A “Greater China”? between China’s mainland, Hong Kong, and Taiwan

Economy or Politics? Increasing complex economic interests between the 3 Chinese societies –“flying geese” pattern of development movement of capital and industries convergence of economic structures –utilization of market and labor interdependence on trade political tensions

Political tension Mainland and Taiwan have been technically at war since 1949 before Chiang Kai-Shek died in 1975 Republic of China on Taiwan –“gloriously retake the mainland”

Political tension Before Mao Zedong died in 1976 People’s Republic of China on mainland –“liberate Taiwan” U.S. shifted diplomatic recognition from R.O.C. on Taiwan to P.R.C. in 1979 P.R.C. started economic reforms in 1979 R.O.C.’s “3-no” policy in 1979 –no contact, no negotiation, no compromise

New Realities in 1980s “flying geese” pattern of development

New Realities in 1980s Mutually reinforcing dynamic –Taiwan business community lobbied for lifting restriction bypassed regulations to satisfy commercial demand –Taiwan government regulated exchanges legalize what is already taking place –expansion of trade and investment

New Realities in 1980s In 1983, Beijing’s “Guidance on Taiwanese Investment in Special Econo. Zones and Related Favorable Policies” in 1988, Beijing’s “Regulations for Encouraging Investment by Taiwan Compatriots” in 1989, 2 investment zones in Fujian Province, across from Taiwan

People-to-people contacts In mid-1980s, Taiwan visitors traveled illegally to the mainland via Hong Kong in 1987, Taiwan government allowed citizens to visit relatives on mainland

Semi-official contacts Straits Exchange Foundation was established in Taipei in 1991 Association for Relations Across the Taiwan Straits was established in Beijing in 1991 meeting between the 2 organizations in Singapore in 1993 –“one China expressed differently”

Regulations on investment In 1990, Taiwan’s “Regulations on Indirect Investment or Technical Cooperation in the Mainland Area” –mostly in labor-intensive industries –investment projects worth over 1 million US$ required prior approval –investment projects worth over 50 million US$ are prohibited

Restrictions on investment Then Taiwan president Lee Teng-hui –“go south” policy in 1993 attempt to divert investment away from mainland China to Southeast Asia –“be patient, go slow” policy in 1996 prohibited investment in certain sectors capped investment projects at 50 million US$ reduced Taiwan’s equity in mainland joint ventures to 30%

Investment fits mutual needs Taiwan needs to relocate manufacturing –to lower labor cost –to take advantage of the huge market –to gain higher returns on capital mainland needs capital, technology, and management expertise

Both joined WTO in 2001 Growing business pressures and WTO commitments pressure on establishing direct links and reducing barriers to trade and investment

“three links” direct mail, trade, and transportation “mini-links” between mainland and offshore islands under Taiwan’s control

Future development Taiwan may lift strict restrictions on investment and imports from mainland concern over Taiwan’s security –interdependence and independence mainland China’s coastal regions and Taiwan –may become indistinguishable –may become further integrated economically