- The Washington Times - Monday, August 27, 2001

TAIPEI — Taiwan's leader sided yesterday with an elite team of economic advisers who urged him to make a historic policy change and boost economic ties with China — the island's biggest security threat.
Republic of China (Taiwan) leader Chen Shui-bian embraced the panel's advice as the island slips into its first recession in three decades and feels the strong pull of China's booming market, which offers cheap labor and land to Taiwanese firms struggling to stay competitive.
Taiwan's top China policy-maker, Tsai Ing-wen, said yesterday's developments were "a significant step forward" toward trying to improve relations with Beijing.
"This is a clear demonstration from our side that we are prepared to take the risk and take a positive attitude toward China," said Mrs. Tsai, a member of the advisory committee.
China did not immediately comment on the development.
For five decades, the Taiwanese have kept a tight grip on trade and investment with China, fearing that their economy could become too dependent on a communist nation that has threatened to invade them. The two sides split amid civil war in 1949, and China is growing impatient for reunification.
Yesterday, a 120-member presidential advisory group — including Cabinet officials, business leaders and opposition lawmakers — urged the president to relax limits on how much Taiwanese can invest in China. The group also told Mr. Chen to let banks set up branches in China and ease restrictions on Chinese investments in Taiwan.
Just hours after the group made the suggestions during a high-profile summit yesterday, Mr. Chen said that he accepted the recommendations, and his government would spend the next two weeks figuring out how to implement them.
"The group's consensus belongs to all the advisers and to the nation's people and to Abian," Mr. Chen said, referring to himself by his nickname.
One specific change the president agreed to was abandoning a $50 million cap on single investments in China. Such big deals will be considered on a case-by-case basis.
Opponents of expanding trade ties with China have argued that it would speed up the exodus of Taiwanese capital and jobs to China, driving up unemployment rates that have already hit historic highs this year.
"This decision today will only be good for big business. It'll just mean more jobs lost for the workers," said Weng Tai-shan, a Taipei delivery driver in his 40s.
But business leaders have argued that Taiwan — famous for its manufacturing prowess — can no longer compete with China's factories, which are fueled by low-wage labor.
Most of Taiwan's factories that produced consumer goods have already moved to China, where the Taiwanese have invested an estimated $60 billion during the past decade.
Now, many of the island's electronics firms are setting up shop on the mainland or making plans to relocate there.
Supporters of greater economic ties with China also argue that when Taiwan and China join the World Trade Organization later this year, many of Taiwan's restrictions on trade with the mainland will have to be eased.
Now, the free traders argue, the island must do what the United States and other mature economies have done — become a "green silicon island" by shifting into service and high-tech development.
Advisory panelist Joanna Lei, chief executive officer of Pacific Broadband Co., said relaxing restrictions on China investment will help jump-start Taiwan's slumping economy.
"By recognizing China as part of the world market, it will enhance corporations' global positioning that has been largely restrained in the past," Mrs. Lei said.
The presidential advisers did not agree on everything yesterday. One remaining issue was how to settle a long-standing dispute with China over Taiwan's political status. But few expected a consensus on the thorny issue.
The group also offered no new suggestions on how to end a five-decade ban on direct shipping and aviation links between China and Taiwan's main island. The group acknowledged that such a move requires bilateral negotiations — which China has refused to join.
Relaxing trade ties with the mainland doesn't mean that China has become less of a threat, said Mrs. Tsai, the China policy expert. But she said Taiwan can no longer afford to limit its access to China's economy.
"There is still a real risk, but we can't avoid doing things because of the risk," she said.


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