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Beijing's Charm Offensive Is Giving Taiwan The Jitters


International Outlook

BEIJING'S CHARM OFFENSIVE IS GIVING TAIWAN THE JITTERS

After a five-year freeze in relations, Taiwan and China will finally start talking again at a high-level meeting in Shanghai on Oct. 14. In the runup, both Beijing and Taipei have made a number of conciliatory gestures. Taiwan canceled potentially provocative war games scheduled to start on Oct. 12. Beijing dropped its insistence that Taipei must accept its "one China" policy of eventual reunification as a precondition for talks. For the moment, it has agreed to leave aside thorny political topics and just discuss workaday issues such as fishing rights.

Now, China is offering another sweetener. Foreign Minister Tang Jiaxuan promised Taiwan "greater autonomy than Hong Kong" if it reunites with the mainland. Analysts labeled the plan as "one country, three systems." Unlike Hong Kong, Taiwan could, say Chinese officials, keep its own army, and its leaders could serve in China's government."A LOT OF PRESSURE." That's a big reversal from 1995 and 1996, when Beijing frightened the world by testing missiles in the Taiwan Straits. But the changed tone serves China's interests. Beijing doesn't want distracting rows as it tries to implement painful economic reforms. Indeed, it needs continued access to Taiwanese capital and knowhow more than ever. Besides, Beijing is eager to build on the diplomatic gains made during President Bill Clinton's June summit--for instance, by getting permanent most-favored-nation status from the U.S. and support for early World Trade Organization entry. Getting Taiwan on a reunification track would also help Jiang consolidate his power and secure his historical legacy.

Taiwan's business community, which Beijing is eagerly wooing, wants closer ties. More than 30,000 Taiwanese-funded enterprises have invested about $35 billion in China. But two years ago, Taipei restricted high-tech and infrastructure investments and limited those in other sectors to under $50 million. Business argues that Taiwan companies are in danger of being locked out by rivals. "Many world-class international companies have started to invest in petrochemical projects in the mainland. We fear we will lose our opportunity if we invest later," says Formosa Plastics Group Chairman Wang Yung-ching.

To many Taiwanese, however, Beijing's charm offensive is alarming. Taipei is cool to the "three systems" idea, but it's in a bind. The suggestion undercuts Taiwan's main objection to earlier proposals: that they would have treated it just like the small city-state of Hong Kong. "The peaceful approach puts a lot of pressure on us," says Andrew Yang, secretary general of the Chinese Council of Advanced Policy Studies in Taipei.NO CONSENSUS. Reunification is a hot-button issue in Taiwan's politics. The ruling Kuomintang and President Lee Teng-hui prefer to keep their dIstance, favoring eventual reunification once China has democratized and caught up to Taiwan economically. But the main opposition Democratic Progressive Party wants independence. Analysts say recent DPP electoral gains and the prospect that its candidate could win the presidency in 2000 pushed Beijing to parley now. But Taipei can't talk politics with Beijing because of the lack of consensus at home. "Any leader that does this would be immediately attacked," says Lin Chong-pin, vice-chairman of Taiwan's Mainland Affairs Council.

All the same, time is working against Taipei. President Clinton's June public statement of U.S. opposition to Taiwan's independence or U.N. membership was a big setback. Now just 27 countries recognize Taiwan. And it will soon have even fewer friends if Beijing continues to make reasonable-sounding offers that Taipei can't accept.EDITED BY JOHN TEMPLEMANReturn to top

CHINA SHUTTERS FINANCE FIRM

Reflecting growing woes in China's financial sector, the central bank abruptly closed Guangdong International Trust & Investment Corp., which owes over $450 million to foreign lenders. An Oct. 6 announcement said the move was to protect GITIC's creditors and that Beijing would make good on GITIC's loans.

GITIC was one of 10 investment trust companies set up to allow China to tap global capital markets. It was heavily invested in the volatile real estate market, which fell sharply this year. Since the start of 1997, the authorities have shut several smaller institutions as they try to deal with bad loans throughout the financial sector.EDITED BY JOHN TEMPLEMANReturn to top


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