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
August; and
© 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
US?

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.