Wed, Feb 09, 2000 page1

• Chen unveils new China trade plan

  CAMPAIGN PLATFORM The proposals to lift some restrictions on companies doing business in China has met with a favorable response from the business community, but economists remain skeptical

  • By Oliver Lin / STAFF REPORTER
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  DPP presidential candidate Chen Shui-bian (陳水扁) yesterday told a group of Taiwanese business representatives in China that if he is elected, he would allow Taiwanese banks to establish branches in China and Taiwanese companies in China to be listed on Taiwan's stock market.

  The measures, which were hailed by business people at the scene, are regarded by economists as feasible in theory, if properly regulated. Econ-omists also pointed out that actual implementation could face considerable political obstacles.

  At a luncheon in Taipei with Taiwanese business leaders with interests in China, Chen proposed cancelling current restrictions on banks to set up branches in China, allowing them to conduct loans and deposit business in renminbi.

  To help Taiwanese businesses, including operations in China, Chen said Taiwanese companies in China should be encouraged to list on Taiwan's stock market to make it easier for them to raise capital.

  "Taiwan is China's fourth-largest capital supplier and seventh trading partner, while the mainland has been Taiwan's fourth largest trading partner," Chen said.

  Bilateral trade conducted via Hong Kong amounted to US$20.84 billion in the first 10 months of last year. And some 40,000 Taiwanese enterprises have poured an estimated US$40 billion of investment into China.

  Citing statistics up to the third quarter of 1998 from the Chinese government, Chen added that there are more than 40,000 Taiwanese companies with US$20.8 billion invested in China.

  Chen's announcement was welcomed with applause by business leaders at the luncheon.

  Lin Ching-hui (林清輝), chairman of the Taiwanese Businessmen Association in China, said Chen's economic and trade policy would be beneficial to Taiwanese businesses there.

  Some were even more direct.

  "These measures should have been implemented long ago," said Lin Chung-hsin (林忠信), chairman of a leather company in Zhangzhou. "The KMT government has made similar promises but it has never been able to deliver."

  Economists, meanwhile, said the measures are feasible in pure economic terms and would not harm Taiwan financially if properly regulated, but China's attitude is expected to be a major hindrance.

  "Basically these measures will help legalize [current] underground financial exchanges with China," said Wu Rong-I (吳榮義), president of Taiwan Institute of Economic Research. "Businessmen have been channeling money to China anyway." There would not be much of a problem for Taiwanese banks to open branches in China or for Tai-wanese companies abroad to be listed in Taiwan, as such activities would be without restrictions, he said.

  "It is very risky when Taiwanese companies in China cannot raise capital there and have to bring all their funds from Taiwan," Wu said. "But small enterprises going to China do not seem to have alternatives [at the moment]."

  The definition of Taiwanese companies could also be a problem, said Yang Ya-huei (楊雅惠), a research fellow at Chinese Institute of Economic Research.

  "But if they are defined as being 100 percent held by Tai-wanese, then there would not be any worries about their taking too much capital out of Taiwan," Yang said.

  As for banks opening branches in China, Yang said profitability and risk should be their prime considerations.

  Aside from economics, political considerations would be a major hurdle for Chen's measures to be feasible, the economists said.

  "China's unwillingness to recognize Taiwan's sovereignty is the key problem," Wu said. "Chen has set equal footing with China as a precondition for his measures, but it is one thing that China is very unlikely to give in to."

  Chen also called for Beijing and Taipei to open talks on establishing direct air and sea links to ease the financial burdens of Taiwanese businesses.

  "Taiwan has contributed extensively to China's economic growth over the past years while China's market will also play an important role in the next stage of economic growth in Taiwan," Chen said.

  "The two sides should cooperate on a reciprocal basis and remove the political factors hampering their economic development ... to benefit regional peace," Chen told the gathering.

  The government in Taiwan has banned commercial aircraft from flying directly across the Taiwan Strait. But amid eased tensions, it has conditionally allowed calls at its ports by Chinese freighters carrying the flags of third countries.

  All China-bound travelers from Taiwan, however, are forced to transit in a third territory -- usually Hong Kong.

  Chen suggested that Tai-wanese airlines operate flights between the two countries but share the profits with their Chinese counterparts.
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