Listen to this article
It is a mark of how the relationship between Taiwan and China has strengthened over the past few years that even the former head of Taiwan’s opposition party – which historically has been hostile to the mainland and in favour of Taiwanese independence – recently visited Beijing to meet officials and academics.
Since Taiwan’s President Ma Ying-jeou took office in 2008, Taiwan’s relationship with China has warmed significantly. The two have signed nearly 20 trade and investment pacts, started direct flights between Taiwan and the mainland and made Taipei the first market outside Hong Kong able to clear renminbi transactions.
But with those key agreements sealed, the pace of change in the relationship will likely begin to slow, businesspeople and political analysts say.
Many of the regulations that limited Chinese investment in Taiwan or imposed tariffs on Taiwanese goods shipped to China have been loosened or are under negotiation. Remaining restrictions, such as limits on mainland investment in Taiwan property, are seen as too complicated or politically fraught to change for now.
Clarification of the status of the political relationship between Taipei and Beijing remains too controversial for Taiwan’s government to open talks on, political analysts say.
“[Taiwan’s leaders] cannot do a political deal unless they have a mandate from the people of Taiwan,” says Steve Tsang, an expert in Chinese and Taiwanese politics at the university of Nottingham.
The question for many is to what extent the improved relations and trade pacts already signed will boost cross-strait investment.
Many investors are hoping mainland investment in the smaller market will boost Taiwan’s flagging economy and a stock market that has underperformed much of the region.
The signs are positive. In November, the largest investment yet by a Chinese company in a Taiwanese one was unveiled, when Sanan Optoelectronics announced plans to buy an $81m stake in Formosa Epitaxy, an LED maker, although the deal awaits regulatory approval.
Overall investment from China into Taiwan had risen 309 per cent year on year to $156.7m by October of this year. Most of that came from two Chinese banks that opened branches in Taipei this summer.
Yet analysts and businesspeople forecast that mainland Chinese investment in Taiwan will, for now, remain limited.
Although Japanese companies are increasingly interested in partnerships with Taiwanese companies to work on the mainland, the new cross-strait trade agreements have yet to spark similar interest from western companies, says Christoph Nettesheim, head of Boston Consulting Group in greater China.
Mainland investors have focused on a limited number of sectors, particularly technology, where investors want access to Taiwan’s intellectual property, says John Chen, a Taipei-based consultant on cross-strait business.
Real estate is an area of interest, although mainland buyers still face strict limits on purchasing property. Chinese developer Vantone has a partnership with a local group to build luxury flats on a mountain north of Taipei, the first big Chinese-backed development on the island.
Beyond that, Mr Chen hears from prospective Chinese investors that “Taiwan’s market is too small – China invests in Africa or southeast Asia.”
Get alerts on Special Report when a new story is published