Friday, June 13, 2008

Agreement Inked on Regular Direct Flights

Reuters is one of many media outlets announcing the big news:

China and Taiwan signed a landmark deal on Friday to launch regular flights between the long-time rivals as politics was put aside in favour of practicalities in the first such talks in almost a decade.

Apart from special holidays, there have been no regular direct flights since 1949, when the defeated Nationalists fled to the island amid civil war with the Communists.

China has claimed sovereignty over self-ruled and democratic Taiwan ever since and has pledged to bring the island under its control, by force if necessary.

But the election of Taiwan President Ma Ying-jeou, who won by a landslide in March on pledges to boost the local economy by improving trade with China, has suddenly warmed relations.

"This is good for Ma Ying-jeou because he wants to deliver in his first 100 days," said Joseph Cheng, political science professor at City University of Hong Kong.

"Beijing is eager to win the hearts of the Taiwan people."

Goldman Sachs forecast Taiwan GDP growth to slow to 4.5 percent this year from 5.7 percent in 2007, but to rise to 4.8 percent next year "as the economic impact from the progress on cross-Strait policies comes to fruition".
Love that forecast, eh? With an additional 2,000 tourists a day, the economy will be nearly a percentage point worse in economic growth than it was in 2007 -- what it did in 2006, in fact, with no direct links. Note also that in all the hoopla cargo links are still months off. Part of the economic logic of Taiwan linking itself more closely to China was its position in the global supply chain. To retain that, it needs direct shipping and air cargo links to China. If Hsieh had won, I heard from insiders, direct shipping links were the first things to be implemented. WaPo's Ed Cody observes:

In addition, the agreement announced Friday says that negotiations on chartered freight flights are to begin within three months. This was an important point for Taiwan, whose business owners run many factories in mainland China that often require swift resupply.

MEDIA NOTES: Ed Wong's NY Times piece on this same news says that Beijing regards Taiwan as a "renegade province." That's a media formula; Beijing has never used it. Can it be dropped, please? Reports from AP, WaPo. Reuters also reports that the Taiwan media complained they didn't have enough access. That's the world you're building, guys, by supporting the Blues.

UPDATE: LOL. China's Taiwan Affairs Office claims Lee Teng-hui made up the "renegade province" phrase.

李登輝在文中還多次提到"北京聲稱台灣為叛離一省",這是他為欺騙國際輿論而扯下的一個彌天大謊。事實上,祖國大陸方面主張在堅持一個中國原則下進行兩岸 談判,從未說過以中央對地方的名義進行談判,更未說過什麼"台灣是叛離一省"。這恰恰是李登輝之流自設的"稻草人",每當他們的分裂行徑遭到中國人民嚴正 批駁時,便裝扮出一副可憐相,以圖博得國際輿論的同情。

4 comments:

Dezhong said...

Speaking of quick developments, I recently applied for a visitor visa to Taiwan. It seems like they already removed the English word "Taiwan" from the document. I used to have a resident visa a year ago on which "Taiwan" was included in brakets. Now it only says "Republic of China" both in Chinese and English.

No, I am not really surprised. (Though to be fair I should add that my last visitor visa from 2005 also only had "Republic of China" written on it. Anyone with similar experiences?)

Tommy said...

Yes, the money is in the direct cargo links. The tourism revenue is more like a symbolic bump to the economy. No matter how you cut it, 3,000 tourists a day will not bring a huge economic boost.

I do think that, in better economic times, the direct cargo links, together with more tourism can probably bring the GDP to 6 percent growth, as long as the underlying economy is very solid. But all factors would have to be playing perfectly for that to happen.

A bit of perspective. I saw an estimation recently about how much cargo may be lost to the port of Hong Kong if direct shipping links are established. It is something on the order of 4 million TEU annually. The port of Kaoshiung handles just over 10 million TEU annually, so 4 million is nothing to sneeze at. However, Kaoshiung is only one of Taiwan's ports. Lots of cargo goes in and out from the other ports too, so percentage wise, the total boost to shipping will not be 40 percent. Even if it were, this would not translate into 40 percent more business for anyone but port operators. There would simply be slightly lower costs for each container. In fact, costs may fall slightly across the board.

I know things can't be generalised this way, and there is a lot I am leaving out, but my point is that even with direct cargo and tourism links, which can provide a nice bump to the economy when everything is doing swell, Taiwan will not be heading back to the Taiwan Miracle days. Maybe Ma will get lucky and satisfy his economic goals in the future. Don't bet on it soon.

Anonymous said...

That container info is interesting to know Thomas, thanks. I always wondered how HK would be affected by losing this trade. The HK airport will also take a big financial hit.

BTW, a few nights ago I listened to a good mp3 audio called The 2nd Great Depression. It's by a retired statistical analyst/six sigma GE engineer and talks about the American consumer debt.

On interesting point he makes is that in Y2K the cost of a 40' container shipped from China to Long Beach was US$3000. Today it is $9000. If oil goes up to $200 the cost will be $15000.

Taiwan exporters will be in for some tough times for US bound trade.

-

Lastly, I heard a new movie will be coming out on the KMT/CCP lovefest. It's title:

2 Parties 1 Cup

Unknown said...

looking fwd to a greater taiwan-china ties... it can only get better for both countries :)