China’s bridgehead right into Taiwan’s heartland

On a cluster of islands on the mainland side of the Taiwan Strait, China is setting up what it means to become its bridgehead into Taiwan and as this, a major tool to achieve unification. The area labelled “Pingtan Comprehensive Experimental Zone” has become stomping ground for teams of engineers and inspectors ever since earlier this year, the People’s Republic’s State Council has given the nod for a pilot area in Fujian Province to accelerate trade with Taiwan.

Beijing’s plans are as well-thought-out as they are impressive. First stands the establishing of an area on the Strait’s mainland side where both Taiwanese and mainlanders can jointly make money helped by direct shipping links between Fujian Province and Taiwan’s central city of Taichung, the island’s third largest, and subsequently the combining of Pingtan and Taichung into a cross-strait free-trade zone. Yet Taiwanese pundits believe that Beijing’s ultimate ambitions go much farther. They say much like the Tibet railway that can be taken advantage of by the People’s Liberation Army (PLA) in times of conflict with India, Beijing wants to build a high-speed rail from Pingtan to Taipei, thereby turning the Taiwan Strait into an internal lake. As this move would effectively enable the transport of troops and equipment within hours to Taiwan’s east coast city of Hualien, which features something China is very much after, namely a Pacific deep sea harbor, the PLA Navy eventually to be stationed there could easily project power into the Pacific Ocean in general and the South China Sea in particular when the need arises to counter the US Navy and its allies, so the speculations.

The reason why Taichung was chosen is said to have do with Taiwan’s domestic politics. In January 2012, legislative and presidential elections will be held, and as the island’s north traditionally votes for the ruling Beijing-friendly Kuomintang (KMT), and the south for the opposition independence-leaning Democratic Progressive Party (DPP), the populous cities of central Taiwan are assessed as key battleground.

On June 16, at Taichung’s Windsor Hotel, Chen Hua, Deputy Governor of Fujian Province, sought to make the Pingtan Comprehensive Experimental Zone palatable to central Taiwanese officials and relevant regional business circles. Those who came got to hear that for the project, China intends to spend US$4.6 billion in infrastructure alone this year, US$15.4 million a day on average, and in the next three years more than US$15 billion, reaching US$38.5 billion by 2015.

Planning, operating, developing, administering and profiting – five steps carried out jointly by both sides of the Taiwan Strait”, is how Deputy Governor Chen described her “common home” concept. She emphasized that especially SMEs and family-owned enterprises from the island’s center and south are invited to set up bases on Pingtan.

In somewhat more concrete terms, the construction of a 100-km road around Pingtan island is about to begin. A bridge was opened in late 2010 with a second planned, ending the need to use ferries to set foot on the mainland. Last December, the Chinese completed an expressway that shortened the travel time between Pingtan and Fuzhou, the provincial capital city, to 1-1/2 hours from 2-1/2, whereas on the sea side, up to five ports, including a 200,000-ton-capacity port and two of 300,000 tons, are being planned. An area of 18km2 has been designated by Fujian authorities to accommodate a cross-strait financial service center for banks, insurers and securities. Since April, at Pingtan’s port, brand-new ro-ro passenger ferries have been awaiting the starter’s gun, expected to make the trip to Taichung in an astonishingly short 2-1/2 hours. By comparison, a car drive from Taichung to Taipei takes three hours on a good day. And, after the establishment of a free trade zone, people, ships and cargo from Taiwan would enter and leave Pingtan freely, “as if it were their own home,” Deputy Governor Chen said.

The actual preferential treatments Taiwanese are to be given in the pilot zone have already been listed by the Chinese media. Exclusively for Taiwanese businesspeople, restrictive state regulations on certain products such as steel are to be lifted, giving them an edge over their foreign competitors in China. Additionally, Taiwanesewith less than US$500 million to invest can expect extra help, and also Taiwanese exam certificates will be accepted. While Taiwanese lawyers and doctors would be allowed to establish their own businesses, tax benefits are to be granted, and bank loans generously given.

Given all the mouthwatering Chinese overtures, it seems surprising that Taiwanese entrepreneurs’ responses have been lukewarm at best. Fujian failed to increase investment from across the Taiwan Strait significantly in terms of share despite having been promoting the idea since 2004. Cited as reasons that Taiwan so far has been balking at the bait are that businesspeople aren’t convinced that Pingtan will make for a good gateway to China’s domestic market as the islands only come with a population of 400,000. Also, in terms of comprehensive competitiveness, Fujian Province ranks far behind Shanghai in the Yangtze River Delta and Shenzhen and Guangzhou in the Pearl River Delta, where most of Taiwan businesspeople are clustered in China. The main point turning Taiwanese investors off, however, is political risk. The setting up of direct shipping links, let alone a free-trade zone, requires major cross-strait agreements being signed, something the KMT will avoid before the 2012 elections as it touches the vexatious topic of Taiwan’s status. Furthermore, given the DPP’s notoriously ambiguous stance on cross-strait relations, entrepreneurs don’t have too many reasons to believe that a DPP win wouldn’t call the whole project into question, at least for the length of an entire four-years legislative period.

Therefore, if the starting signal to the Pingtan-Taichung link will ever be given, it will most likely be on election day, January 14. It can almost be taken for granted that a KMT win would do its share in making investors’ doubts vanishing into thin air quickly. They know that as Beijing has decided to spend these billions just for the sake of luring the Taiwanese, the Chinese leadership won’t fail to make Pingtan indeed become an immensely lucrative and competitive gateway to China’s market. Furthermore, Taiwan’s geographical center and south will be tempted to jump on the opportunity to escape what they perceive as suppressing centralization as they have long complained over Taiwan’s north’s taking a share far too big of the cross-strait trade cake. As it is all but inconceivable that a future Taiwanese leadership in Taipei could politically afford cutting such a link against the wishes of the central and southern electorate, it doesn’t need a great portion of imagination to presume that the Pingtan-Taichung zone, once established, will from Beijing’s perspective very likely meet the objectives and thus be well worth the money. 


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