Capitalizing on Taiwan Cache: The Fuzhou Cross-

UNCLAS SECTION 01 OF 02 GUANGZHOU 017360

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E.O. 12958: N/A
TAGS: ECON PREL CH TW
SUBJECT: Capitalizing on Taiwan Cache: The Fuzhou Cross-
Strait Trade Fair

REF: (A) GUANGZHOU 14846; (B) 05 GUANGZHOU 26419; (C) 05

GUANGZHOU 8926

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1. (SBU) Summary: Taiwan-based and -invested companies
displayed their wares to an eager crowd at Fuzhou's annual
Cross-Strait Trade Fair. Taiwan agricultural produce
occupied a prominent spot at the fair, following on China's
2005 elimination of tariffs on ten types of agricultural
imports from Taiwan. Mainland customers are willing to pay
higher prices for Taiwan produce, liquor, and other products
because of the higher quality associated with them. Chiang
Pin-Kung, Vice Chair of Taiwan's Kuomintang (KMT) party,
spoke at the fair's opening ceremony about the need for
closer cooperation between the two sides and his hope that
direct links would eventually be established. End summary.

Background on Fujian-Taiwan Trade and the Fair
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2. (U) Taiwan is Fujian's largest source of imports and its
third largest trading partner. More than 10,000 Taiwan-
invested enterprises are based in Fujian, according a speech
given at the fair by Fujian Vice Governor Huang Xiaojing.
Fujian imports from and exports to Taiwan have both been
growing by 30-40 percent per annum in recent years and the
Fujian-Taiwan trade volume reached USD 5 billion in 2005.
Fujian and Taiwan have passenger "mini-links" between the
Fujian port cities of Xiamen and Mawei and the Taiwan
islands of Kinmen (Jinmen) and Matsu (Mazu) (see reftel A).
Other Fujian cities, including Fuzhou, Xiamen, Zhangzhou,
Quanzhou, Putian, and Ningde, have cargo "mini-links" to
Jinmen and Matsu. The annual number of Taiwan visits to
Fujian topped 500,000 in 2005.


3. (U) According to trade fair press reports, 185 exhibitors
were present at the fair, 153 of which were enterprises
based in Taiwan or with Taiwanese investment based in the
mainland. Foreign attendees, most of whom came from Hong
Kong, Taiwan and ASEAN nations, signed 275 cooperation
projects with a total foreign investment of USD 1.5 billion.
However, U.S. investment at the fair, which totaled USD 129
million, for the first time exceeded ASEAN investment,
valued at USD 59 million. Chinalco Ruimin Co. Ltd, China's
leading manufacturer of fabricated aluminum, received the
single largest foreign investment, worth USD 75 million.

Taiwan KMT Vice Chair: Agricultural Cooperation and Direct
Links
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4. (U) KMT Vice Chair Chiang Pin-Kung, who led the KMT's
first official delegation to mainland China in March 2005,
spoke at the opening ceremony of the trade fair. He was
treated as the special guest of honor, second only to Fujian
Governor Huang Xiaojing in terms of protocol. In his speech
Chiang said his ancestral roots lie in Fujian, as do those
of 80 percent of Taiwanese. He described economic ties
between Fujian and the mainland as strong, and said no
Taiwan enterprise could afford to miss out on the mainland's
business opportunities, and called for more joint exchanges
between Fujian and Taiwan to utilize comparative advantages.
Chiang also highlighted the importance of the mini-links
between Taiwan and the mainland, as well as chartered direct
flights during the Spring Festival. He added that he looked
forward to the day when direct postal, passenger, and
shipping links will make Fujian an even more valuable trade
partner with Taiwan.


5. (U) Chiang also spotlighted efforts to increase cross-
strait agricultural trade, saying that Fujian has set up a
marketing center to help Taiwan companies sell their
agricultural produce in Fujian. In addition, Fujian's
Taiwan Agricultural Experiment Zone, which originally
covered only Fuzhou and Zhangzhou cities, has been expanded
to the entire province (see reftel B).

Taiwan Produce and Liquor: A Special Appeal
--------------


6. (SBU) One of the largest exhibitors at the fair was
Chaoda Modern Agriculture Group, a mainland-based company
that operates 30 farms in South China and is listed on the
Hong Kong Stock Exchange. The company sells itself as an
ecologically sensitive and organic grower of fruit and

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vegetables. Chaoda also imports Taiwan produce -- indeed,
after China eliminated import tariffs on ten different kinds
of Taiwan fruits and vegetables in spring 2005, Chaoda
imported the first batch and sold them at the cross-strait
fair. (Note: The zero-tariff policy for some Taiwan produce
came in the wake a visit to the mainland by former KMT chair
Lien Chan. End note.) Sales of Taiwan fruit in the
mainland have reportedly surged despite their higher cost
than domestically grown fruit. When asked why, a Chaoda
sales representative at the fair said Taiwan fruit is of a
higher quality than mainland fruit and thus demands a higher
price. He said mainland Chinese, especially southerners,
value fresh produce -- motioning to the large crowds of
customers around his booths.


7. (SBU) Exhibition booths for products from the Taiwan-held
islands of Matsu, Kinmen, and Penghu all held prominent
spots in the main hall of the fair. In the Matsu area,
three different makers of sorghum liquor competed for
customers. A sales representative for the Matsu Chungkao
brand, who was born and raised on Matsu (which has a
population of less than 10,000),said his company decided to
come to the fair after observing the success of its two
rivals in their mainland sales. He described the fair as
primarily an opportunity to build a brand name in the
mainland market. When asked why the company does not
produce its liquor on the mainland to reduce costs, he
scoffed and said the different climates would significantly
compromise quality. He described the mainland's import
procedures are fairly straightforward but added that tariffs
are still too high for his product.

A Sign of the Times: C. Straits Cafe
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8. (SBU) A rapidly growing restaurant chain on the mainland,

C. Straits Cafe (Liangan Kafe) has found success by
embracing the issue of Taiwan-mainland relations. The
company is owned by a married couple, in which the husband
is from Taiwan and the wife is from the mainland (Hangzhou).
The company, founded 12 years ago, has over 300 restaurants
on the mainland and plans to reach 500 by the end of 2006.
When asked whether the association with Taiwan has brought
any negative repercussions, a regional marketing manager
said the contrary is true, as the company has handled the
cross-strait issue to its advantage. She said the owners
are both adamant supporters of reunification and oppose
Taiwan's independence movement. Indeed, the company's logo
has an arch spanning its two sides and the restaurants are
adorned with a slogan that reads "successful communication
begins with two sides."

Comment
--------------


9. (SBU) Though the trade fair included exhibitors from a
wide array of industries, including Taiwan high-tech
companies and mainland industrial parks, those selling
agricultural goods are enjoying increasing prominence since
the mainland's 2005 tariff cuts. The Taiwan cache clearly
resonates for mainland customers, and is an opportunity for
Taiwan SMEs to find a market on the mainland if they have
not already. C. Straits Cafe has hit the right notes
politically for business on the mainland. Not surprisingly,
with a message that is unabashedly pro-reunification, the
company does not operate any restaurants in Taiwan.

DONG