Eugene Y. Change, President of Taiwan Acquire Assets Corp., said that direct air and marine transportation will save Taiwanese businesses operating on the mainland market hundreds of millions of Taiwan dollars ($1= 33.085 Taiwan dollars).

Cao Xiaoheng, Director of the Institute on Taiwan Economics, Nankai University, Tianjin, said that with direct transportation across the Straits, Taiwanese businesses can make better use of resources and markets on the mainland, upgrading economic cooperation to a higher level.

Cao said, "Direct marine and air transportation is more convenient, efficient and less costly. It will change the pattern of economic and trade cooperation. The division of labor between the mainland and Taiwan will go from a vertical division to a horizontal division."

Cao's observation was echoed by Ding, who added that with direct transportation, Taiwanese businessmen who used to concentrate in the Pearl River Delta and the Yangtze River Delta could move further north into the mainland.

Ding said that now that goods flow more easily across the Straits, Taiwanese businesses are expected to increase the proportion of goods they sell on the mainland. Taiwan's investment on the mainland will expand from the manufacturing industry into service industry, he added, and the two economies will become more closely linked.

"More convenient transportation will boost tourism and the consumption of consumer goods," Cao said. The cost of traveling to Taiwan will fall, triggering a tourism boom. Lower transportation costs will make it possible for Taiwanese businessmen to slash the price of their goods sold on the mainland, giving them incentives to bring more goods across the waters.

Deeper cooperation

Currently, cross-Straits economic and trade relations have not been fully established, and there remain barriers to cooperation in finance, investment and personnel, Cao said. He wants to see more done to step up economic and trade cooperation.

Although the "three direct links" have facilitated the flow of people and goods, there are still bottlenecks in financial cooperation. The two sides have not signed an agreement on financial supervision or currency clearing. Currently, capital flows across the Straits have to go through banks in a third place, increasing transaction costs and hindering financial cooperation. Public companies on the mainland cannot be listed on Taiwan stock exchanges, and vice versa, which obstructs the deepening of economic cooperation.

The current global economic situation has made it easier for the two sides to reach a consensus on "helping brothers" through difficult times, and has prompted them to enhance financial exchanges and cooperation, and to open discussions on the financial system. To cope with global financial storms, more in-depth cooperation between economic entities is necessary.

Financial cooperation will fuel more rapid and efficient economic cooperation across the Taiwan Straits, Chang said.

At present, Taiwan has set a high threshold on the mainland's investment in Taiwan, which has thwarted many mainland investors from investing on the island. Previously, cross-Straits relations were asymmetrical, with more capital and people coming from Taiwan to the mainland; while all-round economic cooperation should be characterized by symmetric economic exchanges, said Sun Shengliang, Director of the Economics Research Office of the Institute of Taiwan Studies, Chinese Academy of Social Sciences.

Sun said that in the future, the two sides should build a more flexible and pragmatic economic cooperation mechanism. The two-way flow of capital and personnel are key to the further development of cross-Straits economic and trade relations. Mainland investment in Taiwan will spur economic growth on both sides of the Straits and will create employment opportunities in Taiwan.

Although great progress has been made in cross-Straits economic and trade relations, many complicated economic problems are still to be solved, Cao believes. Mechanisms to facilitate economic and trade relations cannot be built overnight.

According to Cao, the framework for cross-Straits economic and trade cooperation should be built step by step. Trade and economic ties should first be normalized, and then deepened, before a closely knitted, highly interdependent and mutually beneficial "economic common wealth" can be established, he said.

This is an excerpt from an article published in the Economics Information Daily