Michael Bleby
2 July 2008
Johannesburg — ON FRIDAY, mainland China and Taiwan end 60 years of political posturing as they resume direct flights between the two. Five airlines will offer services from Taiwan to the mainland and six will fly from the mainland to Taiwan, a total of nine return flights from each side a week.
The initial steps to link mainland China with what it regards as a renegade province are modest. They have only become possible since March, when the island 100km southeast of the mainland elected the nationalist KMT party's Ma Ying-jeou as president, bringing an end to eight years of pro-independence rhetoric under the Democratic Progressive Party administration of Chen Shui-bian that ruffled feathers with Beijing.
Regular direct flights will cut the five-hour trip -- travellers have to go via Hong Kong, Macau or another destination -- to 90 minutes. Direct flights have so far only been permitted on special occasions, such as Lunar New Year, or for humanitarian reasons. Regular services will boost Taiwan's ambition to act as a stepping-stone for others to enter the gigantic mainland market.
"The relationship with China is changing to a more friendly relationship," King Liu, founding chairman of Taichung-based Giant bicycle manufacturer, said in May . "Foreign companies can include Taiwan as a stepping stone to China. If you use Taiwan as an investment, then ... you can invest into China."
The initial regular flights would expand into scheduled ones and then into beyond rides that would fly from, say Shanghai to Taipei and on to a third destination, President Ma told the New York Times last month. Allowing Taiwanese banks and financial services companies to set up shop on the mainland will be an important next step, he said.
That seems sensible. Despite the fact that the two entities do not formally recognise each other, Taiwan's own economy is intimately tied up with that of the People's Republic of China. The mainland is Taiwan's largest export market, and its second-largest source of imports after Japan. There is vast Taiwanese investment in the mainland economy. Trade between the two sides was worth $124,5bn last year.
"There are 300000 Taiwanese living in Shanghai. Most of the best restaurants in Shanghai are run by Taiwanese ," says Martyn Davies, executive director of the Stellenbosch University-based Centre for Chinese Studies.
For an SA that harbours similar ambitions as a stepping-stone to the rest of the African continent, Taiwan's experience is a cautionary tale. It has largely missed the boat. Political posturing over the past eight years has seen Chinese Taipei, as it is known at the Olympic games, cede the position of key link to China to Hong Kong.
"It really lost out," says Chia-Chao Wu, MD of rating agency Empowerdex, who immigrated to SA from Taiwan in 1985. "They allowed Hong Kong to become the de facto bridge. Hong Kong benefits hugely."
The value of cross-Strait trade re-exported via Hong Kong rose from $8,7bn in 1993 -- almost two-thirds of the total cross-Strait trade that year -- to $24,1bn last year, even though Hong Kong's share of that trade has dropped , according to the Hong Kong Trade Development Council . Hong Kong was China's third-largest trading partner last year, after the US and Japan, with $197,2bn, US-China Business Council figures show.
Taiwan and SA have similar histories. Post-war SA took shape after the Nationalists won power in 1948. Modern Taiwan came into being in 1949 when Chiang Kai-shek fled the mainland in 1949. His nationalist KMT party held power until 2000. It held its first democratic presidential election in 1996, two years after SA's first democratic election.
"They'd had one party rule as we'd had for almost half a century," says Davies. "It was almost exactly the same situation. They had a similar regime of government that was authoritarian and discriminated against ethnic groupings. There was a liberation struggle in Taiwan. It had a very similar democratic trajectory as in SA".
The pace of political change was too slow for the changing economic realities, however, Davies says. Taiwan's window to act as a stepping stone to the mainland opened in 1990, when businesses started strengthening ties on the other side.
"Taiwanese businesses were moving much of it, illegitimately, into China".
It is not only the past eight years of independence rhetoric that have prevented closer ties. There were significant hurdles to overcome, such as the 1996 Taiwan Strait Crisis that saw the People's Republic test missiles in the waters near Taiwan in response to then president Lee Teng-hui's visit to the US. However, for as long as there were no direct links between Taiwan and the mainland, any role Taiwan could play as a funnel to China was limited. But now, even as Taiwan and the mainland resolve their problems, Taiwan's opportunity may be lost.
"These are highly sophisticated markets," says Davies. "Why go anywhere before going to them?"
Both Davies and Wu warn that SA finds itself in a similar role with respect to Africa .
"Undoubtedly SA should be a regional hub, but internal divisions are preventing us from becoming that hub," Davies says. "If you don't want to give people work permits, how can they be a regional hub? Mauritius has already taken the role of Johannesburg as a regional financial centre. If Nigeria gets its act together, we're going to lose our status as first-choice African destination market."
Wu sees another threat to SA's regional dominance.
"If SA chooses the xenophobic route and cuts out Africa, you might end up like Taiwan. SA has a very good position at the moment, but there are a lot of other African economies that are going to become the access into Africa. If SA doesn't appreciate its position, it's going to end up as a stagnant economy."
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