Taiwan drops China trade ban

Taiwan mainland affairs council chairwoman Tsai Ing-wen announced the new measures in preparation for Taiwan's entry into the WTO

TAIPEI, Taiwan -- Taiwan has lifted a 50-year ban on direct trade and investment in China as both sides prepare for their expected accession to the World Trade Organization (WTO), officials said Wednesday.

Mainland Affairs Council (MAC) chairwoman Tsai Ing-wen said Taiwan would scrap a US$50 million ceiling on individual investments in China and allow offshore units of Taiwan banks to remit money to and from China.

The move would pave the way for local businesses to directly invest in China instead of routing investments through a third country, said Tsai.

Taiwanese businessmen have skirted government curbs lured by low land and labor costs as well as common language and culture.

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She added Taiwan would scrap its "no haste, be patient" policy which had restricted China-bound projects, and replace it with the so-called "aggressive opening, effective management" approach to help lift the economy.

"It's no longer appropriate to adopt passive measures such as 'no haste, be patient' to contain investments on the mainland," Tsai said citing drastic changes in the international and domestic economic environment as the main reason behind the policy shift.

"Facing globalization and the new situation after the two sides of (Taiwan) Strait join the WTO, we must consider the urgent need to raise the global competitiveness of businesses," said Tsai whose council formulates policy towards the mainland.

With a battered economy, record unemployment and crucial elections looming, Taiwan's government has been forced into further integrating its economy with China's despite political tensions.

China considers Taiwan as a renegade province that needs to be reunified with mainland.

Economy first

"Political problems take more time to resolve so we try to resolve economic problems first. This is a move in a good direction. It can't be bad," Tsai told Reuters.

Both China and Taiwan are expected to gain permission to join the World Trade Organization (WTO) at a meeting in Qatar beginning on Friday.

Despite simmering political tensions, Taiwan businessmen have poured about US$60 billion into China.

The government also plans to simplify procedures on investment projects under US$20 million.

The liberalization measures were part of a package of consensus reached by an advisory body to President Chen in August to buoy the sagging economy.

The announcement helped push Taiwan's benchmark TAIEX to close 1.84 percent higher on Wednesday.

Observers meanwhile noted the move was also aimed at improving President Chen Shui-bian's standing ahead of December parliamentary elections.

Taiwan banned direct trade and transport links with China at the end of the Chinese civil war in 1949.