Identifier
Created
Classification
Origin
09SHANGHAI206
2009-05-05 06:35:00
CONFIDENTIAL
Consulate Shanghai
Cable title:  

TAIWAN BUSINESS LEADER IN NANJING SEES PROGRESS IN

Tags:  PREL PGOV ETRD EAIR EFIN CH TW 
pdf how-to read a cable
VZCZCXRO6112
RR RUEHCN RUEHGH
DE RUEHGH #0206/01 1250635
ZNY CCCCC ZZH
R 050635Z MAY 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7917
INFO RUEHBJ/AMEMBASSY BEIJING 2773
RUEHIN/AIT TAIPEI 1760
RUEHHK/AMCONSUL HONG KONG 2141
RUEHSH/AMCONSUL SHENYANG 1964
RUEHGZ/AMCONSUL GUANGZHOU 0429
RUEHCN/AMCONSUL CHENGDU 1973
RUEHKO/AMEMBASSY TOKYO 0649
RHEHAAA/NSC WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 8562
C O N F I D E N T I A L SECTION 01 OF 02 SHANGHAI 000206 

SIPDIS

TREASURY FOR OASIA - DOHNER, HAARSAGER, WINSHIP
USDOC FOR ITA MAC DAS KASOFF, MELCHER, SZYMANSKI
NSC FOR LOI
AIT TAIPEI PLEASE HOLD FOR AIT KAOHSIUNG

E.O. 12958: DECL: 5/5/2034
TAGS: PREL PGOV ETRD EAIR EFIN CH TW
SUBJECT: TAIWAN BUSINESS LEADER IN NANJING SEES PROGRESS IN
CROSS-STRAIT ECONOMIC NORMALIZATION, BUT LONG ROAD AHEAD

REF: A) SHANGHAI 85; B) SHANGHAI 200; C) TAIPEI 518; D) TAIPEI 514; E) BEIJING
1174; F) SHANGHAI 26

CLASSIFIED BY: Simon Schuchat, Deputy Principal Officer, U.S.
Consulate, Shanghai, U.S. Department of State.
REASON: 1.4 (b),(d)



C O N F I D E N T I A L SECTION 01 OF 02 SHANGHAI 000206

SIPDIS

TREASURY FOR OASIA - DOHNER, HAARSAGER, WINSHIP
USDOC FOR ITA MAC DAS KASOFF, MELCHER, SZYMANSKI
NSC FOR LOI
AIT TAIPEI PLEASE HOLD FOR AIT KAOHSIUNG

E.O. 12958: DECL: 5/5/2034
TAGS: PREL PGOV ETRD EAIR EFIN CH TW
SUBJECT: TAIWAN BUSINESS LEADER IN NANJING SEES PROGRESS IN
CROSS-STRAIT ECONOMIC NORMALIZATION, BUT LONG ROAD AHEAD

REF: A) SHANGHAI 85; B) SHANGHAI 200; C) TAIPEI 518; D) TAIPEI 514; E) BEIJING
1174; F) SHANGHAI 26

CLASSIFIED BY: Simon Schuchat, Deputy Principal Officer, U.S.
Consulate, Shanghai, U.S. Department of State.
REASON: 1.4 (b),(d)




1. (C) Summary: The recent SEF-ARATS talks in Nanjing are part
of the process of "normalizing" cross-Strait economic relations,
said a key Taiwan business leader in Nanjing. Though the three
agreements are generally "useful" and may yield concrete
economic benefits in the long-run, the talks were significant
mainly for regularizing cross-Strait dialogue. The talks laid
out a general framework for financial cooperation, but there are
still many details to be worked out regarding currency
convertibility and Taiwan banks' ability to issue RMB loans in
the Mainland. Taiwan needs to develop its infrastructure to
handle the growing number of Mainland tourists. Our
interlocutor and SEF Chairman Chiang Pin-kung discussed the
possibility of setting up an SEF office in East China. There
will be little benefit to Ma assuming the KMT chairmanship, said
our interlocutor. End summary.


2. (SBU) On May 4, DPO and Poloff spoke with Hai Zhongtian, a
Taiwan business leader based in Nanjing and Shanghai, about the
recent SEF-ARATS talks held in Nanjing April 25-26. Hai is Vice
Chairman of the Nanjing branch of the Taiwan Compatriot
Investment Enterprises Association (Taixiehui),a trade
association with branches in major cities across mainland China
representing the interests of Taiwan enterprises. Hai is also a
KMT Central Committee member, BMW dealer, and Chief
Representative of Lian Qiang International (a Taiwan IT and
telecommunications equipment firm with 40 branches across the
Mainland). Hai is an influential figure in KMT circles and the

Taiwan business community in East China. We met in Hai's
Shanghai office of Lian Qiang International.

Part of Cross-Strait Normalization Process
--------------

3. (C) Hai sees the recent talks in Nanjing as part of the
process of "normalizing" cross-Strait economic relations.
Though the three agreements are generally "useful" and may yield
concrete economic benefits in the long-run, the talks were
significant mainly for regularizing the process of cross-Strait
dialogue. The two sides also made a concerted effort to focus
on economic matters, thereby minimizing the public backlash in
Taiwan. It will take another few years before both sides are
ready to discuss more sensitive political issues, said Hai.
Taiwan President Ma Ying-jeou has benefited from these talks, as
people in Taiwan partly attribute the recent rise in the Taiwan
stock market to warming economic ties with the Mainland,
according to Hai.

Financial Agreement: Many Questions Still Remain
-------------- --------------

4. (C) Hai believes the centerpiece of the Nanjing talks was
the agreement on financial cooperation. The talks were
successful in laying out a general framework, he said, but
beneath the surface, "there are still many problems." The
details on currency exchange, Taiwan banks' ability to issue RMB
loans in the Mainland, and the treatment of collateral on both
sides of the Strait still need to be worked out. (Note: See Ref
A for more on Taiwan firms' complaints about securing RMB
financing in the Mainland. End note.) Mainland banks do not
want to set up branches in Taiwan yet because of the currency
convertibility issue, said Hai. Taiwan financial firms, fearful
of competition from much bigger Mainland banks, also do not want
Mainland banks to enter the Taiwan market, a factor which Taiwan
regulators will have to consider when working out the details of
this agreement.


5. (C) Hai added that the true level of Taiwan investment in
the Mainland is not very clear, as many Taiwan entrepreneurs do
not report their business activities in the Mainland because
they violate either Mainland or Taiwan regulations. Although
Taiwan authorities want Taiwan firms in the Mainland to reinvest
in Taiwan, this is highly unlikely to happen because Taiwan

SHANGHAI 00000206 002 OF 002


firms do not see much economic benefit in redirecting their
assets back to the island, said Hai. However, he thinks details
on the agreement allowing Mainland investment to Taiwan will be
worked out relatively quickly, as Taiwan desperately needs the
Mainland's capital.

Direct Flights: Taiwan Needs to Develop Its Capacity
-------------- --------------

6. (C) Hai echoed complaints from other East China
interlocutors about the lack of adequate infrastructure in
Taiwan to receive large numbers of Mainland visitors. (Ref B.)
Although the number of direct flights will increase from 108 to
270 per week, Taiwan has the capacity to properly accommodate
only 3000-3500 Mainland tourists a day, argued Hai. The cost
for tour groups to Taiwan may decrease with an increase in
volume, but this will lead to a decline in quality as travel
agencies cut costs by directing groups to second-rate hotels
amid limited options. Mainland firms should invest in and
develop Taiwan's hotel and transportation infrastructure,
suggested Hai. Regarding the third agreement on anti-crime
cooperation, Hai called it a positive development for
cross-Strait relations, but said it will not have a significant
impact on Taiwan enterprises in the Mainland.

Setting Up SEF Office in East China?
--------------

7. (C) Hai said he accompanied SEF Chairman Chiang Pin-kung
during Chiang's recent visit to Nanjing and Shanghai. During a
private exchange with Chiang, according to Hai, the two
discussed the idea of setting up an SEF office in East China.
Hai said he offered to rent space in the Lian Qiang building in
Shanghai to SEF for one RMB a year in what he termed his
personal contribution to the improvement of cross-Strait
relations. He did not disclose Chiang's reaction to his offer,
but speculated that this would not happen until next year at the
earliest.

Preparing for Wu's Visit, Views on Ma
--------------

8. (C) Hai said he will return to Nanjing in a few days to
advise the Nanjing Government in its preparations for KMT
Chairman Wu Po-hsiung's upcoming visit to Nanjing at the end of
May. Hai called Wu a "warm" person and appears personally close
to the KMT Chairman. Regarding speculation that Ma Ying-jeou
will take over the KMT chairmanship after Wu's term expires, Hai
said this would not be a good idea since Ma, concurrently
serving as President, would not be able to travel to the
Mainland to engage in cross-Strait talks. The KMT chairmanship
would not provide much political benefit to Ma, added Hai, since
it would not necessarily enhance his control over Taiwan's
Legislative Yuan, which has become increasingly difficult to
control since the switch to a single member constituency system.
CAMP