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Taiwan President Chen Favors Expansion of Trade with China

By Philip P. Pan

President Chen Shui-bian of Taiwan broke Sunday with a decades-old policy of restricting trade with China and endorsed a high-profile economic council’s proposals to expand commercial ties aggressively despite lingering military and political tensions.

Chen promised new policies within two weeks based on the panel’s recommendations, which include lifting a $50 million cap on any single Taiwanese investment in China and allowing Chinese investment in Taiwan’s real estate and stock markets.

Tsai Ing-wen, Taiwan’s top official for relations with China, said the proposals meant an end to the “no haste, be patient” policy of limiting trade with China for fear of becoming too dependent on a rival that has long threatened to seize Taiwan by force.

“This is a clear demonstration from our side that we are prepared to take the risk and take a positive attitude toward China,” Tsai said.

There was no immediate reaction from Beijing, which considers Taiwan an inseparable part of China and views Chen with suspicion because he once advocated independence for the capitalist, democratic island.

A state-run Chinese newspaper had dismissed earlier reports about the proposals, insisting that Chen accept the “one-China principle” and renounce any claims to Taiwanese independence. But a senior Chinese trade official also said China would not stand in the way of increased Taiwanese investment.

Depending on how Beijing reacts, Chen’s move could prove to be a turning point both for his troubled presidency and for relations between China and Taiwan.

With Taiwan in a recession, businesses there have been pressing Chen to lift trade restrictions they say puts them at a disadvantage with other companies taking advantage of China’s cheap labor and booming economy. By giving in, Chen has angered members of his own party, including the vice president, but his standing with the public could rise, especially if the island’s economy rebounds.

More broadly, the proposals -- made by a committee of government officials, academics, and business leaders -- could accelerate Taiwan’s economic integration with China. Although direct investment in China is banned, Taiwanese firms have indirectly invested an estimated $60 billion over the past decade and about 40 percent of Taiwan’s foreign investment now goes to China.

Briefing reporters in Taipei, the capital of Taiwan, Tsai said she hoped the proposals would break a stalemate in relations with Beijing, which has refused to open talks with Chen’s government. “We do hope they will consider this as some sort of goodwill,” she said.