Identifier
Created
Classification
Origin
05TAIPEI3880
2005-09-20 22:50:00
CONFIDENTIAL
American Institute Taiwan, Taipei
Cable title:  

PFP LEGISLATOR LIU YI-JU PUSHES CROSS-STRAIT

Tags:  ECON EINV PINR PREL TW CN 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 003880 

SIPDIS

DEPT PASS TO AIT/W AND USTR
DEPT FOR EAP/TC, EAP/EP AND EB/IFD/OIA
TREASURY FOR OASIA ZELIKOW,WISNER AND OCC AMCMAHON
TREASURY ALSO PASS TO FEDERAL RESERVE BOARD OF GOVERNORS,
SAN FRANCISO FRB AND NEW YORK FRB

E.O. 12958: DECL: 09/18/2020
TAGS: ECON EINV PINR PREL TW CN
SUBJECT: PFP LEGISLATOR LIU YI-JU PUSHES CROSS-STRAIT
ECONOMIC TIES

Classified By: AIT ACTING DIRECTOR DAVID KEEGAN, REASON 1.5 B/D

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 003880

SIPDIS

DEPT PASS TO AIT/W AND USTR
DEPT FOR EAP/TC, EAP/EP AND EB/IFD/OIA
TREASURY FOR OASIA ZELIKOW,WISNER AND OCC AMCMAHON
TREASURY ALSO PASS TO FEDERAL RESERVE BOARD OF GOVERNORS,
SAN FRANCISO FRB AND NEW YORK FRB

E.O. 12958: DECL: 09/18/2020
TAGS: ECON EINV PINR PREL TW CN
SUBJECT: PFP LEGISLATOR LIU YI-JU PUSHES CROSS-STRAIT
ECONOMIC TIES

Classified By: AIT ACTING DIRECTOR DAVID KEEGAN, REASON 1.5 B/D


1. (C) Summary: People's First Party (PFP) Legislator
Christina Liu (Yi-ju) is a harsh critic of the Chen
Administration's economic policies and believes that better
cross-Strait relations are an urgent economic priority for
Taiwan. At the same time, although she belongs to the same
party as pro-unification PFP Chairman James Soong (Chu-yu),
she believes Taiwan should not/not relinquish the option of
independence, and she is very concerned with practical
measures to protect Taiwan's economic interests. An educator
by calling and innovative dynamo by bent, Dr. Liu has worked
to improve the understanding of economic issues of her
colleagues in the Legislative Yuan (LY). End summary.

Introduction:
--------------


2. (C) PFP Legislator Dr. Christina Liu spoke with AIT on
September 2 and at an AmCham lunch on September 12 on the
recent inter-Party, cross-Strait financial discussions she
organized and led in Shanghai, Yangzhou, and Nanjing and her
views of Taiwan's overall economic situation. Dr. Liu is the
founder and chairperson of an informal inter-party
legislative group, the "Financial Legislation Enhancement
Consortium," which was established in March this year to
promote better understanding of the economic statutes that
the legislators must review. She has one of the strongest
backgrounds in financial and economic affairs among members
of the LY, and frequently writes and circulates opinion
pieces on financial topics among her colleagues.

Financial Issues Delegation to China
--------------


3. (C) Even before PFP Chairman James Soong's landmark trip
to China May 5-13, 2005, Dr. Liu had begun to organize a
separate inter-Party LY delegation visit to China to discuss
the practical cross-Strait financial issues that are of
direct concern to Taiwan businesses. Taiwan's business

community would like to see real progress on financial issues
including direct RMB-NTD currency exchange and a mechanism
for Taiwan companies invested in China to list on the Taiwan
stock exchange. While accompanying Soong as part of his PFP
delegation, Liu took the opportunity to speak with PRC Vice
President Zeng Qinghong about her idea for broader-based
discussions of practical financial issues.

"One China" Not the View of Most in Taiwan
--------------


4. (C) Shortly before the Soong visit in May, the PRC had
announced that it welcomed visits by any Taiwan politicians
willing to accept the "1992 consensus" on "one China." Dr.
Liu complained to Vice President Zeng that this was too
restrictive, that the PRC needed to recognize that most
Taiwan people were not ready to accept this condition. She
explained to him her plan to bring a inter-Party delegation,
including members of the ruling Democratic Progressive Party
(DPP) to visit China in August and asked if this "1992
consensus" restriction could be lifted for members of her
delegation.

Visas Where None Were Issued Before
--------------


5. (C) PRC Vice President Zeng, Liu told AIT, agreed to her
request on the condition that the delegation did not visit
Beijing. The delegation she assembled was composed of 12
opposition party LY members, 12 ruling party LY members, as
well as journalists, academics and business people. Dr. Liu
even succeeded in obtaining PRC visas for DPP legislators Kuo
Cheng-liang and Kao Chih-peng who had previously been denied
visas to go to Hong Kong because of their outspoken
pro-independence views.

CSB Squashes Inter-Party Cross-Strait Cooperation
-------------- ---


6. (C) In late August, however, just days before the
delegation was scheduled to depart, Taiwan President Chen
Shui-bian, asserting his leadership (and fear of losing
control over the pace of cross-Strait re-approachment),
ordered that no DPP members should travel with this
delegation. (DPP legislators Kuo Cheng-liang and Kao
Chih-peng separately confirmed to AIT/ECON that they had been
planning to travel with Liu's delegation until "events
intervened.") In the end, the delegation led by Dr. Liu
consisted of 12 legislators (all from the "pan-Blue"
opposition parties),30 prominent business and finance
leaders, and 11 journalists. The delegation met with PRC
banking officials, business executives, and academics in
Shanghai, Yangzhou, and Nanjing. PRC party officials they
met included the Secretary General of the Communist Party in
Shanghai. Among the topics discussed was the continuing lack
of any mechanism for direct currency exchange between the RMB
and the NTD. Liu told AIT she had succeeded in persuading a
deputy governor of the Peoples, Bank of China (PBC) that
there was no practical reason why this obstacle to
cross-Strait business should remain.


7. (C) Officials on both sides of the Taiwan Strait have
long maintained that there can be no direct currency exchange
until the two governments sign an MOU on currency
settlements. Liu suggested a way to facilitate direct
exchange that avoided the need for an MOU by using the PBC
branch office in Hong Kong as an intermediary for
settlements. Liu stated that the discussions also achieved
consensus on about 20 other economic issues, including
mechanisms for Taiwan businesses in China to list on the
Taiwan Stock Exchange, RMB appreciation, and China's
macro-economic adjustment.


8. (C) Dr. Liu told AIT that she had consulted with Taiwan's
MAC and central bank both before and after her trip regarding
the topics and proposals raised in the discussions. Liu said
she that as a consultant to the MAC on cross-Strait currency
exchange issues, she knew her proposal could be accepted by
the MAC (MAC had vetted it in advance of the trip). She also
stated that she had "indirectly" consulted with President
Chen prior to her trip. She explained that one of her main
goals was to allow Taiwan retail investors to be able to
share in the profits of Taiwan firms in China, and thus a
listing mechanism was important to her.

Financial and Economic Bills Promotion Society
-------------- -


9. (C) In March 2005, Liu organized an inter-party group
within the LY, the "Financial Legislation Enhancement
Consortium." Approximately half of the group's 20-30 members
came from pan-Green parties and half from pan-Blue
(opposition) parties. About 40 percent of the committee
members serve on the LY Finance committee, while the other 60
percent serve on other LY committees. Liu expects the
membership in this group will increase to over 30 during the
LY session that started on September 13. Liu has also
recruited some 50 scholars and business leaders to serve as
initiators of a new think tank called the "Financial and
Economic Laws Research Association."

Views on Taiwan Economic Issues
--------------


10. (C) Dr. Liu has a generally negative view of Taiwan's
current economic performance. She is a harsh critic of the
Chen administration's economic policies and in her
conversations with AIT alleged widespread government
corruption and waste. She told AIT and later told AmCham
that she is opposed to any tax increases because more revenue
would just create more opportunities for government
corruption. The solution to the real problem of the
government deficit of 3.5% of GNP (she maintains the true
percentage is much larger than official statistics show) is
to reduce the size of government and cut government spending.



11. (C) Dr. Liu voted against additional funding for the
"Financial Reconstruction Fund" designed to help problem
banks exit the market, claiming that non-performing loans in
Taiwan's banking industry were not a serious problem, and did
not justify a government bailout. She is very critical of
Taiwan's Financial Supervisory Commission (FSC) because its
commissioners are "academics who lack bureaucratic
discipline" and "speak their ideas as though they were
government policy." Dr. Liu was also very critical of the
Taiwan government's use of "Build, Operate, Transfer" (BOT)
contracts for public infrastructure projects. She strongly
supports the demand by legislators for an investigation of
possible malfeasance in the "five corruptions"-- construction
of the Kaohsiung metro, the high-speed rail, stock market
insider trading and the recent privatization of two
state-owned enterprises.


12. (C) Dr. Liu said she does not think the Alternative
Minimum Tax Statute (reftel) will pass the LY because the KMT
will block it. She personally opposes the bill because she
believes additional government revenue will only encourage
additional government waste and because of the statute's
negative impact on investment in Taiwan. Liu has drafted an
alternate version of the bill which would apply to
individuals, but not corporations. She thought the
government should devote more effort to establishing tax
treaties with other countries as a prerequisite to taxing
overseas income and reducing capital flight. She argued that
establishing direct links with China is an urgent economic
priority.

Not Seeing Eye-to-Eye with James Soong
--------------


13. (C) Liu said she would not join the September 14 PFP
trip to China led by James Soong because of her disagreement
with him over his statement in May that "Taiwan independence
is not an option." Liu believed that a democratic government
should not take away options from the people, at least half
of whom, she thought, prefer independence. Under some
circumstances, independence might be an option, she told AIT.

Additional Background
--------------


14. (C) Dr. Liu is the author of dozens of published
academic and practitioner articles in international financial
journals, as well as the author of four books on economic and
financial topics. She spent over 18 years in the United
States during which time she earned her Ph.D. in Economics
from the University of Chicago and taught economics at City
University of New York. In addition to being one of PFP's
two at-large legislators, she is the founder and chairperson
of the LY Financial Law Reform Forum, and a Professor at
National Taiwan University as well as a Professor at
Beijing's Tsinghua University. (Note: Over the past four
years, Liu has traveled to Beijing every weekend to teach a
total of six hours of classes on Saturday and Sunday at the
Tsinghua campus there. However, this school year, she will

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teach at the Tsinghua campus in Shenzhen.) She is the
daughter of former Finance Minister Shirley Kuo.
KEEGAN