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Wednesday, 15 August, 2001, 07:44 GMT 08:44 UK
Taiwan leader backs trade with China
Taipei, capital of Taiwan
Taipei is anxious to kick start its economy
By Taiwan correspondent Damian Grammaticas

Taiwan's president has given his support to a proposal to lift a 50-year ban on direct trading and financial links with China.

But the idea is a controversial one.

The vice-president has warned that the island's economy and its security could be threatened.

President Chen Shui-bian
The president says Taiwan must be competitive
Taiwan isolated itself from mainland China to preserve the island's national security and its economic independence.

Now President Chen Shui-bian has said that a new, more relaxed policy is the right path to follow.

In an era of globalisation, he said, Taiwan could not resist the pressure for greater trade and economic relations with China.

To open up, he added, would help Taiwan maintain its competitiveness in the global market.

His comments come after a committee of economic advisors recommended at the weekend that Taiwan make preparations for direct shipping and air links and lift the current cap on the amount local companies can invest in China.

'Active' policy

The move, which has yet to be adopted as official policy, has strong support from the business community which sees it as a way to revive Taiwan's struggling economy.

But Vice-President Annette Lu said lifting restrictions would mean handing over Taiwan's hard-earned money to mainland China.

Taiwan's current policy goes by the name "go slow, be patient".

The proposal is to replace it with one called "active opening, effective management".

Although the island is just 150km (95 miles) from the mainland, businessmen and travellers have to fly via Hong Kong, and goods pass the same way. Taiwanese firms are limited to investing not more than $50m in each project on the mainland.

Nevertheless it is estimated that Taiwanese companies have pumped more than $50bn into China in the past decade, some by circumventing the restrictions. With the global slowdown hurting Taiwan, companies want the policy relaxed so they can access cheap labour and new markets.

President Chen has now given his support saying Taiwan needs to "go outside and find more opportunities".

But there are fears that the move could instead undermine Taiwan's economy by opening the floodgates for businesses to leave the island in droves.

Ms Lu has criticised what she called mainland fever among Taiwan's companies, which she said were taking the island's lifeblood to China. And Taiwan's National Security Bureau has warned that China is trying to force the island to reunify with the mainland through economic means.

The government says it is aware of the threat, but believes it can deal with it by being prudent and creating effective risk management measures.

Taiwanese businessman Chuck Han
"Business is business"
See also:

13 Aug 01 | Business
Taiwan to free up China investment
10 Aug 01 | Asia-Pacific
Taiwan denies UN bid threatens China
23 Jul 01 | Business
Taiwan's economy worsens
20 Jul 01 | Business
Taiwan's growth set to halve to 2.2%
30 May 01 | Business
Tech crisis hits Taiwan economy
18 May 01 | Asia-Pacific
Taiwan reaches out to China
06 Aug 01 | Country profiles
Country profile: Taiwan
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