Beijing's sub rosa efforts to punish investment banks which do prominent promotion for Taiwanese corporate fundraisers has just been escalated to the level of diplomatic complaint by the United States Government. It is a dispute which China should not have allowed to happen in the first place.
The problem began with efforts by Credit Suisse First Boston (CSFB) to publicise Taiwanese financial deals planned for the coming months. This included staging investment conferences in Hong Kong and Europe attended by Taiwanese officials, including Finance Minister Yen Ching-chang. These are common events, designed to convince other bankers to help raise funds and thereby earn the hosts some fat commissions.
But including the Finance Minister apparently was moving one limb too high up the government tree. Beijing officials suddenly barred CSFB from some lucrative deals in China, and made clear this was in retaliation for being too chummy with Taipei. At least five other institutions - Goldman Sachs, Merrill Lynch, JP Morgan Chase, ABN Amro and Daiwa Securities - quickly did the all-too-predictable and curtailed their own plans to tout pending Taiwanese investments.
This mixing of finance and politics might hurt Taiwan, at least temporarily, but it certainly does China's own reputation no good. Beijing is highly sensitive to matters affecting Taiwanese sovereignty, but that wasn't relevant to these strictly commercial events. By injecting that issue into matters which should rise or fall on their economic merits, Beijing officials have reminded the world that dealing with them can still be subject to arbitrary political obstacles.
Curiously, this dispute runs counter to a wide range of other cross-strait ventures. In fact, the Taiwanese official who seemed so objectionable was in Suzhou last night to meet his Beijing counterpart, Finance Minister Xiang Huaicheng. Their agenda presumably included proposals to establish direct trade and transport links between island and mainland.
It is in China's own interest to have Taiwan prosper, with an economy closely connected to that of the mainland. Scaring away skittish bankers is easy to do, but that raises questions about China's own constancy and does no one any good.
