Identifier
Created
Classification
Origin
05TAIPEI1919
2005-04-26 07:26:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
American Institute Taiwan, Taipei
Cable title:  

CROSS-STRAIT ECONOMIC ROUNDUP - FIRST QUARTER

Tags:  ECON PREL ETRD EINV EWWT CH TW 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 03 TAIPEI 001919 

SIPDIS

SENSITIVE

DEPT PASS TO AIT/W
DEPT FOR EAP/ TC

E.O. 12958: N/A
TAGS: ECON PREL ETRD EINV EWWT CH TW
SUBJECT: CROSS-STRAIT ECONOMIC ROUNDUP - FIRST QUARTER
2005

REF: A) 04 TAIPEI 84, B) 04 TAIPEI 2592, C) 04 TAIPEI
3323, D) TAIPEI 268


Summary
-------

UNCLAS SECTION 01 OF 03 TAIPEI 001919

SIPDIS

SENSITIVE

DEPT PASS TO AIT/W
DEPT FOR EAP/ TC

E.O. 12958: N/A
TAGS: ECON PREL ETRD EINV EWWT CH TW
SUBJECT: CROSS-STRAIT ECONOMIC ROUNDUP - FIRST QUARTER
2005

REF: A) 04 TAIPEI 84, B) 04 TAIPEI 2592, C) 04 TAIPEI
3323, D) TAIPEI 268


Summary
--------------


1. (U) During the first quarter of 2004, EVA Air and China
Airlines (CAL) both made progress in establishing air cargo
ventures in Mainland China. The airlines also applied for
permission to fly through PRC airspace on flights to Europe
and other parts of Asia. Taiwan's Investment Commission
fined the Chairman of China's Semiconductor Manufacturing
International Corp., Richard Chang, for alleged illegal
investment in Mainland China. Evergreen Group announced a
major investment in Ningbo Harbor near Shanghai. Taiwan's
Financial Supervisory Commission also approved new Mainland
investment categories for Taiwan financial institutions.
(End Summary.)

Travel and Transportation
--------------


2. (SBU) In an effort by Taiwan's air cargo leaders to take
advantage of capacity shortages in the Mainland, EVA Airways
on March 23 confirmed plans to work with Shanghai Airlines
in forming an air cargo venture aimed at exports from
northeast China. EVA Air President K.W. Chang told AIT/T
that EVA would transfer one MD-11 cargo aircraft to the new
venture and take an active role in management. EVA will
have a 40-percent stake in the venture. Earlier in the
month, Taiwan's China Airlines (CAL) announced that it would
finalize its long-delayed investment in China Air Cargo
(CAC) in April or May. CAL and CAC have been discussing
this proposal since late 2002. CAL will buy 25 percent of
CAC's stock. Both Taiwan and PRC authorities have approved
the investment. In addition, CAL reached an agreement with
Hong Kong's Dragon Airlines on March 19 under which Dragon
will rent a CAL cargo plane for one year to provide joint
cargo service from Hong Kong to New York.


3. (SBU) Both of Taiwan's major carriers, CAL and EVA,
applied to Taiwan's Civil Aeronautics Administration (CAA)
on March 6 for permission to overfly mainland China. CAL
wishes to overfly the PRC on flights to Frankfurt, New Delhi
and Hanoi. EVA would do so on flights to Paris. In 2003,

both CAL and EVA applied for overflight permission for
flights to Europe during the Iraq war, but only one CAL
flight actually passed through PRC airspace. On April 25,
EVA Air's Chang told AIT/T that the PRC had already granted
overflight permission, but Taiwan's Mainland Affairs Council
(MAC) had still not responded to the request. Chang does
not expect MAC to respond any time soon. He speculated that
some Taiwan government agencies fear that giving Taiwan
airlines permission to overfly the PRC will lead PRC
airlines to request permission to overfly Taiwan.


4. (U) On March 15, MAC announced that Hong Kong and Macau
Airlines Cathay Pacific, Dragon Air and Air Macau and travel
agents would be required to provide MAC with the names of
persons traveling from Taiwan to the PRC. CAA gave the
airlines until April 25 to begin reporting the passenger
lists.

Investment and Trade - SMIC...
--------------


5. (U) The Investment Commission of Taiwan's Ministry of
Economic Affairs on March 31 fined Semiconductor
Manufacturing International Corp. (SMIC) Chairman Richard
Chang NTD 5 million and ordered him to withdraw his
investment in the Mainland firm. Chang is a former employee
of Taiwan Semiconductor Manufacturing Co. (TSMC). Two years
ago, the IC attempted to investigate Chang's investment but
was unable to find enough evidence that he had personally
invested in the firm. However, late last year SMIC released
more detailed financial data in order to list on Hong Kong
and U.S. stock exchanges, enabling the Commission to reach
its decision. Richard Chang is a U.S. citizen of Taiwan
origin. He has claimed that because he is a U.S. citizens
Taiwan authorities have no jurisdiction over his investment
activities.

TSMC...

SIPDIS
--------------


6. (U) On March 19, TSMC (Shanghai) Company Limited
announced that it plans to expand its Mainland presence by
establishing a design service center with a staff of 40.
TSMC (Shanghai) released recruitment advertisements seeking

SIPDIS
layout, circuit design and computer aided design (CAD)
technicians. TSMC will soon submit its application to
Taiwan's Investment Commission for approval.

Evergreen Group...
--------------


7. (U) Evergreen Group via its Italian shipping subsidiary,
LLoyd Triestino China Limited (LT),signed a joint
investment contract in January with the PRC's Ningbo Harbor
near Shanghai to invest in two container berths. Evergreen
Marine Corp. officials told AIT/T that the investment
totaled USD 250 million. According to media reports, the
Italian subsidiary will own 50 percent of the venture.
Earlier, the Group had invested in some berths in Shenzhen.
Evergreen also announced on April 10 that the PRC approved
its plan to set up a marine shipping branch office in
Shenzhen through the Italian subsidiary. Evergreen is the
first Taiwan marine shipping company to set up such a branch
office in the PRC.


8. (U) On January 1, Taiwan Salt, which is 40 percent
government owned, revealed that it had applied for Taiwan
approval to invest in the Mainland. To avoid high Mainland
duties, Taiwan Salt plans to set up a subsidiary in Shanghai
for packaging and marketing its cosmetics products. Many
state-controlled enterprises are restricted from investing
in the PRC.


9. (U) Taiwan Cellular Corp. (TCC) announced in January that
it would establish its first PRC customer service company in
Dalian. TCC and its mainland partner each own a 50-percent
stake in the newly established company. Later, TCC
announced that it would set up another customer service
technology office in Xiamen for paging and service
consultation.


10. (U) Taiwan's Board of Foreign Trade announced February
18 that it would lift the ban on imports from the PRC for 16
product categories. These include small refrigerators; TV
signal boosters; and several wireless IT components, such as
USB adapter, printer adapter, and LAN access point. After
this latest round of trade liberalization, more than 78.3
percent of product categories listed in the Taiwan tariff
schedule can be imported from the Mainland.

Finance
--------------


11. (U) During the quarter, the Financial Supervisory
Commission (FSC) approved two new categories of investment
in the PRC by Taiwan financial institutions. On February
14, the FSC announced that Taiwan securities firms could
invest in PRC securities companies. However, these PRC
firms are not permitted to provide services to individuals
or enterprises in Taiwan. On March 3, the FSC also
announced that financial holding companies' overseas
subsidiaries could apply to establish representative offices
in the PRC. Immediately after the Bureau of Monetary
Affairs released the application procedures for such
investment on March 18, Fubon Financial Holding Company made
public its plans to set up a representative office in
Dongguan via its Hong Kong subsidiary.

Exchanges
--------------


12. (U) The Chairman of the Taiwan Farmers Association
(TFA),Gu Yuan-jun, told Taiwan's local press on March 15
that he planned to visit Beijing to talk about promoting
Taiwan's fruit exports. The PRC has offered to open up its
agricultural markets to Taiwan imports. According to Gu, it
has also offered to set up a Taiwan fruit-trading center in
Shanghai. Chairman Gu said that the TFA planned to set up
three Taiwan agricultural trade centers in Shanghai, Beijing
and Guangzhou.


13. (U) In what the press called an unplanned meeting, Fu
Don-Cheng, Director of the MAC Economic Affairs Department
met on February 28 with Dai Xiaofeng, Director of the
Exchanges Bureau of the PRC's Taiwan Affairs Office TAO on
the Taiwan-controlled island of Matsu. The two were
visiting Matsu separately to observe the operations of the
mini-links. According to media reports, the two discussed
several cross-strait issues, including cooperation on
criminal investigations, cargo transportation, and
agricultural trade.

PAAL