China to Invest in Taiwan

For the first time since the end of the Chinese Civil War in 1949, institutional investors from mainland China will be allowed to invest in Taiwanese money markets.

An announcement made by Taiwan’s financial regulator on Friday of last week ended a decades-old ban imposed amid fears that Chinese investment would make Taiwan economically dependent on the mainland.

The Times Online reported May 1:

The decision is a major milestone in Taiwan’s rapidly developing economic ties with China and the first step in a wide-ranging financial cooperation program it launched with the mainland just last weekend. On Sunday, envoys from the two sides signed a financial cooperation agreement in the southern Chinese city of Nanjing that paves the way for the two sides to open banks and other financial service institutions in the other’s territory.

Already, China’s top telecoms carrier, China Mobile, has announced that it intends to buy 12 percent of Taiwan’s third-largest telecom operator, which would make it the first Chinese state-owned company with a stake in a Taiwanese company.

For years, Beijing has claimed the island of Taiwan as a renegade province and threatened to use military force to bring it under Chinese rule. Now it appears that Beijing is cleverly taking advantage of the global economic downturn in order to interlace Taiwan’s economy with its own—thus making it more difficult for Taiwan to declare de jure independence at any point in the future.

Beijing is happy enough to let Taiwan move closer to China, but once it has moved closer, the Taiwanese will never be allowed to move further away again.

For more information on the future of Taiwan, read “Taiwan’s New Direction” and “Taiwan Betrayal.”