From the Portfolio Manager's Desk
June 23 , 2008
By Steven R. Champion
The first official agreement between Taiwan and China to result from the flurry of contacts initiated by the newly-elected government of Ma Ying-jeou was signed on June 13th. The pact allows for direct charter flights between thirteen provinces in China and eight cities in Taiwan every weekend beginning July 4th. The U.S. requested that its airlines be allowed to participate in the cross-straights flights but for now carriers will be limited to those from China and Taiwan who will equally divide the 36 weekend charter flights. To date, direct flights have been permitted only four times a year on certain Chinese holidays. Another aspect of the agreement allows up to 3,000 Chinese tourists to Taiwan daily for stays of up to ten days. President Ma has stated his hope that regularly scheduled direct flights will begin with a year and that Taiwan will eventually be able to attract a million Chinese tourists annually. Earlier in these talks, Taiwan and China also agreed to set up permanent representative offices in each other’s territory.
A Goldman Sachs economist predicted that the increase in direct charter flights and tourists from China could add sixty to eighty basis points to Taiwan’s economic growth rate. But more important than the immediate economic impact is the evidence that Ma will act quickly to implement his campaign promise to foster greater economic activity between China and Taiwan, and that both are willing for now to set aside political differences for mutual pragmatic benefit.
