ONLINE : AUGUST 14, 2000 ISSUE
-- ASIAN COVER STORY
Up to China (int'l edition)
while assuaging Beijing's fears, stays its independent course
Views: Taiwanese check out China through high-powered scopes
come true. That's how China's leadership saw the presidential
victory of longtime Taiwan opposition leader and independence
advocate Chen Shui-bian in March. Chen's election fanned fears
in Beijing that the island, which it regards as part of China,
would finally declare independence from the mainland. If that
happened, China was prepared to declare war. Since then, Chen
has done much to assuage those fears. He has promised not
to formally declare independence unless China attacks. He
has practically begged China to sit down and negotiate. Faced
with a growing economic imperative for closer relations, he
has dropped Taiwan's refusal to allow direct trade, transportation,
and postal links with China.
same time, though, he has kept up his provocative rhetoric.
In one of his first interviews since taking office in May,
the 49-year-old President declared himself the leader of a
''sovereign and independent country.'' Referring to China's
attempts to intimidate voters with threats during the election
campaign, he charged that Beijing ''does not understand the
Taiwanese people.'' Citing 70% public approval for his policy
of standing up for Taiwan's sovereignty, Chen urged Chinese
leaders to ''learn from the election result.''
tempers are now cooling in Beijing. Officials in Taiwan, both
local and foreign, say both sides want negotiations soon.
''They're looking for an excuse to talk,'' says a foreign
observer. The next move could come after the August summit
of Chinese leaders at the resort of Beidaihe, where the vexing
question of Taiwan will top the agenda.
though China has shown some signs that it might be willing
to talk, any real easing of tensions in the Taiwan Strait
remains far off. The biggest sticking point is Chen's steadfast
refusal to bow to Beijing's demand to accept its definition
of the One China policy--which means accepting Beijing's sovereignty
over Taiwan--before talks can start.
A BROADSIDE. Chen's planned foreign travel in mid-August won't
make relations any easier. He has scheduled a swing through
Central America and Africa, home to the 29 countries that
still grant diplomatic recognition to Taiwan instead of China,
as well as a refueling stopover in Los Angeles. The trip will
certainly anger Beijing, which is obsessed with denying diplomatic
recognition to Taiwan, and U.S. officials are bracing for
sparring aside, economics plays a big role in driving improved
relations. Mainland-Taiwan economic ties are approaching a
crossroads as both countries enter the World Trade Organization,
probably before the end of this year. As both sides implement
WTO provisions, they'll have to end many restrictions and
implement direct trade. Taiwan companies have invested about
$40 billion in China. The figure is climbing sharply, powered
by a wave of high-tech investment. But Chinese authorities
are for the first time putting pressure on Taiwanese-founded
businesses in the mainland, especially those headed by Chen
supporters. Such pressure tactics might work, but could just
as easily trigger an anti-Beijing backlash.
side's leaders can ignore domestic politics. Chen's administration
has made several missteps. In late July, he was forced to
sack a senior official after live television showed four people
swept to their deaths in floods: Rival government agencies
had squabbled over rescue efforts. Taiwan Vice-President Annette
Lu continues to espouse a more stridently pro-independence
line than Chen, provoking suspicions in Beijing that she is
expressing Chen's real opinion.
China's President Jiang Zemin refuses to be the one who loses
Taiwan. His fear: Taiwan is stalling for time, betting that
support abroad, especially in the U.S., will grow for Taiwan's
independence aspirations. Yet if he plays the bully, he risks
alienating U.S. public opinion. If he does nothing, Taiwan
may slip slowly away. The Portuguese dubbed Taiwan Ihla Formosa,
or ''beautiful island.'' But for China, it remains one ugly
L. Clifford in Taipei
"Must Learn From [My] Election" (int'l edition)
"The information they get is far from the truth"
patient, determined democrat wear down Beijing's hard-liners?
Taiwan President Chen Shui-bian, the 49-year-old former-opposition
lawyer who has just finished his second month on the job,
is betting that the answer is yes. Despite browbeating from
the mainland, Chen shows no signs of being rattled. Indeed,
he says, signs are emerging that pressures may be easing.
Chen's strategy for Taiwan's survival as an independent country:
Hold out an olive branch by offering to sit down and talk,
but don't give ground on the issue of sovereignty. And bet
that U.S. backing and a hunger to get into the WTO will restrain
Beijing from lashing out militarily.
of his first interviews since taking office on May 20 (see
below), Chen gave no quarter to Beijing. While indicating
his eagerness to talk with Beijing and speaking about a "moral
obligation" to promote peace and stability, Chen claimed
that the mere fact that tensions with China had not escalated
marked a triumph for his policy of standing up for Taiwan.
He spoke boldly of Taiwan as "a sovereign and independent
country" and said that it was his duty to protect the
interests of the people of Taiwan. He also gave support for
Washington's controversial "Star Wars" missile shield,
known as Theater Missile Defense, saying it was necessary
because of China's deployment of missiles.
INVESTMENTS. Taking aim at Beijing's leaders, Chen bluntly
accused Beijing of not understanding Taiwan's people and said
that the mainland leadership was being misled by Taiwanese
visitors more intent on currying favor with Beijing than in
representing the true picture on the island. And pointing
to the 70% popular approval ratings of his cross-Strait policy
and the backlash against Beijing's attempts to intimidate
Taiwan's voters in the last two presidential votes, Chen urged
Beijing to "learn from the election result" and
"get to know me."
China is getting to know Taiwan investors very well indeed.
Despite tensions, entrepreneurs continue to pour money into
mainland projects. Taiwanese businessmen are seeking Taipei's
approval for ever-more sophisticated high-tech investments
and want Chen to follow through on his promise to end a ban
on direct trade and transportation links. But after pushing
the idea for years, China suddenly appears cool to it. And
for the first time, Beijing is pressuring Taiwan-backed mainland
businesses to help bend the new President to China's will.
Chen hopes relations with China have stabilized and may even
be improving. More moderate remarks coming out of Beijing
recently -- most notably from former Chinese Foreign Minister
Qian Qichen -- may mean that relations are set to improve,
says Tsai Ing-wen, Chairperson of the cabinet-level Mainland
Affairs Council in Taipei. Officials in Taiwan, both local
and foreign, say that the two sides are looking for a way
to jumpstart negotiations. Any move will probably not come
until after China's leadership holds its annual August meeting
at the seaside resort of Beidaihe, where the vexing question
of Taiwan will top the agenda.
ON PRIORITIES. Chen's travel plans won't make restarting
talks any easier. Chen said that he will ignore Beijing's
threats and go to the inauguration of the new Dominican Republic
president later this month. His trip to the Dominican Republic
will be part of a larger swing through Central America and
Africa, home to some of the few remaining countries that still
grant diplomatic recognition to Taiwan. The trip will certainly
anger China. Further complicating the diplomatic tangle is
a planned refueling stop for the Presidential jet in Los Angeles.
U.S. officials already are bracing themselves for a broadside
and coherent though Chen may be in person, his government
is starting to look frayed after just three months in power.
In late July, Chen was forced to replace his Vice Premier
after a tragic flooding accident that took the lives of four
people. Television cameras captured the agony of the victims
trapped for hours, while government agencies squabbled among
themselves over who was responsible for rescuing them, until
rising waters swept the quartet to their deaths before a nationwide
audience. And concerns about economic policies has knocked
20% off the stock market since April. Vice-President Annette
Lu, cut out of the inner power circle, is shaping up as one
of the Administration's most high-profile critics.
troubles mean that Chen is scaling back his agenda of domestic
reform. While vowing to push ahead with his anticorruption
campaign, Chen acknowledged that reform of the business empire
of the former ruling party, the Kuomintang, was "not
a priority." With his Democratic Progressive Party controlling
only a minority in the Legislative Yuan, Chen needs to stay
focused on bigger issues -- above all else, China.
are edited excerpts of an interview, done in Taipei's grand,
Japanese colonial-era neo-Victorian Presidential Office Building
on July 27, with Chen by Business Week Asia Regional Editor
Mark L. Clifford:
do you hope to accomplish vis-a-vis China during your term
president of the Republic of China and as a leader of a country
in the Asia-Pacific region my natural obligation and mission
is to jointly work with other leaders of Asia-Pacific nations
to promote peace and stability in the region. We must promote
peace and stability in the Taiwan Strait. This is not only
my top priority -- it is a moral obligation.
course, we need to clean up Taiwan politics. We must ensure
economic prosperity and progress. As a leader I will work
hard to terminate black gold or corruption in this country
while at the same time working to create an improved climate
for investment and business.
Taiwan into the 21st century we must also make Taiwan into
a new indicator of high human rights standards in the world.
While we have made a number of reforms in our constitution
in the process of democratization, there are a number of problems
currently. I hope there is the opportunity to make additional
reforms and improvements in the Constitution.
of economic development, I hope that the phrase 'Green Silicon
Island' will become a new name for Taiwan. I hope that by
the year 2010 Taiwan will become a pioneer in digital economy.
will you, as you put it in your inaugural speech, "expand
Taiwan's room for survival in the international arena,"
and how does your planed forthcoming trip to Latin American
and Africa fit in with this goal?
my May 20 inaugural speech, I said that "Taiwan stands
up." Standing up means that I must also go out into the
world as the leader of a sovereign and independent country.
We must naturally push our diplomacy. We hope that Taiwan
will take part internationally. The people in this country
expect the government to take them back into the United Nations.
Naturally, we face some difficulties, but we must not give
up. At the same time, we must try to participate in other
international organizations, including nongovernmental organizations.
my Presidential inauguration, many heads of state visited
from other countries to celebrate with us. While some other
leaders of nations were not able to come, they nevertheless
sent high-level or special delegations. These representatives
of countries that are Taiwan's diplomatic friends invited
me to visit [their] countries to strengthen relations. I hope
to have the opportunity to reciprocate and on behalf of the
Taiwanese people to thank them for their friendship and support.
We hope to enhance the substantial relationship between the
Republic of China and our diplomatic friends.
whether I or not I will travel, when I will travel and which
countries I will visit -- all these issues are being arranged
right now by the relevant government institutions. We will
make a formal announcement when these issues are settled.
you concerned that Beijing will be enraged by these visits?
A: I believe
that, as President of a sovereign state, going abroad and
exchanging meetings with our diplomatic friends is my duty.
I believe I will be supported by our citizens for representing
our interests on their behalf.
role would you like the U.S. to play?
A: I believe
that permanent peace and the security and stability of the
Asia-Pacific region are not only in the interests of Taiwan
but also in the interests of the U.S. Therefore security and
stability in the Asia-Pacific region is the common language
between Taiwan and the U.S. I believe we can cooperate on
the concern on behalf of the U.S. for the Taiwan Strait and
Cross Straits relations is quite normal. For the U.S. government
and [its] people, improvement of Cross Straits relations is
in their interest. I think the U.S. can play a more active
role. I think the role of the U.S. can be [as] a balancer
you in favor of the proposed Theatre Missile Defense system?
If so, would you like to see it extended to Taiwan?
issue of TMD exists because of the deployment of missiles
[by China] across the Taiwan Strait. This has been a threat
to the peace and stability of the Asia-Pacific region. This
is why the U.S. is considering the development of TMD.
TMD is not yet fully researched and developed, and it is too
early to say whether Taiwan would invest in this project,
but the government is seriously studying this policy. The
decision to join is not a unilateral decision on our part.
It also depends on the attitude of the U.S. as well as the
threat imposed by the PRC's missiles.
to opinion polls in Taiwan most people want to invest in TMD.
We know that TMD is not absolute in terms of resolving our
problems. It is not 100% secure. In addition to TMD, we must
exert creativity and wisdom to improve Cross Straits relations.
is that creativity and wisdom?
is related to the improvement of Cross Strait relations. We
know that the purchasing of weapons does not provide 100%
security. Taiwan's security does not rely only on traditional
defense. It must incorporate political, economic, social,
and energy-resource security, as well as the broader issue
of regional security. We must not believe in [only] the hardware
of weapons nor do we want to start an arms race.
seem stuck. Do you see any signs of progress, or are you disappointed
at the lack of progress?
there are no significant breakthroughs, the situation has
China require radical change before reconciliation can occur?
I have noticed that U.S. Secretary [of State Madeline] Albright
and Secretary [of Defense William] Cohen have visited China.
In terms of Cross Straits relations, our information tells
us that it is not seen as tense right now. There is not a
sense of urgency or of crisis.
should grasp that opportunity is the greatest issue right
now. We hope to sit down and resume negotiations. We can only
do that by offering goodwill and through the wisdom of leaders
on both sides. I have confidence that relations can improve.
noticed that there have been some adjustments and differences
in some statements by PRC leaders before the March 18 elections
and after the May 20th inauguration. I do not know if this
can solve the problem. However, we prefer to interpret such
adjustments as indications of goodwill. We feel it is most
important to sit down and talk without prejudice before reaching
an ultimate resolution. We should put aside our differences
and seek a foundation that is acceptable to both sides.
China and Taiwan negotiate on the basis of the 1992 agreement
about "one China"? If so, what is your understanding
of that agreement?
to our understanding, in 1992 there was discussion of a so-called
"one China". However, there was a disagreement and
no consensus. Most Taiwanese people cannot accept Taiwan becoming
a second Hong Kong or a second Macao. They cannot accept the
one country-two systems policy [applied to Hong Kong and Macao],
nor can they accept the "one China" principle interpreted
as Taiwan becoming part of the PRC.
if you go abroad and you are not willing to accept the one
China policy won't relations with Beijing get worse?
is most important to please the Taiwanese people. I must [represent]
the Taiwan people. Everything I do must be accepted by the
people. It is a democratic country and I cannot do whatever
I wish without respecting the wishes of the people.
past few months, it has been clear that Cross Straits relations
have not deteriorated. I will continue to express sincerity
and goodwill, and I call on the leaders of the other side
to react with sincerity and goodwill. With wisdom and creativity,
the two leaders can sit down and negotiate the question of
the future of "one China."
you disappointed that China hasn't responded to your offer
of allowing direct trading and transportation links?
long as Taiwan's national security is maintained under the
principle of market functions and mutual benefits, this government
can adjust the present policy in regards to the three links.
Whether we care [to talk] about the mini three links or in
a broader sense, it requires officials on both sides to sit
down and talk.
can China learn from your election, and do you expect your
election to act as a spur to democratic change in China?
democracy, freedom, and human rights are universal human values.
No individual political party or government can block the
development of these values. Neither can they ignore public
opinion in Taiwan.
as a democratic country we feel that the spirit of democracy
is in the alternation of power from one party to another through
a process of a peaceful transfer of power. This is a necessary
trend in democratic countries. Taiwan has not been left out
of this trend. It also illustrates that a political party,
no matter how hard it tries, cannot govern forever. There
will always be a time when it must step down or transfer power.
the election results demonstrate that the leadership in the
PRC does not understand the Taiwanese people. Over the past
two presidential elections, they have applied the same methods
of threats and intimidation. However, the choices of the people
of Taiwan have proven them wrong.
the PRC doesn't understand the DPP nor do they understand
me. They believed that a DPP victory would bring a declaration
of independence. Thus far, my Cross Strait policy has been
supported by 70% of the people in this country. It represents
a consensus of the Taiwan people. The PRC leadership listens
to people who visit China and often mislead them. The information
they get is far from the truth. This leads to miscalculations
and misjudgments on their part. They must learn from the election
result. They must see our sincerity in improving relations.
They should see the gestures made by the new government. They
need to get to know me, and they need to get to know the DPP.
you concerned that China could use Taiwan's business community
as a wedge to divide Taiwan, as happened in Hong Kong in the
runup to the 1997 handover?
have noticed that the PRC has used tactics of trying to split
our society. In the past, they have done this through selected
businesses or industries. We have noticed that recently not
only do they apply such methods through businesses, [but]
they have also been reaching out to political parties and
legislators. They are even extending their influence to representatives
of the government and the military, as well as overseas Taiwanese
groups. I think it is not so important to notice how they
split or pressure our society. It is more important to put
our attention on how to build confidence among ourselves to
build solidarity so that we have greater strength to resist
will you do to promote greater Taiwanese investment in the
Cross Straits relations and the three direct [transportation
and trading] links is already the set policy of the new government.
To do so we must sit down and talk. Without doing so, there
will be no breakthroughs.
end of this year, it is very likely that both sides will be
joining the WTO, and this will of course affect direct investment
on both sides. Once both sides join, the question of opening
up direct investments will have to be further examined and
specifically, do you propose to eliminate "black gold"
and do away with the widespread perception, especially among
Chinese outside of Taiwan, that the island's "democracy"
has been little more than a "mafia-ocracy"?
termination of black gold policies and corruption is a top
priority of this government. Right now the relevant agencies
are preparing to act. I expect grand action after the end
of this term of the Legislative Yuan.
moves are you making to dismantle the KMT business empire
and how important a priority is this?
the KMT party assets, there are still many questions as to
how much they have as well as the source of such assets. Right
now there are still efforts being made to clarify these questions.
This issue is not a priority.
President Lee Teng-hui's formulation of "special state-to-state
is not appropriate for the new government to criticize or
comment on the former President's positions. However, as the
President of the ROC, it is my obligation and responsibility
to maintain sovereignty, dignity, and security, and to enhance
the well-being of Taiwan's people.
May 20 inaugural speech, I emphasized that the improvement
of Cross Strait relations must be based on the principles
of democracy and parity. The leaders of both sides must respect
the will of the people. Only the 23 million residents of Taiwan
have the right to decide their future.
lessons do you draw from the Korean summit and from Kim Dae
Jung's "sunshine diplomacy" that preceded it?
greatest lesson we have learned in witnessing the two Korean
leaders is that they sat down and reconciled. They have been
able to put aside prejudices and differences. Only by putting
aside such prejudices and differences in Cross Straits relations
can reconciliation occur. We believe it is also essential
to put aside our differences in search of some consensus.
the two Koreas and the Cross Strait relations result from
very different historical circumstances, reconciliation is
a global trend. If [both Koreas] can sit down, why can't the
leaders on the two sides of the Taiwan Strait sit down?
China, Taiwan investors are both welcome and suspect
Chun-che flips on the police-issue siren in his Nissan Cefiro
and steps on the gas as he winds through downtown Dongguan.
Huang has just finished blasting clay pigeons at the skeet-shooting
range he manages, a place where he and other Taiwanese businessmen
living in the southern Chinese city go to let off steam. Weaving
from lane to lane, Huang gripes that the tangled traffic is
making him late for the next appointment. But it is a snarl
he helped create. In the last 10 years, Huang, and others
like him, transformed what was a sleepy city into a veritable
in the middle of Guangdong province's industrial-export belt,
Dongguan is home to some 40,000 Taiwanese and 3,000 of their
factories. Their imprint is everywhere--from the luxury villas
to the flashy karaoke bars where businessmen flirt with young
women. In the city's northwest, China's first Taiwanese-run
school is nearing completion. Every week, it seems, a delegation
of Taiwan officials arrives to check out the community or
meet with Dongguan officials.
collaboration that has flourished across China: Some 250,000
Taiwanese on the mainland run factories and companies responsible
for some 12% of the country's exports. Taiwanese investors
have pumped some $40 billion into the mainland economy. Their
real contribution may be even greater, since many disguise
their activities through Hong Kong front companies to avoid
antagonizing their own government, which has long been leery
about becoming too dependent on China.
WAVE. Moreover, Taiwanese investors are moving well beyond
the small-time activities of cowboy capitalists like Huang.
In many ways Huang, who also manages an office equipment factory,
represents the first wave of Taiwan businessmen: makers of
low-end clothing, shoes, and furniture. The new wave, by contrast,
is dominated by Taiwanese multinationals that are establishing
high-tech production lines and sometimes cutting deals with
China's most powerful people. For example, Winston Wang, son
of Taiwanese petrochemical tycoon Wang Yung-ching, has plans
to build a semiconductor plant in Shanghai, according to some
Taiwanese sources. His prospective partner is none other than
Jiang Mianheng, son of Chinese President Jiang Zemin.
March election of Taiwan President Chen Shui-bian is sending
jitters through China's Taiwanese community, despite its connections
and aggressive expansion. In the past, President Chen has
backed independence from China, a matter of grave concern
in Beijing. Taiwan investors fret that a diplomatic downturn
could derail their ambitious mainland agenda. The disappearance
in June of General Pan Hsi-hsien has heightened their anxieties.
The former chief of personnel at Taiwan's National Security
Bureau, Pan went missing after taking up a senior position
with a Taiwan electronics company in Dongguan. The Taiwanese
believe he was nabbed by China's State Security Ministry and
is being held for questioning. Beijing has not confirmed these
is that Beijing may be trying to use Taiwan businesses on
the mainland--especially companies run by the handful of executives
who advise President Chen on economic policy--to extract concessions
from his government. Who better to push Chen away from independence,
the theory goes, than the men with the most to lose in China?
warn that political pressure from Beijing could prompt them
to curb their expansion plans. But most investors are simply
hunkering down for the long haul, hoping that common sense
will prevail. ''We're afraid,'' acknowledges C.M. Wu, managing
director of Acer Peripherals (Suzhou) Inc., which makes CD-ROM
drives, monitors, and other computer gear in China. ''But
we still want to expand.''
is, neither Taiwan nor China can afford to disengage. For
Taiwanese companies facing rising costs at home, China offers
a nearly limitless pool of cheap labor and engineering talent.
Taiwan's tech powerhouses also crave access to China's market.
For Beijing, the Taiwanese provide plentiful jobs at a time
when bloated state enterprises are laying off millions. They
also bring the latest technology and management systems, which
China needs as it prepares to join the World Trade Organization.
in many quarters is that the burgeoning economic relationship
actually will lead to a lasting political thaw. ''Both governments
and the people win'' with Taiwanese investment, says H.D.
Yeh, chairman of Dongguan Primax Electronic Products Ltd.,
one of the world's largest computer mice producers and employer
of 3,500 workers in China. ''We hope that through this economic
cooperation, both governments can keep the peace.''
certainly has much to gain from seeing the flood of Taiwanese
investment continue. Today's biggest investors are the likes
of computer equipment companies Proview, Delta Electronics,
and Acer. They are building factories that are turning China
into a major electronics export platform.
of the high-tech migration is obvious on the manicured grounds
of the Suzhou New District, a special economic zone in Jiangsu,
the coastal province where Taiwan investment is growing fastest.
Acer Peripherals has sunk $80 million into a 6,000-worker
facility. The place resembles a college campus, with training
facilities and a soccer field. A few miles away, Sampo Group
has opened a $22 million plant that makes parts for personal-computer
monitors. Not far off, Yageo Corp.'s $98 million factory produces
resistors for such corporate giants as IBM, Acer, and Philips
is rolling out a range of incentives to keep Taiwanese companies
happy. Last December, the government made it easier for them
to get loans and strengthened laws providing legal protection.
Local governments coping with mounting unemployment are slashing
taxes and land-use fees. Guangdong's government has opened
special information offices for Taiwanese investors and launched
a Web site where business people can post complaints and suggestions.
is that even as China beckons with one hand, it intimidates
with the other. Or at least it seems to. Taiwanese factory
owners complain of being targeted in a wave of crackdowns
by Chinese officials over labor standards and customs rules.
Often, it's hard to tell whether the Taiwanese are being singled
out. But it seems clear that companies most visibly associated
with President Chen are the most likely victims of politics.
''Business leaders who support Taiwan independence and have
a bad influence, but still hope to benefit from China's strong
economy, are not welcome,'' says Jiang Changfang, a Guangdong
official responsible for Taiwan affairs. Chinese officials
also have warned Hong Kong companies to shun Taiwanese who
oppose Bejing's line.
CRACKDOWN. Executives at plastic and electronics company
Chi Mei Industry certainly believe they are being targeted.
Group Chairman Hsu Wen-lung is a longtime Chen backer and
now advises the President on economic policy. In May, 20 tax
inspectors descended on a Chi Mei plant near Nanjing and scrutinized
its books. Company officials say the inspectors found no irregularities
but made clear the crackdown was tied to Hsu's support for
Chen. The company also says authorities have threatened its
mainland customers with special tax scrutiny. Chi Mei has
sunk $200 million into China, but now threatens to freeze
In a move
that some Taiwanese analysts viewed as a deliberate snub,
high-ranking Chinese officials refused to see Acer Group Chairman
Stan Shih, another Chen adviser, when he visited Beijing in
April for a computer show. Acer officials in Taipei play down
the incident, but its executives in China worry that Beijing
could block its future investments. In the past, Acer avoided
cross-Strait politics, says J.T. Wang, the Taiwan-based chairman
of Acer Sertek Inc., the group's sales and marketing arm.
''But now the politics comes to us.'' That means that Acer
must assure Beijing it opposes independence and backs the
view that Taiwan is part of China.
Taiwanese executives are mostly irritated at their own government.
After being badgered by previous President Lee Teng-hui to
go slow in China, many expected Chen's election to lead to
a friendlier climate. Indeed, during the campaign, Chen vowed
to quickly lift decades-old restrictions on direct transportation,
communication, and postal links. His top aides suggest they
will do so soon.
though, many constraints remain. Taipei still bans investment
in finance and transportation as well as in products it considers
technologically advanced. Taiwanese companies cannot assemble
PCs or motherboards containing anything more powerful than
a 486-class microprocessor, for example. Nor are they supposed
to make semiconductors and high-speed cable modems. Taiwan's
government also has capped individual investments at $50 million
and restricted how much capital companies can invest. ''Our
businesses should aim for the global market, not the mainland
market,'' says Tsai Ing-wen, chairperson of the Mainland Affairs
Council in Taipei, which oversees cross-Strait relations.
''We do have a national security concern.''
Taiwanese businessmen have devised numerous schemes to skirt
the rules. Many route their investments through companies
in Hong Kong, the U.S., or Japan. Several Guangdong-based
companies admit they don't divulge to Taipei the amount of
money they've put in China or disclose whether they are making
products on the restricted list.
Despite the mixed signals, there are signs that pragmatism
will win out. In July, legislators from Chen's Democratic
Progressive Party and the Kuomintang--the old ruling party--visited
Dongguan to see how Taiwanese investors are faring. In Beijing,
Taiwanese politicians met Vice-Premier Qian Qichen, who called
for better contacts. And Tang Shubei, former head of China's
Taiwan Affairs Office, attended a Taiwan investment conference
just think the controversy will blow over. There have been
many stormy episodes in cross-Strait relations, and each time
Beijing has refrained from harming commerce. A crackdown now
could discourage the kind of big, technology-intensive investments
China needs most. The less optimistic view is that the time
is coming for Beijing to tighten the screws. With Hong Kong
and Macau safely returned to the motherland, President Jiang
and other top leaders have made unification with Taiwan a
top priority. And now that some of the island's premier technology
companies have big money at stake, Beijing is gaining valuable
leverage. Taiwanese industry has long learned to thrive despite
political ambiguity. By putting Taiwan's factories at risk,
Beijing may be sending the first warnings that the era of
carefree neutrality is coming to an end.
Roberts in Dongguan, with Alysha Webb in Suzhou, and Mark
L. Clifford and Brent Hannon in Taipei
Deep-Pocket Commitment to China
companies have invested $40 billion in China's economy
Taiwanese live and work in China
companies operating in China now number 40,000
companies are responsible for 12% of China's total exports