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Taiwan-China ties to enter new phase after Boao Forum: Barclays

2012/03/22 17:04:10

Taipei, March 22 (CNA) A global forum to be hosted by China in early April could take cross-Taiwan Strait relations to a new level, financial services provider Barclays said Thursday.

"The cross-strait dialogue is entering a more exciting phase, in our view. The next milestone is the Boao Forum on April 1-3," Barclays said in a press release.

Barclays forecast that two major steps forward in cross-strait exchanges could be taken in the wake of the summit -- further tourism liberalization and an investment protection agreement.

Vice President-elect Wu Den-yih will represent Taiwan at the forum in his capacity as an adviser to the Cross-Straits Common Market Foundation.

Firstly, the press release said, Taiwan and China might show a further commitment to signing an "overdue investment protection agreement that could spark foreign direct investment (FDI) flows into Taiwan."

"Indeed, we believe mainland investments in Taiwan could accelerate once the investment protection agreement (IPA) is in place to resolve disputes and protect Chinese investments and assets in Taiwan," it went on.

A new proposal by the Ministry of Economic Affairs put forward earlier in the week will allow Chinese capital to be pumped into 97 percent of Taiwan's manufacturing industry, 51 percent of its service sector and 51 percent of its public infrastructure construction industry.

This third wave of opening of Taiwan's market to Chinese capital is set to take effect by the end of March, according to Vice Economics Minister Huang Jung-chiou.

The signing of the IPA is expected to "spark some FDI and mergers and acquisitions flowing back into Taiwan" when Taiwanese businesses have invested more than US$200 billion in China, Barclays said.

In addition, negotiations for further opening to Chinese independent travelers could speed up after the summit in Hainan Province, off the coast of southern China.

"The Free Independent Traveller (FIT) program could be expanded to 35 cities over the next two years," while the daily limit of FIT applicants "could be raised to 1,000" from the current 500 people, Barclays predicted.

Taiwan launched the FIT program for Chinese nationals in June, 2011, allowing people from Beijing, Shanghai and Xiamen to visit Taiwan without having to travel as part of a tour group.

Further opening to Chinese tourists could boost Taiwan's foreign exchange earnings from an estimated US$4.5 billion in 2011 to US$8 billion in 2012 as Chinese arrivals are expected to double, according to Barclays.

Citing Singapore's experience in 2004, Barclays said that "boosting tourism can revitalize the service sector -- creating jobs, reflating commercial and residential real estate values and ending wage stagnation."

In terms of the country's economic outlook for 2012, Barclays predicted a 3 percent GDP growth, compared with 4 percent in 2011, and an annual inflation rate of 1.8 percent.

However, it said it does not expect to see any monetary stimulus implemented, as the current monetary conditions are already accommodative.

(By Luo Hsiu-wen and Kendra Lin)