China in Transition

# Improved Cross-Straits Relations under the Ma Ying-jeou Administration - A path to peaceful reunification -

Chi Hung KWAN
Consulting Fellow, RIETI

The Kuomintang Party administration of Ma Ying-jeou, which came to power in Taiwan with the presidential election in 2008, has dropped the Taiwanization Policy promoted by the former Democratic Progressive Party administration Chen Shui-bian in favor of closer relations with the mainland. The mainland, too, has also employed a more flexible policy toward Taiwan since Hu Jintao became General Secretary of the Chinese Communist Party in 2002, in contrast to the hard-line stance adopted by his predecessor Jiang Zemin. With these developments, cross-strait relations are now increasingly oriented towards rapprochement rather than confrontation.

## "Three Links" now fully in place

Ma Ying-jeou was inaugurated as president of Taiwan on May 20, 2008. Just three weeks later, on June 12, Chiang Pin-kung, chairman of the Straits Exchange Foundation (SEF) in Taiwan, visited Beijing to meet with Chen Yunlin, chairman of the Association for Relations Across the Taiwan Straits (ARATS). The visit marked the highest working-level talks between the contact organizations in China and Taiwan in approximately ten years, and led to an agreement (effective from July 4, 2008) on issues such as the weekend operation of charter flights by both China and Taiwan across the Straits and the acceptance of tourists from the mainland to Taiwan.

At the second meeting of Chen Yunlin and Chiang Pin-kung, held on November 4, the two sides signed agreements on: 1) air transportation such as cross-straits daily operation of charter flights; 2) marine transportation, including direct cross-straits voyages; 3) postal mail services, including direct cross-straits delivery; and 4) food safety, such as the establishment of an immediate cross-Straits reporting system.

At the third Chen-Chiang meeting, held in Nanjing in April 2009, a supplementary agreement on cross-straits air transportation was signed (opening scheduled passenger and freight flights). It was also agreed to hold talks on cross-straits financial cooperation and mutual legal support for joint crime control.

Based on this series of agreements, the Three Links (telecommunication, transportation, and commerce) that China had been seeking are now fully in place.

Meanwhile, Taiwan has established a policy of officially granting permission to investments by mainland Chinese companies in Taiwan and has accelerated work to create a legal basis for these investments. With this policy, the unidirectional flow of investments from Taiwan to the mainland observed so far will come to an end, to be replaced by bi-directional investment and exchange. Taipei also proposes the conclusion of an Economic Cooperation Framework Agreement (ECFA), a kind of free trade agreement that includes the abolition of customs duties, with positive response from Beijing ( box ).

Taking advantage of improved relations with Taiwan, mainland China is focusing on expanding economic exchange across the straits. Beijing has announced the following five steps: 1) promote investments by mainland Chinese companies in Taiwan; 2) step up purchasing of Taiwanese products; 3) encourage Taiwan-affiliated companies to develop markets on the mainland; 4) encourage Chinese to travel as tourists to Taiwan; and 5) create an economic scheme with the flavors of both China and Taiwan through discussions to respond to demand for economic development on both sides (according to comments by Wen Jiabao in a meeting with Fredrick Chien, chief advisor of Taiwan's Cross-Straits Common Market Foundation at the annual meeting of the Boao Forum for Asia held in Hainan in April 2008). China is also pursuing a plan to support the development of the west coast of the Taiwan Straits, centering on Fujian Province, which China positions as a test area and the forefront for exchange and cooperation ("Opinions of the State Council on Supporting Fujian Province to Speed up of Building Economic Zone on the West Coast of the Straits" adopted in principle at a session of the Standing Committee of the State Council held on May 5, 2009).

## Peaceful reunification emerges as a future possibility

When celebrating the first anniversary of his presidency, Ma Ying-jeou reflected on the cross-straits relations, saying that "In one year we have transformed the Taiwan Straits from a dangerous flashpoint to a conduit for peace and prosperity." (Opening remarks at a press conference with foreign journalists celebrating the first anniversary of his presidency on May 20, 2009). Both Taiwan and the mainland now need to show wisdom in turning these changes into peaceful reunification.

Unlike the former Chen Shui-bian administration, President Ma Ying-jeou has accepted the 1992 agreement between China and Taiwan, in which both would interpret specific details on their own under the One-China Principle. This has met the conditions for resuming the dialogue required by Beijing. Meanwhile, the cross-straits policy of Ma Ying-jeou is based on the "Three Nos" (no reunification, no independence, and no use of force) and aims to maintain the status quo on both sides for the time being. However, the "no reunification" mentioned here means that Taiwan will not discuss the reunification issue with the Chinese Communist Party while President Ma Ying-jeou is in office but does not rule out the possibility of reunification in the future.

Following the shift in cross-straits policy on the part of Taiwan from confrontation in favor of rapprochement, Hu Jintao, General Secretary of the Communist Party, urged further improvements in the relationship in his speech, commemorating the 30th anniversary of the "Message to Compatriots in Taiwan," delivered at roundtable talks on December 31, 2008. In the speech, in addition to the usual pronouncements calling for the reunification under the One-China Principle, opposing Taiwanese independence, promoting economic exchange, including the Three Links, and encouraging human exchange, including those between the parties, he touched on a number of key issues of interest to Taiwan, as follows:

1. Signing of a comprehensive cross-straits economic cooperation agreement
2. Acceptance of Taiwan's participation in the activities of international organizations
3. Facilitating practical talks on the political relationship
4. Establishing a system for mutual trust on cross-straits military issues
5. Construction of a framework for the peaceful development of cross-straits relations, including the conclusion of a peaceful accord.

As described above, both the Hu Jintao and Ma Ying-jeou administrations show a willingness to compromise on cross-straits relations, in contrast to the days of their respective predecessors, Jiang Zemin and Chen Shui-bian.

However, high hurdles remain before Beijing can achieve its goal of peaceful reunification. As Ma Ying-jeou has said, "The last thing we need is a cross-strait arms race, or diplomatic contention. What we most need is rule of law, and for both sides to spur each other to make further improvements in the area of human rights. Going forward, these universal values ought to be a shared language for the people on the two sides of the Taiwan Straits. Indeed, I intend to use them as the signposts that guide us in our efforts to build a free and democratic society for generations yet to come." (Remarks on the 20 th anniversary of the Tiananmen Square incident, June 4, 2009). If the political regimes on both sides converge through competition in the promotion of rule of law and human rights, the door to peaceful renunciation will indeed be opened.

June 30, 2009

## Box: Why does Taiwan need the Economic Cooperation Framework Agreement?

One of the reasons why Taiwan is trying to conclude an Economic Cooperation Framework Agreement with mainland China is that trade with the mainland is accounting for a growing proportion of total Taiwanese trade ( figure ). Taiwanese trade with the mainland reached $105.4 billion in 2008 (with exports of$74.0 billion and imports of $31.4 billion), significantly exceeding trade with Japan of$64.1 billion (exports of $17.6 billion and imports of$46.5 billion) and trade with the United States of $57.1 billion (exports of$30.8 billion and imports of $26.3 billion). This reflects the fact that many Taiwanese companies use the mainland as a production base. In fact, Taiwanese investments in mainland China amounted to$75.6 billion from 1991 to 2008, accounting for 57.1% of Taiwanese outward foreign direct investment.

In particular, the China-ASEAN Free Trade Agreement (CAFTA) concluded in 2007 will exempt most of the products in both regions from customs duties by 2010. In contrast, as customs duties of 5% to 10% will still be levied on Taiwanese products when they are exported to the mainland, it is expected that Taiwanese products will lose a great deal of their competitiveness compared with products from ASEAN countries. Exporters in Taiwan will be forced to shift their production bases offshore and factories incapable of making the move will be closed. The Economic Cooperation Framework Agreement is essential for avoiding this situation.

Related article

"Three Scenarios for Cross-Straits Relations," China in Transition, October 21, 2004.

June 30, 2009

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