Dr. Wu of e-telligence Research and Consulting answered a few questions I asked him about China-Taiwan relations. His firm focuses on these relations and has a bi-weekly report you can subscribe to. Please contact e-telligence at [email protected]
1. How has the ECFA affected trans-border relations?
ETRC: Singed on June 29, 2010, the “Economic Cooperation Framework
Agreement” (ECFA) has brought three fundamental changes to
cross-Strait relations between China and Taiwan:
(a) An institutional mechanism (ECFA) has been put in place that would
make the ongoing socioeconomic engagement between China and
Taiwan irreversible, no matter which political party or candidate wins
the next election;
(b) The flow of capital and personnel has now become truly a two-way
exchange, with more Chinese investments expected in Taiwan after
the signing of the mutual investment protection agreement in early
© It heightens the likelihood for Taiwan to be economically integrated
regionally and maintains the competitiveness of Taiwanese products
and services following the formation of the “China plus ASEAN” free
trade area in January 2010.
2. It is estimated that the DPP cannot reverse the economic progress of
the KMT. What are your firm’s views on that?
ETRC: Direct transportation links, Chinese tourists to Taiwan and the
signing of ECFA in 2010 have been three of the most important
breakthroughs in the post-2008 cross-Strait rapprochement.
First, the direct air and sea links between major cities on both sides of the
Taiwan Strait have not only made travels more convenient, they have
fundamentally changed the development and operation strategies for
businesses. For example, it is now possible for Taiwanese business
executives to fly to Shanghai in the morning, meet Chinese counterparts
for lunch, and come back to Taipei for a late supper—all in the same day!
It is thus no longer necessary to have both manufacturing facilities and
corporate headquarters in China, as it has often been the case for
Taiwanese businesses since 1990s.
Second, the influx of Chinese tourists to Taiwan—projected to exceed 2.2
million this year—has provided a timely boost to the island’s retail and
hospitality industries. Though some of the retailers have been
disappointed by the per capita spending—approximately US$160—of
Chinese tourists, the number is expected to steadily increase in the
coming years. On the other hand, besides new boutique and business
hotels, more leading brands of international hotel chains have come into
Taiwan and established operations around the island, including the
Meridien, the W Hotel, and the Mandarin Oriental.
Finally, the opposition DPP has often reiterated its position that it will not
unilaterally terminate the ECFA if it returns to power. That continues to
be the position held by the newly-elected DPP Chairman, Su
Tseng-chang. In addition, since cross-Strait relations have been identified
as one of the major factors for the DPP losing two consecutive
presidential elections, most expect some fundamental changes in its
stance toward China are almost inevitable. In addition, Su has repeatedly
stated that he would be willing to visit China if no pre-conditions were
attached. That, however, remains a long shot in the near future.
3. How has the military situation changed in the past 10 years? Has
Taiwan positioned itself in an irreversibly tight relationship with the
ETRC: A credible defense has always been one of the few
subject-matters where both the KMT and the DPP can agree upon.
Though cross-Strait military tension has eased significantly, it continues
to be a government priority to acquire advanced weapons systems, mostly
from the United States. The latest item is an upgrade package to enhance
the combat capabilities of Taiwan’s existing fleet of F-16 A/B fighters.
China, on the other hand, has been engaged in an ambitious military
modernization and expansion program that goes far beyond Taiwan. With
the percentage of its annual military budget growing at double-digit,
countries like the US and Japan are concerned over the rising Chinese
military might and the possible impact on regional peace and stability.
In addition, despite the socioeconomic progress in cross-Strait ties since
2008, China’s military threat against Taiwan has not changed, particularly
its missile deployment along the southeastern coastal provinces. The
continued military threat against Taiwan, in turn, continues to justify the
procurement of advanced weapons from countries like the US.