Taiwan and China Mover Closer to Normal

Posted by: Bruce Einhorn on May 1, 2009

There are some good things that come out of economic crises. We saw one the other day, with the Taiwanese government on Wednesday giving the green light for China Mobile to invest $533 million in Taiwanese cellular operator FarEasTone. Even as ties between the two sides have been warming, with companies from Taiwan pouring billions of dollars into the mainland and airlines from Taiwan and China opening up direct flights, Chinese investment in Taiwan was one of the last remaining barriers left over from the bad old days. Now that’s gone.

Maybe this would have happened anyway, since President Ma Ying-jeou had campaigned on the promise of normalizing ties with Beijing. But the Taiwanese economy is hurting badly right now – and foreign investors aren’t exactly stampeding into Taiwan. Opening the door to China Mobile, the state-owned cellular operator that so far has had very limited success in its attempt to expand outside its home market, makes a lot of sense.

And for all its size and strength, China Mobile could use the help, too. Sure, it’s the world’s biggest cellular operator, but it’s pretty much a one-trick pony. The company achieved that No. 1 status thanks to its near-monopoly position at home. Over the past decade it has had just one competitor, and a feeble one at that: state-owned China Unicom, which the government forced to operate a CDMA network in addition to the far more popular GSM network as a sop to the U.S. (San Diego-based Qualcomm is the company behind CDMA.) Beyond its home market, China Mobile is puny. It has a subsidiary in Hong Kong and another in Pakistan, but the company has much bigger ambitions to be a global player. Taiwan – close to home, with people who speak the same language – gives China Mobile a relatively easy expansion opportunity.

Other Chinese companies also are struggling to keep up with Beijing’s wishes to make their name globally, so it’s no wonder the Taiwanese stock market has soared on the news. It seems a pretty good bet that China Mobile isn’t going to be the only mainland company looking at Taiwan.

Reader Comments

Bob

May 1, 2009 11:55 PM

Steadily improving relations between China and Taiwan means Taiwan's economy finally will have a chance to break out from a decade of under-performance and catching up for lost time (decade).

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Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

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