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。

[Taiwan]

WSJ-Asia:Taiwan Airlines to benefit from Direct Flights?

I've been kvetching recently about the tendency to view the China-Taiwan economic relationship in cargo-cult terms, and here today the Asian edition of the Wall Street Journal carried an article today cautioning investors on exaggerating the effects of direct flights (link is behind a pay wall):

[Analysts] believe that even if direct China-Taiwan air links materialize -- the main hope behind the stocks' rise -- the airlines wouldn't benefit much.

This would hold true even in the most optimistic of scenarios, such as a doubling of traffic.

"Our calculations indicate that direct passenger links are only worth around NT$1 a share for both [Taiwanese] carriers," Merrill Lynch analyst Paul Dewberry wrote in a recent report. "In addition to susbstantial cannibalization of the Hong Kong route, the airlines will face stiff competition from Chinese carriers as well as suffer less-efficient use of assets."

The issue is still politics, though of a different nature. The distribution of the main revenue generator, destinations, is going to be based on negotiations. In fact, analysts point out, because direct links are verboten at present, Taiwan airlines are somewhat insulated from competition (Chinese competition, anyway). Since routes will be negotiated reciprocally, this means that all routes will be subject to (tough) competition from Chinese airlines. The analysts argue that even assuming that passenger traffic doubles to 16 million annually by 2012, up from 8 million currently between Taipei and Hong Kong (often claimed to be the busiest route on earth), China Airlines and Eva may at most carve out a 20% share of this market. Both airlines lost money last year, with China Airlines racking up a record deficit, attributable in part to rising fuel costs. These fundamentals, high fuel prices and competition, aren't going to change when direct flights happen.

Nor do analysts expect Chinese airlines to derive any great benefit. Airlines that are currently minting money on the ban on direct flights, like Air Macau and Cathy Pacific, can expect their share to plummet as up to 70% of passengers are expected to switch. Not mentioned is what will happen to Hong Kong's economy when many who might have stopped over for a day, switch to direct flights....

[Taiwan]

Ma charter flight plan opens July 4 (UPDATED with nuke plants)

Ma speaking at the Dead Dictator's Tomb (Taipei Times). Looks like a Photoshop moment, but it's for real. Cries out for captioning.

China Economic Review says Ma's charter flight plan commences July 4:

The National Policy Foundation, a think tank of Ma’s Nationalist Party or Kuomintang, said in a recent report that it had completed the direct weekend charter plan.

The service would begin taking passengers from the mainland for the weekend and carrying them back on Monday noon.

Chen Shih-yi, a foundation spokesman, said Ma had instructed that the service be started from July 4, and be extended to Chinese tourists coming to Taiwan for vacation after Beijing and Taipei work out an agreement.

Chen said Taiwan will open its international airports in Taoyuan in the north, Taichung in central Taiwan and Kaohsiung in the south for charter services. Flight points from the mainland will include Beijing, Shanghai, Guangzhou and Xiamen.

The development is an expansion of the current system of flying on holidays, which began five years ago.

UPDATE: Taipower announces it will add ten new nuclear plant units to replace existing units. Another consequence of KMT ascendancy.

[Taiwan]