SCMP Tuesday, January 9, 2001

HK needs a strait move


A ferry trip from the Taiwanese island of Matsu to the mainland port of Fuzhou lasts an hour while that from Quemoy to Xiamen is even shorter. But the voyage that the two Taiwan vessels embarked on last week had taken more than 50 years. These limited, direct contacts are now called the "mini-three links". The gesture was modest but the symbolic value was momentous. Whereas once Chinese people wondered whether Taiwan and the mainland would ever agree to open direct ties, now we simply ask "how soon?"
We in Hong Kong applaud any easing of tensions across the Taiwan Strait. While we understand that the establishment of full contacts may still take some time, we know that these are as inevitable as national reunification - and perhaps even a prelude to it.
Our city figures mightily in the cross-strait equation. Hong Kong's return to China in July 1997 set the tone and the momentum for the settling of the Taiwan issue under the concept of "one country, two systems". Indeed, late leader Deng Xiaoping conceived of this concept, not only for Hong Kong, but chiefly as a means for restoring Taiwan to the national family.
Our importance in the overall scheme of Chinese reunification is not only political and historical but also economic and social. Hong Kong has helped expedite economic integration between the two sides of the strait. In 1999, recorded trade between the mainland and Taiwan amounted to $200 billion and a substantial portion of that booming traffic was conducted through Hong Kong in the form of re-exports. In 1999, the mainland shipped $12.7 billion worth of goods to Taiwan through Hong Kong while Taiwan shipped almost $64 billion to the mainland through Hong Kong.
It is quite likely that a good portion of that trade will not be routed through Hong Kong if Taiwan and the mainland are able to send their goods directly to each other. But we should not be too grim about the mainland-Taiwan re-export traffic ceasing altogether. In recent years, many Taiwan investors, besides doing business in Fujian province, have also established factories in the Pearl River Delta region. So they will need to continue to manage and finance those enterprises in Guangdong province, as well as export the finished products through our city.
Some shippers believe that in the short term, due to the advent of limited direct traffic between the Taiwanese port of Kaohsiung and the mainland's Xiamen, we may lose five per cent of that trade. The more serious impact will still be some years away, giving us sufficient time to map out a strategy not only to cope with such a major shift, but also to benefit from it.
The other challenge is financial. Taiwan businesses have invested an estimated $300 billion on the mainland since the 1980s. The government of President Chen Shiu-bian has all but dropped the policy of his predecessor, Lee Teng-hui, who had tried in vain to curb the flow of money into the mainland and prevent Taiwan from becoming too dependent on that market. A substantial portion of the capital has been channelled through Hong Kong, which has unrivalled acumen in servicing such investments.
When Mr Chen was the mayor of Taipei - between 1994 and 1998 - he aspired for the city to emulate Hong Kong as a financial centre. Back then, this was impossible given the hostility across the strait. But circumstances have since changed and so we have to be ready for the competition from Taipei.
In time, Taiwan's advantage over Hong Kong in technological development, telecommunications and the sciences - with its abundance of PhDs trained in the United States - could be telling. American technology companies may find Taiwan a more attractive, alternative gateway to the mainland, if only because the costs of doing business on the island are lower and expertise is abundant. This is why it is imperative that we treat Taiwan as a potentially serious rival, shore up our own technology, or work out a partnership which would be mutually beneficial for all three Chinese territories.
Perhaps the most vulnerable sector is tourism in Hong Kong. Mainlanders have become our most numerous visitors. About three million of them called on Hong Kong in 1999. Second on the list are visitors from Taiwan; almost 2.1 million of them visited us in 1999 - in most cases in transit to or from the mainland - and injected $11 billion into our economy. One day, with direct flights to the mainland, many visitors from Taiwan could decide not to come through Hong Kong. Our tourism planners in government and the Hong Kong Tourist Association should consider how best to appeal to Taiwan so that more people would not delete us from their itineraries.
Financial Secretary Donald Tsang Yam-kuen has less than three months to draft his next budget. Mr Tsang will, of course, tailor Hong Kong's finances to fit our immediate economic needs. But he should also ponder the meaning of the rapidly expanding links between the mainland and Taiwan, both of which are expected to join the World Trade Organisation this year.
We are now poised on either the precipice of peril or the threshold of opportunity. If we miss our step, we will stumble and perhaps fall.
But if we seize the chance and adopt the right policies, then we can help everyone - the mainland, Taiwan and ourselves - to achieve a three-win situation, which can also serve as the catalyst for the peaceful, and prosperous, reunification of our nation.
James Tien Pei-Chun is chairman of the Liberal Party.