Pacts offer businesses better prospects, but financial woes may slow cross-strait trade

PUBLISHED : Saturday, 08 November, 2008, 12:00am
UPDATED : Saturday, 08 November, 2008, 12:00am

Mainland companies doing business with Taiwan expect lower costs and more convenience to flow from agreements the two sides signed this week allowing direct flights, shipping and postal links.

But the full potential unleashed by the deals may not be realised quickly because of the global financial crisis, company officials said.

Some in Taiwan fear the deals are a political ploy by the mainland to bolster its goal of reunification, but mainland companies from Shanghai to Xiamen see only business opportunities for themselves.

'We have looked forward to this day for a long time,' said Yang Guanghua , general manager of Xiamen Airlines.

The mainland first publicly floated the idea of the 'three links' - mail, air and shipping services, and trade - as early as January 1979 - soon after its economic reform and opening up began.

At the time, the National People's Congress issued a letter to the Taiwanese people saying direct links would increase contacts and communication. When the mainland and Taiwan joined the World Trade Organisation in 2001 - Taiwan as a 'separate customs territory' to avoid the contentious issue of sovereignty - some analysts predicted the advent of direct links. But negotiations were ruled out by the fractious relationship between the two sides and by Taiwan's then president, Chen Shui-bian.

Now Xiamen Airlines, based in Fujian province across from Taiwan, will increase its routes and buy new planes to serve them after the mainland and the island agreed to triple the number of weekly charter flights to 108 and fly directly, instead of passing through Hong Kong airspace.

Such expansion for an airline is rare in today's troubled economic times, although the carrier's timetable for the move is uncertain.

Mike Chiang, one of the hundreds of thousands of Taiwanese living in greater Shanghai, expects it will become more convenient to visit his parents in Kaohsiung. Before the agreement, previous charters were indirect and operated only on weekends and holidays. 'It's quite convenient. I will definitely take it ... it will be cheaper,' he said.

Travel agencies hope the flights will increase the number of mainland tour groups visiting Taiwan, a new line of business that has not generated as much income as had been expected since its launch in early July.

'It will make it easier for tour agencies to design more diversified and flexible package tours. Since the ticket price is expected to drop by 30 to 40 per cent, the total travel expenses for customers will decrease by 20 to 30 per cent,' said Ge Wanjun , general manger of Shanghai Jin Jiang Travel.

The flight time between Shanghai and Taipei is expected to be about 80 minutes, compared with nearly three hours now. Direct shipping will be allowed between more than 60 ports on the mainland and 11 in Taiwan.

'The beginning of direct links is good news for both shipping companies and ports,' said Tong Mengda , general economist for the Ningbo Port Company. 'It will benefit the development of cross-strait trade and investment because half of the travel time will be saved and operating costs can be reduced by 30 to 40 per cent.'

Mr Tong expects increased traffic for Ningbo's port, which serves many Taiwanese companies in Zhejiang province , but sounds a note of caution. 'It's hard to say how much impact the deal will have now due to the economic crisis. In the long run, it should have a positive impact on the development of cross-strait trade.'

For Taiwanese companies operating on the mainland, the deals also mean increased efficiency and flexibility, executives said.

'After the agreements were signed, many Taiwanese businesspeople here celebrated, no matter what their political stance, because it was a long-awaited moment for them,' said Lu Xiaoyan , secretary of Shanghai's Taiwan Business Association, which represents more than 1,300 members. 'The deal may not have a critical influence now because of the financial crisis, but it should have a long-lasting effect.'

Additional reporting by Lilian Zhang