Kitchenware maker counting on WTO

One production line spits out Hello Kitty kettles for Japan, another "George Foreman" grills for the US.

Kitchen appliances by the dozen fly out of the doors of the Xiamen factory owned by Taiwan's Tsann Kuen Enterprise (燦坤實業), one of 50,000 Taiwan firms that have poured some US$60 billion of investment into China.

At first, say Tsann Kuen managers, the factory in China seemed like a risky proposition. Back in 1988, Taiwan and China had only just taken their first halting steps towards rapprochement.

Thirteen years later, they are still bitterly divided over terms for unification.

But economic links forged in Xiamen and other boom cities along the China coast are slowly drawing the two sides together despite political deadlock.

With China and Taiwan poised to join the WTO and Taiwan's economy wallowing in recession, firms like Tsann Kuen hope to break down political barriers to trade and investment in China for good.

But while both sides appear keen to expand business ties, they are still unwilling to make the political compromises to open direct trade and transport links, analysts say.

"The Chinese market is increasingly important for us," said Zhu Chengde, assistant general manager of Tsann Kuen's Xiamen plant, which churns out kitchenware.

"From next year we will increase efforts to promote the domestic market and design products which suit Chinese consumers."

Like many foreign companies, Tsann Kuen hopes to benefit from lower tariffs on imported raw materials and greater access to the local market once China and Taiwan are both in the WTO.

Only 5 percent of Tsann Kuen's current annual sales of about US$265 million go to the Chinese market at present but the firm aims to increase that to 30 percent by 2005, Zhu said.

But what Tsann Kuen and other Taiwan firms really want is to reopen direct trade, mail and transport channels.

President Chen Shui-bian (陳水扁) lifted the 50-year ban on direct trade and investment in China this month but the move still requires the approval of Beijing.

"The most obvious advantage of opening the three links is that it would greatly lower transport costs," said Zhu. "We pay a lot of extra costs transporting goods via Hong Kong."

Hopes of a breakthrough are high in Xiamen and would be one of the biggest beneficiaries if the direct links were opened.

Underlining the increasing optimism, Taiwanese investment in Xiamen rose 45 percent in the first 10 months of this year, according to city government statistics.

"One reason is the political and economic situation on Taiwan island has steadily deteriorated so Taiwan businesses are rushing to Xiamen," said Zhong Xingguo,

director general of the Xiamen Foreign Investment Committee. "Secondly, calls from both sides for opening the three links are getting louder by the day."