chinese state media said busi-nesses that support President Chen Shui-bian (陳水扁) were not welcome there.
Reports that Beijing will engage in war games in the Taiwan Strait this month helped to push share prices down 3.5 percent on Thursday. The TAIEX yesterday rebounded by 0.94 percent.
"Economic sanctions will hurt others as well as itself. It will have a huge impact on the Chinese economy," Mainland Affairs Council Vice Chairman Chiu Tai-san (邱太三) told a news conference.
More than 50,000 Taiwanese companies have helped to create some 10 million jobs in China, he said.
China would show its readiness for war with Taiwan in military games in the Taiwan Strait over the coming weeks, the Communist Party-backed Global Times newspaper said yesterday.
About 18,000 People's Liberation Army troops would take part in exercises to establish air superiority on Dongshan island, some 150 nautical miles west of Penghu, it said.
The troops on Dongshan would come from the Nanjing Military Region, where China has deployed 500 missiles at Taiwan, it said.
While China has often held exercises on Dongshan island, these maneuvers would be the first of their kind, it said.
Their mission was "to fight for control of the air over the Taiwan Strait," it said.
Guided missile brigades, ground troops, warships and submarines would take part, it said. Russian SU-27 fighters armed with air-to-surface missiles would back up tanks going ashore.
The newspaper cited reports saying the drills might be held toward the middle of this month.
An operator at the Overseas Chinese Hotel on Dongshan island said that China had ordered fishermen out of the waters used for the drill a month earlier than usual.
"They hold military exercises here every year from July to September," she said. "They usually ban fishing at sea from July 1, but this year, it is banned from June 1."
Despite the political tensions, Taiwanese companies have invested an estimated US$100 billion in China since the late 1980s, moving much of its manufacturing sector to take advantage of cheaper labor.
China is Taiwan's top export destination.
Chiu condemned a suggestion by a Chinese academic that Beijing could punish China-based Taiwanese businesses that support Chen.
"We urge Beijing to restrain these irresponsible scholars and clarify their remarks when necessary," he said.
The stock market fell 5.1 percent on May 17, after China criticized Chen's leanings toward independence.
The Chinese Communist Party's main newspaper, the People's Daily, said on Monday that China did not welcome businessmen who supported Taiwanese independence and singled out a prominent tycoon, Hsu Wen-lung (許文龍) of the Chi Mei Group.
The Chi Mei Group owns computer screen maker Chi Mei Optoelectronics, whose shares fell further to end down 1.77 percent at NT$55.50 despite the market rebound.
To shore up confidence, the government urged stock investors to exercise reason and focus on solid economic and corporate fundamentals rather than on rumors.
The Ministry of National Defense said it saw no signs of unusual military activity by China, adding that it was normal for China to hold military drills from May to August.
The Taiwanese army held a small routine training drill and test-fired some artillery on the offshore island of Penghu on Thursday.
It denied the exercise was linked to reports of the planned Chinese war games.
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