Taiwan fails to lure mainland investors....?
By Jens Kastner
http://www.econmatters.com/2011/11/how-low-can-you-go-selling-out-taiwan.html
TAIPEI - Taiwan has gradually opened up to investments from China since 2009. Relaxations have been hugely controversial over concerns that the former arch-enemy would use its money as a means to achieve backdoor unification. But as of today, a noteworthy flow of Chinese foreign direct investments (FDI) toward Taiwan is conspicuous by absence. Aggregated they had only reached some US$150 million at the end of last year, a Lilliputian amount compared to 2011's total foreign investments in Taiwan of $9.53 billion. The Taiwanese government's red tape is not the only reason for the disappointing figure.
Those who have $150 million to spare could afford a fancy office tower on top of a Taipei subway station; or a massive cement factory in some Taiwanese backwater town; or two dozen topnotch helicopters. Anyway, $150 million is petty cash for China, the world's largest foreign exchange reserve holder with reserves as high as $3.2016 trillion, especially when considering that it's assessed Beijing would do almost anything to pocket Taiwan.
A comparison with other countries' FDI on the island makes the insignificance of the sum even clearer: Taiwan's largest investor last year, with investments worth $2.15 billion, were the Americans, while the Singaporeans came in second at $1.02 billion, followed by the Japanese at $0.97 billion. And in China, about 80,000 Taiwanese enterprises have invested with value totaling some astronomic $80 billion.
To make China inject cash into their economy, the Taiwanese implemented two waves of opening. Both of which were largely spurned.
In 2009, Chinese FDI was allowed in 192 items that were not considered sensitive, such as textiles, garments and clothing accessories, electronic components, computers, mobile phones, automobiles and plastics. As the industries involved were competitive, low profit or mature, this opening only brought in some $140 million. But when in March last year, panels and semiconductors together with 40 other sectors were put on the list, the amount was predicted to grow dramatically.
Chinese TV brands would form strategic alliances with LCD panel firms in Taiwan in order to stabilize their component supply, while the Taiwanese firms in turn would be able to afford technology upgrades to compete against rival South Korea, economists and officials predicted back then. They said the Chinese would put up with rules such as the one that prohibits them from having board control over their Taiwanese partners, or the one that only allows them to acquire a maximum 10% stake in existing Taiwanese technology companies.
Decisively belying this optimism, what was meant as a landmark relaxation only made the tiny difference of $10 million. As an outcome as surprising as embarrassing, Taiwan has not attracted any Chinese investment in anchor sectors, such as panels and chips, since.
Whether the Chinese will be more tempted to invest in the island's financial sector is left to be seen. In January, Taipei allowed banks from across the strait to acquire stakes in Taiwanese banks and financial holding companies. According to the new rules, qualified Chinese lenders may take up to a 5% stake in a single Taiwanese bank or financial holding company, but collectively their shares may not exceed a 10% ceiling. China Construction Bank (CCB) and Industrial and Commercial Bank of China (ICBC) are rumored to harbor interest but have not filed applications to date.
Furthermore, under present rules, Chinese lenders are allowed to open one branch each in Taiwan. Applications by the Bank of China and the Bank of Communications to upgrade their representative offices in Taipei to branches were recently approved of. China's third and fifth-largest lenders by asset are now authorized to invest $40 million and $51 million, respectively.
An announcement on a third wave of opening to Chinese FDI is expected in March. Taiwanese officials indicated that Chinese firms will be allowed to build subways, roads and stations, among other infrastructure, but that their funds will still be banned in the property market to prevent speculation. It is furthermore relatively certain that neither will enterprises operating fixed networks and telephone services be allowed nor that restrictions on advertisements by Chinese companies will be relaxed.
In interviews with Asia Times Online, economists shed light on why China's firms don't take the bait. According to them, it's not only the island's rigid regulators who deserve the blame.
"The lacking of investment incentive is the main reason and strict regulations is the second one," said Peter Wang Yu-Ter, an economist at Ming Chuan University in Taipei. "This might be bad for Taiwan's economic development. But political factors are usually taken into account in any affairs between China and Taiwan."
The omnipresent political component in Taipei's decision-making comes about because the unification-wary among the Taiwanese fear that Beijing wants to control the island's economy via FDI while at the same time locking up Taiwan's own capital and talent in the mainland's.
Hong Honigmann, professor at National Tsing Hua University, pointed at yet more reasons for the absence of monetary windfall. He weighed in that according to the textbooks of economy, FDI tend to flow from developed countries into developing ones. "So if China invests in Taiwan, it could be called an adverse current."
Hong furthermore emphasized that a cross-strait investment agreement has yet to be signed, and that "FDI usually come along with flows of personnel and services, all of which being obstructed by Taipei when dealing with China."
A cross-strait investment agreement has despite intense negotiations failed to materialize as Taipei requests international arbitration which Beijing opposes as it would imply Taiwanese statehood. As indicated by Hong, obtaining Taiwanese visas is far more complicated for Chinese citizens than for nationals from Taiwan's other major FDI sources.
Ronald A Edwards, a specialist on China's political economy at Tamkang University in Taipei, singled out restrictions on the purchase of land as a major turn-off as well as significant political risks.
"Any sudden massive influx of investment from the mainland is bound to cause a political reaction in Taiwan that works against further investment and possibly also against mainland Chinese investors' chances to obtain the returns on their investment," Edwards said.
"Also, with Taiwan's presidential elections cycles being only four-year periods, there's the scare of possible roll backs of investment-related agreements should the DPP [anti-unification Democratic Progressive Party] take over the administration."
In far-away Vancouver, Yves Tiberghien, a China expert and associate professor at the University of British Columbia's Department of Political Science, argued that investments in Taiwan don't fit with China's FDI patterns anyway.
"Chinese outward FDI is mostly seeking to get natural resources, financial firms, or some industrial firms in Western powers. There is not much in Taiwan that Chinese firms cannot already have in the mainland. So, it could be mainly that - a question of demand."
Also Hu Sheng-Cheng, an economist at Academia Sinica, Taiwan's most renowned research institution, presented an intriguing explanation for China's lackluster investments.
He said that the presidential and legislative elections held in mid-January, in which Ma Ying-jeou of the Beijing-friendly Kuomintang (KMT) won re-election, showed that Beijing achieves its objectives without having to waste money on little lucrative investments in Taiwan. Shortly before the polls, a number of Taiwanese entrepreneurs active in China publicly endorsed the Beijing-friendly cross-strait approach of Ma, a move that likely contributed a good deal to his win.
"If mainland China wants to control Taiwan's economy, all it has to do is pressuring the big Taiwanese companies in China. They don't even have to come here investing for this," Hu said.
He concluded on a disturbing note. According to him, while China spurns investing in Taiwan's technology firms and their likes, it will be much more interested in the financial sector.
"Through the banking pipeline, the mainland can obtain detailed information about Taiwan's economic operations; this, and not FDI, will enable them to directly control Taiwan's economy."
By Jens Kastner
http://www.econmatters.com/2011/11/how-low-can-you-go-selling-out-taiwan.html
TAIPEI - Taiwan has gradually opened up to investments from China since 2009. Relaxations have been hugely controversial over concerns that the former arch-enemy would use its money as a means to achieve backdoor unification. But as of today, a noteworthy flow of Chinese foreign direct investments (FDI) toward Taiwan is conspicuous by absence. Aggregated they had only reached some US$150 million at the end of last year, a Lilliputian amount compared to 2011's total foreign investments in Taiwan of $9.53 billion. The Taiwanese government's red tape is not the only reason for the disappointing figure.
Those who have $150 million to spare could afford a fancy office tower on top of a Taipei subway station; or a massive cement factory in some Taiwanese backwater town; or two dozen topnotch helicopters. Anyway, $150 million is petty cash for China, the world's largest foreign exchange reserve holder with reserves as high as $3.2016 trillion, especially when considering that it's assessed Beijing would do almost anything to pocket Taiwan.
A comparison with other countries' FDI on the island makes the insignificance of the sum even clearer: Taiwan's largest investor last year, with investments worth $2.15 billion, were the Americans, while the Singaporeans came in second at $1.02 billion, followed by the Japanese at $0.97 billion. And in China, about 80,000 Taiwanese enterprises have invested with value totaling some astronomic $80 billion.
To make China inject cash into their economy, the Taiwanese implemented two waves of opening. Both of which were largely spurned.
In 2009, Chinese FDI was allowed in 192 items that were not considered sensitive, such as textiles, garments and clothing accessories, electronic components, computers, mobile phones, automobiles and plastics. As the industries involved were competitive, low profit or mature, this opening only brought in some $140 million. But when in March last year, panels and semiconductors together with 40 other sectors were put on the list, the amount was predicted to grow dramatically.
Chinese TV brands would form strategic alliances with LCD panel firms in Taiwan in order to stabilize their component supply, while the Taiwanese firms in turn would be able to afford technology upgrades to compete against rival South Korea, economists and officials predicted back then. They said the Chinese would put up with rules such as the one that prohibits them from having board control over their Taiwanese partners, or the one that only allows them to acquire a maximum 10% stake in existing Taiwanese technology companies.
Decisively belying this optimism, what was meant as a landmark relaxation only made the tiny difference of $10 million. As an outcome as surprising as embarrassing, Taiwan has not attracted any Chinese investment in anchor sectors, such as panels and chips, since.
Whether the Chinese will be more tempted to invest in the island's financial sector is left to be seen. In January, Taipei allowed banks from across the strait to acquire stakes in Taiwanese banks and financial holding companies. According to the new rules, qualified Chinese lenders may take up to a 5% stake in a single Taiwanese bank or financial holding company, but collectively their shares may not exceed a 10% ceiling. China Construction Bank (CCB) and Industrial and Commercial Bank of China (ICBC) are rumored to harbor interest but have not filed applications to date.
Furthermore, under present rules, Chinese lenders are allowed to open one branch each in Taiwan. Applications by the Bank of China and the Bank of Communications to upgrade their representative offices in Taipei to branches were recently approved of. China's third and fifth-largest lenders by asset are now authorized to invest $40 million and $51 million, respectively.
An announcement on a third wave of opening to Chinese FDI is expected in March. Taiwanese officials indicated that Chinese firms will be allowed to build subways, roads and stations, among other infrastructure, but that their funds will still be banned in the property market to prevent speculation. It is furthermore relatively certain that neither will enterprises operating fixed networks and telephone services be allowed nor that restrictions on advertisements by Chinese companies will be relaxed.
In interviews with Asia Times Online, economists shed light on why China's firms don't take the bait. According to them, it's not only the island's rigid regulators who deserve the blame.
"The lacking of investment incentive is the main reason and strict regulations is the second one," said Peter Wang Yu-Ter, an economist at Ming Chuan University in Taipei. "This might be bad for Taiwan's economic development. But political factors are usually taken into account in any affairs between China and Taiwan."
The omnipresent political component in Taipei's decision-making comes about because the unification-wary among the Taiwanese fear that Beijing wants to control the island's economy via FDI while at the same time locking up Taiwan's own capital and talent in the mainland's.
Hong Honigmann, professor at National Tsing Hua University, pointed at yet more reasons for the absence of monetary windfall. He weighed in that according to the textbooks of economy, FDI tend to flow from developed countries into developing ones. "So if China invests in Taiwan, it could be called an adverse current."
Hong furthermore emphasized that a cross-strait investment agreement has yet to be signed, and that "FDI usually come along with flows of personnel and services, all of which being obstructed by Taipei when dealing with China."
A cross-strait investment agreement has despite intense negotiations failed to materialize as Taipei requests international arbitration which Beijing opposes as it would imply Taiwanese statehood. As indicated by Hong, obtaining Taiwanese visas is far more complicated for Chinese citizens than for nationals from Taiwan's other major FDI sources.
Ronald A Edwards, a specialist on China's political economy at Tamkang University in Taipei, singled out restrictions on the purchase of land as a major turn-off as well as significant political risks.
"Any sudden massive influx of investment from the mainland is bound to cause a political reaction in Taiwan that works against further investment and possibly also against mainland Chinese investors' chances to obtain the returns on their investment," Edwards said.
"Also, with Taiwan's presidential elections cycles being only four-year periods, there's the scare of possible roll backs of investment-related agreements should the DPP [anti-unification Democratic Progressive Party] take over the administration."
In far-away Vancouver, Yves Tiberghien, a China expert and associate professor at the University of British Columbia's Department of Political Science, argued that investments in Taiwan don't fit with China's FDI patterns anyway.
"Chinese outward FDI is mostly seeking to get natural resources, financial firms, or some industrial firms in Western powers. There is not much in Taiwan that Chinese firms cannot already have in the mainland. So, it could be mainly that - a question of demand."
Also Hu Sheng-Cheng, an economist at Academia Sinica, Taiwan's most renowned research institution, presented an intriguing explanation for China's lackluster investments.
He said that the presidential and legislative elections held in mid-January, in which Ma Ying-jeou of the Beijing-friendly Kuomintang (KMT) won re-election, showed that Beijing achieves its objectives without having to waste money on little lucrative investments in Taiwan. Shortly before the polls, a number of Taiwanese entrepreneurs active in China publicly endorsed the Beijing-friendly cross-strait approach of Ma, a move that likely contributed a good deal to his win.
"If mainland China wants to control Taiwan's economy, all it has to do is pressuring the big Taiwanese companies in China. They don't even have to come here investing for this," Hu said.
He concluded on a disturbing note. According to him, while China spurns investing in Taiwan's technology firms and their likes, it will be much more interested in the financial sector.
"Through the banking pipeline, the mainland can obtain detailed information about Taiwan's economic operations; this, and not FDI, will enable them to directly control Taiwan's economy."
China blocks Hong Kong-Taiwan embrace...
By Jens Kastner
TAIPEI - Taiwan's Beijing-friendly Kuomintang (KMT) government would like to see Hong Kong's Chief Executive Donald Tsang stop by on the island. However, it seems Beijing and Tsang himself aren't too keen on the implications of such a visit.
Tsang has previously said an official visit to Taipei was his heartfelt wish, and the pending opening of Hong Kong's de facto consulate in Taipei seemed to present a perfect opportunity. However, Tsang no longer wants to visit, with the reversal more lively based on events in China rather than in Hong Kong or Taiwan.
The formal opening of the Hong Kong Economic, Trade and Cultural Office in Taipei - which started operating in late 2011 - is expected within months. Tsang said in his 2009 annual policy address that he wanted to visit Taiwan during his term, which ends on June 30.
Taiwan's representative office in Hong Kong recently revealed that it had made what it called "goodwill gestures" likely in preparation for an invitation. However, these were reportedly turned down by the chief executive's office.
A trip by Tsang to Taiwan would have been a complicated matter. Since Beijing doesn't recognize the Taiwanese government as legitimate, the question of how he would address Taiwanese officials is an early stumbling block.
How potentially explosive such protocol issues are in cross-Taiwan Strait meetings was demonstrated vividly in 2010, when Chen Yunlin, chairman of Beijing's Association for Relations Across the Taiwan Strait, visited Taiwan, making him the highest-ranking mainland official ever to do so. Chen infamously addressed Taiwan's President Ma Ying-jeou as "Mr Ma", enraging many Taiwanese and costing the KMT significant political capital at home.
Tsang's status as the chief executive of the Hong Kong Special Administrative Region (SAR) lends him a rank in the Chinese political hierarchy equivalent to a provincial governor or a minister. Taipei would therefore have to put up with Beijing presenting Tsang's trip to a mainland audience as two SARs dealing with one another.
Already heading in that direction, Tsang said in 2009, "Hong Kong can introduce to Taiwan how the principle of 'one country, two systems' is being implemented in the city."
"One country, two systems" is a brainchild of China's former leader Deng Xiaoping. It stipulates that the mainland, Hong Kong, Macau and Taiwan all belong to "one China" but that each region can have its own political system and run its own legal, economic and financial affairs.
To the Taiwanese, having enjoyed de facto independence for six decades, the Deng doctrine has never been an attractive option.
Regardless of the obvious risks Tsang's visit would bring about, the Taiwanese KMT government under Ma still wanted him to come.
Chen In-Chin, a professor at Taiwan's National Central University's Graduate Institute of Law and Government, told Asia Times Online that Ma felt the visit would benefit Taiwan's global presence.
"President Ma intends to expand his room for maneuver on the international stage with the help of the Hong Kong connection," Chen said. "Ma wants to get into the Trans-Pacific Partnership [TPP], and Washington has signaled it is okay with this, but it is a complicated diplomatic game." [1]
The TPP is a multilateral free trade agreement promoted by the Barack Obama administration that excludes China. Ma has made membership part of his "golden decade plan", but Beijing is certain to oppose it as it could enable Taiwan to drift from its orbit.
"By dealing properly with Hong Kong, Ma can demonstrate to Beijing that it can give Taiwan some international room. Hong Kong is a perfect touchstone as it is a World Trade Organization member and can individually sign free trade agreements. Taiwan wants that, too," Chen said.
But Tsang has some plausible motivations to drop by in Taipei, according to Chen.
"In recent months, there's been heated brawls between the city and Beijing [mainly about the Hongkongers' impression their city is flooded by mainlanders], and many people merely see him as Beijing's puppet. Tsang going to Taiwan could prove to Hong Kong's population that he is doing something for them."
Chen added that Hong Kong maintained close relations with Taiwan prior to the hand-over from Britain to China in 1997, but that these had since cooled. Tsang could be lauded for a trip that could revive business and cultural ties. He is positive that it's the Chinese leadership preventing Hong Kong and Taipei from getting together.
"Beijing considers both as SARs. Ties between two SARs mustn't be closer than their respective ties to Beijing."
However, it is not totally implausible that Beijing could applaud Tsang for traveling to Taiwan. In 2006, Chinese President Hu Jintao reportedly established an academic team that's main task was finding a path between the "one country, two systems" spurned by the Taiwanese and the "special state-to-state relations", which is an anathema to the Chinese Communist Party (CCP).
It's not clear if the mission was a success, but it is evident that there have been some major changes of attitude on Beijing's side since. Hu's hallmark approach - that easy topics are negotiated first between Beijing and Taipei, thereby leaving the difficult and political ones shelved - has proved hugely successful.
Given his high rank, a visit by Tsang to Taipei could be seen in the same context, since it would allow a fine-tuning of protocol and etiquette in cross-strait meetings that then would pave the way for mainland officials of a very high rank to visit Taipei, as well as their Taiwanese counterparts traveling to Beijing.
Late last year, Ma Ying-jeou indicated the possibility of a peace agreement, but in the same breath said that he couldn't sign it as long as Beijing would not address him as "president".
Developments surrounding the Taiwanese presidential and legislative elections in January also signaled that Hu's academic team had been creative.
In the past, Chinese media were not allowed to use terms such as "president" and "legislature" when reporting on Taiwanese politics without putting them between inverted commas, but during and after the elections even orthodox state-run publications like the Global Times skipped the practice.
The formula, if there is any, is simple: If Beijing's media organs can call Ma "president", figures like Tsang can do so when visiting Taipei. A main stumbling block for political cross-strait negotiations, including those for a peace agreement, would seemingly be removed.
Professor Chen confirmed that the CCP had commissioned China's academic circles to come up with new ideas.
"The academics acknowledge that for China's quest to achieve unification, there's no easy way around the ROC [Republic of China] constitution. But Hong Kong might be a vehicle out of the quagmire. If a Hong Kong chief executive would address Ma as 'president' as a trial, Beijing could observe the reaction."
A likewise strategy would explain why Tsang said he wanted to go in the first place. But Chen also presented a plausible explanation as to why he changed his mind.
According to Chen, the lead-up to the Chinese leadership change expected at the 18th party congress this autumn has been getting out of hand for the CCP.
He cites the unfolding political drama in Chonqing, where party chief Bo Xilai, who was tipped to join the all-powerful Politburo Standing Committee, is battling for his political survival after his right-hand man, Chongqing vice mayor Wang Lijun, tried to seek asylum in a US consulate.
While Bo's rivals, most prominently Guangdong CCP chief Wang Yang, are said to be laughing up their sleeves, the outgoing CCP leadership is concerned events could spin out of control and even impact on Hu's legacy.
"It'd be way too risky for Beijing to let Tsang visit Taipei at this stage. If Tsang would say anything here that faintly smacks of a formal recognition of Taiwan's independent status, it would give powerful political ammunition to China's political left and ultra-nationalists. They would then brand Tsang's moves [and Hu's cross-strait approach] as treason."
Note
1. The Trans-Pacific Partnership's nine full members are Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam.
Jens Kastner is a Taipei-based journalist.
By Jens Kastner
TAIPEI - Taiwan's Beijing-friendly Kuomintang (KMT) government would like to see Hong Kong's Chief Executive Donald Tsang stop by on the island. However, it seems Beijing and Tsang himself aren't too keen on the implications of such a visit.
Tsang has previously said an official visit to Taipei was his heartfelt wish, and the pending opening of Hong Kong's de facto consulate in Taipei seemed to present a perfect opportunity. However, Tsang no longer wants to visit, with the reversal more lively based on events in China rather than in Hong Kong or Taiwan.
The formal opening of the Hong Kong Economic, Trade and Cultural Office in Taipei - which started operating in late 2011 - is expected within months. Tsang said in his 2009 annual policy address that he wanted to visit Taiwan during his term, which ends on June 30.
Taiwan's representative office in Hong Kong recently revealed that it had made what it called "goodwill gestures" likely in preparation for an invitation. However, these were reportedly turned down by the chief executive's office.
A trip by Tsang to Taiwan would have been a complicated matter. Since Beijing doesn't recognize the Taiwanese government as legitimate, the question of how he would address Taiwanese officials is an early stumbling block.
How potentially explosive such protocol issues are in cross-Taiwan Strait meetings was demonstrated vividly in 2010, when Chen Yunlin, chairman of Beijing's Association for Relations Across the Taiwan Strait, visited Taiwan, making him the highest-ranking mainland official ever to do so. Chen infamously addressed Taiwan's President Ma Ying-jeou as "Mr Ma", enraging many Taiwanese and costing the KMT significant political capital at home.
Tsang's status as the chief executive of the Hong Kong Special Administrative Region (SAR) lends him a rank in the Chinese political hierarchy equivalent to a provincial governor or a minister. Taipei would therefore have to put up with Beijing presenting Tsang's trip to a mainland audience as two SARs dealing with one another.
Already heading in that direction, Tsang said in 2009, "Hong Kong can introduce to Taiwan how the principle of 'one country, two systems' is being implemented in the city."
"One country, two systems" is a brainchild of China's former leader Deng Xiaoping. It stipulates that the mainland, Hong Kong, Macau and Taiwan all belong to "one China" but that each region can have its own political system and run its own legal, economic and financial affairs.
To the Taiwanese, having enjoyed de facto independence for six decades, the Deng doctrine has never been an attractive option.
Regardless of the obvious risks Tsang's visit would bring about, the Taiwanese KMT government under Ma still wanted him to come.
Chen In-Chin, a professor at Taiwan's National Central University's Graduate Institute of Law and Government, told Asia Times Online that Ma felt the visit would benefit Taiwan's global presence.
"President Ma intends to expand his room for maneuver on the international stage with the help of the Hong Kong connection," Chen said. "Ma wants to get into the Trans-Pacific Partnership [TPP], and Washington has signaled it is okay with this, but it is a complicated diplomatic game." [1]
The TPP is a multilateral free trade agreement promoted by the Barack Obama administration that excludes China. Ma has made membership part of his "golden decade plan", but Beijing is certain to oppose it as it could enable Taiwan to drift from its orbit.
"By dealing properly with Hong Kong, Ma can demonstrate to Beijing that it can give Taiwan some international room. Hong Kong is a perfect touchstone as it is a World Trade Organization member and can individually sign free trade agreements. Taiwan wants that, too," Chen said.
But Tsang has some plausible motivations to drop by in Taipei, according to Chen.
"In recent months, there's been heated brawls between the city and Beijing [mainly about the Hongkongers' impression their city is flooded by mainlanders], and many people merely see him as Beijing's puppet. Tsang going to Taiwan could prove to Hong Kong's population that he is doing something for them."
Chen added that Hong Kong maintained close relations with Taiwan prior to the hand-over from Britain to China in 1997, but that these had since cooled. Tsang could be lauded for a trip that could revive business and cultural ties. He is positive that it's the Chinese leadership preventing Hong Kong and Taipei from getting together.
"Beijing considers both as SARs. Ties between two SARs mustn't be closer than their respective ties to Beijing."
However, it is not totally implausible that Beijing could applaud Tsang for traveling to Taiwan. In 2006, Chinese President Hu Jintao reportedly established an academic team that's main task was finding a path between the "one country, two systems" spurned by the Taiwanese and the "special state-to-state relations", which is an anathema to the Chinese Communist Party (CCP).
It's not clear if the mission was a success, but it is evident that there have been some major changes of attitude on Beijing's side since. Hu's hallmark approach - that easy topics are negotiated first between Beijing and Taipei, thereby leaving the difficult and political ones shelved - has proved hugely successful.
Given his high rank, a visit by Tsang to Taipei could be seen in the same context, since it would allow a fine-tuning of protocol and etiquette in cross-strait meetings that then would pave the way for mainland officials of a very high rank to visit Taipei, as well as their Taiwanese counterparts traveling to Beijing.
Late last year, Ma Ying-jeou indicated the possibility of a peace agreement, but in the same breath said that he couldn't sign it as long as Beijing would not address him as "president".
Developments surrounding the Taiwanese presidential and legislative elections in January also signaled that Hu's academic team had been creative.
In the past, Chinese media were not allowed to use terms such as "president" and "legislature" when reporting on Taiwanese politics without putting them between inverted commas, but during and after the elections even orthodox state-run publications like the Global Times skipped the practice.
The formula, if there is any, is simple: If Beijing's media organs can call Ma "president", figures like Tsang can do so when visiting Taipei. A main stumbling block for political cross-strait negotiations, including those for a peace agreement, would seemingly be removed.
Professor Chen confirmed that the CCP had commissioned China's academic circles to come up with new ideas.
"The academics acknowledge that for China's quest to achieve unification, there's no easy way around the ROC [Republic of China] constitution. But Hong Kong might be a vehicle out of the quagmire. If a Hong Kong chief executive would address Ma as 'president' as a trial, Beijing could observe the reaction."
A likewise strategy would explain why Tsang said he wanted to go in the first place. But Chen also presented a plausible explanation as to why he changed his mind.
According to Chen, the lead-up to the Chinese leadership change expected at the 18th party congress this autumn has been getting out of hand for the CCP.
He cites the unfolding political drama in Chonqing, where party chief Bo Xilai, who was tipped to join the all-powerful Politburo Standing Committee, is battling for his political survival after his right-hand man, Chongqing vice mayor Wang Lijun, tried to seek asylum in a US consulate.
While Bo's rivals, most prominently Guangdong CCP chief Wang Yang, are said to be laughing up their sleeves, the outgoing CCP leadership is concerned events could spin out of control and even impact on Hu's legacy.
"It'd be way too risky for Beijing to let Tsang visit Taipei at this stage. If Tsang would say anything here that faintly smacks of a formal recognition of Taiwan's independent status, it would give powerful political ammunition to China's political left and ultra-nationalists. They would then brand Tsang's moves [and Hu's cross-strait approach] as treason."
Note
1. The Trans-Pacific Partnership's nine full members are Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam.
Jens Kastner is a Taipei-based journalist.
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