DANIEL TSAI URGES CLOSER CROSS-STRAIT TIES

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 001456

SIPDIS

SIPDIS

STATE PASS USTR
STATE FOR EAP/TC,
USTR FOR ALTBACH AND WINELAND,
USDOC FOR 4431/ITA/MAC/AP/OPB/TAIWAN/JDUTTON
TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF GOVERNORS,
AND SAN FRANCISCO FRB/TERESA CURRAN

E.O. 12958: DECL: 04/26/2010
TAGS: ETRD ECON PREL PGOV TW
SUBJECT: DANIEL TSAI URGES CLOSER CROSS-STRAIT TIES

REF: A. TAIPEI 1333


B. TAIPEI 1344

Classified By: AIT DIRECTOR STEPHEN M. YOUNG FOR REASONS 1.5 (b),(d)


1. (C) Summary: During an April 26 introductory call, Fubon
Financial Holdings (FFH) Chairman Daniel Tsai lamented
President Chen's squandered opportunities for a breakthrough
in cross-Strait relations and said he would advise
politicians to have more confidence in Taiwan's future. Tsai
also relayed a first-hand account of what might have been an
attempt by First Lady Wu Shu-chen to obtain inside stock
information, and said it was "not the right time" to enact a
personal bankruptcy law. End summary.

Tsai Family Background

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2. (C) On April 26, AIT Director Stephen Young paid an
introductory call on Daniel Tsai (Ming-chung) Chairman of
Fubon Financial Holdings. Daniel is a leading figure in one
of Taiwan's most powerful families. In 2004, Daniel Tsai
(50) and his brother Richard (47) took control of the FFH
banking and insurance empire from patriarch Tsai Wan-tsai
(76). FFH has affiliates in banking, securities, life
insurance, fund management, real estate, and, since 2003,
owns the largest private mobile phone network in Taiwan

Media Fosters Political Extremism
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3. (C) AIT Director Young commented on the need for
political parties to be mindful of overall national interests
and the need to provide good governance. In response, Tsai
referred to a recent article by noted author Lung Ying-tai
(former head of Taipei City Government Cultural Affairs
Section) that described Taiwan as a "young democracy" going
through certain temporary growing pains. He also referred
to the "Yi Ching" philosophy of natural cycles and predicted
that Taiwan politics would swing back towards the center from
its current uncompromising trend, where politicians were
"held hostage" by their party's more extreme factions. He
noted that political television talk shows fueled extremism,
and suggested that Taiwan had too much sensational media
coverage of its politics.


4. (C) Tsai said it was clear that the mainstream opinion of
Taiwan's public supported improved relations with China.
"Nobody wants war" he noted. Tsai said China was too busy
with its own internal problems to push unification with
Taiwan and this made the present an excellent time to work on
establishing better relations with China. At the same time,
he noted, "everybody knew" that someday China might be
engulfed in social unrest, and Taiwan was very fortunate to
have 90 miles of water between itself and the mainland.

KMT-CCP Economic and Trade Forum
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5. (C) Tsai said he was not coerced into attending the
recent KMT-CCP Economic and Trade Forum in Beijing, but that
as a known Pan Green supporter, he had had reservations about
whether it was the right thing to do. In the end, he decided
the economic issues to be discussed were important enough to
warrant his attendance. He noted that the CCP had invited
him, not the KMT. He hinted that at side talks during the
forum, he had achieved a "breakthrough" in obtaining
permission for FFH to provide banking services in China.
Tsai explained to us his idea for how Hong Kong banking

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regulators could act as intermediaries to enable a free flow
of information between Taiwan and PRC regulators.

FFH Targets Taiwan Businesses in China
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6. (C) One of FFH's top priorities was to target the huge
amounts of personal wealth that flow between Taiwan and
China, Tsai said. Tsai said he had not fully appreciated how

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many wealthy Taiwan clients there were in China until FFH
acquired its Hong Kong subsidiary. FFH was now hoping to
acquire a locally licensed bank in China as the next step in
plans to target Taiwan businesspeople there.

China Targets President Chen's Key Supporters
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7. (C) In response to the Director's observation that Tsai
had received a long handshake from CPC Chairman Hu, Tsai
noted that the photo of the two of them shaking hands had
been used by Chinese media as the official photo of the
event. He then mused how China was currently "writing
checks" to win over the strongest support groups of President
Chen and the DPP: farmers, doctors, young people, and the
hotel industry.

President Chen Written Off Years Ago
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8. (C) Tsai believes Taiwan should take advantage of China's
current willingness to compromise. However, he noted that
China had totally "written off" President Chen since around
2002 and would not deal with him. Tsai said that when Chen
was first elected in 2000, many people, including Chen
himself thought he might have an opportunity for a
breakthrough in cross-Strait relations. But his overtures
were rebuffed and opportunities frittered away.


9. (C) Now, in 2006, it is clear that Chen has no chance of
dealing with China. Part of the problem was Chen's lack of
international experience or perspective, which, Tsai said,
kept him from understanding the global significance of
China's rise. He has increasingly surrounded himself with
people who shared his views. At the same time, Tsai said,
the new government in China was becoming more sophisticated
in dealing with Taiwan. While in China, Tsai had heard
high-level officials express regret for having fired missiles
in 1996 to threaten Taiwan and for threatening remarks then
PRC Premier Zhu Rongji made during the 2000 Taiwan
presidential election campaign.

Strong Defense Still Important
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10. (C) Tsai said he thought both the Pan Green and Pan Blue
"overplayed" China in domestic politics: Pan Green overstated
the threat posed by China and Pan Blue overstated how much
Taiwan needed China. Tsai said he believed that economic
integration with China would make Taiwan stronger, not
weaker. But he agreed with the Director that a strong
defense was still necessary in case China was ever tempted to
quell domestic unrest by shifting internal attention to
Taiwan.

First Lady Playing with Fire
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11. (C) Commenting on headlines in many local papers about
First Lady Wu Shu-chen's extensive business interests, Tsai
said her continued dealing in stocks after her husband took
office was inappropriate. He then told AIT that, shortly
after FFH acquired Chunghwa Telecom, he had received a phone
call from the First Lady congratulating him on his wise
purchase and noting how the share price was increasing
rapidly. Tsai said he avoided giving any significant
information to Wu, but felt the call was inappropriate.


Party Politics
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12. (C) Tsai thought Taipei Mayor/KMT Chairman Ma seemed
focused squarely on being a good leader, rather than striving
for personal gain. In this he was different from other KMT
politicians, Tsai said, and this difference could lead to a
split in the party. Tsai thought it would be "difficult" for
the DPP to retain the presidency in 2008. He also believed

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former Premier Frank Hsieh should "put aside his pride" and
run for Taipei mayor in the fall. In this manner he could
serve as Taipei Mayor for four or eight years before running
for the presidency. If Hsieh persists in his quest to be the
DPP candidate for President in 2008, it might lead to a split
within the DPP.
YOUNG