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Economic News

22 Jul 2010
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Trade between Taiwan and mainland China is at near-record levels, just one encouraging sign of further rapprochement from both Taipei and Beijing. Nonetheless, there may be a few clouds on the horizon to darken the prospects of even closer economic ties between the two neighbours.



On April 29, Taiwan's Ministry of Economic Affairs (MOEA) released bilateral trade figures with China for the first two months of the year, with exports to the mainland being valued at $11.7bn, a 20.8% increase over the same period in 2007. Exports to China represented 29.4% percent of Taiwan's total overseas trade.



Taiwan's trade surplus with China rose to $7.16bn, an increase of 25.3%. Chinese imports were worth $4.54bn, just under one-eighth of Taiwan's total incoming foreign trade.



The strong figures for the opening of the year put Taiwan behind only Japan and South Korea as the major source of imports for China.



Taiwan and China are showing something of a united front in diplomatic relations, with Taiwan supporting China in a dispute with the World Trade Organisation (WTO). China is seeking to be allowed to implement tariffs above the 23% level suggested for developing countries, and wants to extend the grace period to enact tariff cuts to three to five years, up from the planned two-year period.



Though rejected by WTO officials, Taiwan is backing Beijing's position, the only country to do so. While Taiwan may be exhibiting some degree of solidarity with the mainland, it could also be looking to protect the interests of the many Taiwanese businesses that have set up shop in China.



Despite this evidence of increasingly close economic links, both in trade and the negotiating table, there could be some showers ahead to dampen the enthusiasm the two countries have for each other.



Beijing is said to be less than pleased with incoming Taiwanese President Ma Ying-jeou's choice of Lai Hsing-yuan to head up his administration's Mainland Affairs Council, the agency directly responsible for relations with Beijing.



Some members of Ma's Kuomintang Party have also been vocal in their criticism of Lai's appointment, saying her former status as a parliamentary deputy of a pro-independence party, the Taiwan Solidarity Union, could harm ties with China and was incompatible with the president's policies.



On May 1, Lai said she fully supported Ma's policy of improving ties with the mainland.



"My beliefs are in line with those of Mr Ma," she told reporters.



Ma won the March 22 election in part due to his campaign platform of better relations with China and boosting the economy, the two being linked to no small degree. Incurring the ire of Beijing even before coming to office on May 20 may not be the best start to Ma's administration or to putting the twin planks of his policy platform in place.



Kuomintang officials are particularly concerned that Lai's presence may pose a threat to negotiations for direct flights between Taiwan and the mainland. Ma has promised he will have this implemented by the first week of July, facilitating the visit of 1m Chinese tourists to the island annually.



At least one Kuomintang deputy has said if Ma cannot get the promised flights off the ground it will be due to antagonising Beijing with Lai's appointment.



On May 1, the local press quoted Kuomintang legislator Chiu Yi as saying, "If the government fails to kick off cross-strait direct charter flights on July 4, Lai Hsing-yuan must step down."



Beijing has avoided making any direct comment on Lai's appointment, with a spokesperson for China's Taiwan Affairs office saying on April 30, "What we really care about is the future development of cross-strait relations."

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