A Greater China? between Chinas mainland, Hong Kong, and Taiwan Economy or Politics? Increasing complex economic interests between the 3 Chinese societies flying geese pattern of development movement of capital and industries convergence of economic structures utilization of market and labor interdependence on trade political tensions Political tension Mainland and Taiwan have been technically at war since 1949 before Chiang Kai-Shek died in 1975 Republic of China on Taiwan gloriously retake the mainland Political tension Before Mao Zedong died in 1976 Peoples Republic of China on mainland liberate Taiwan U.S. shifted diplomatic recognition from R.O.C. on Taiwan to P.R.C. in 1979 P.R.C. started economic reforms in 1979 R.O.C.s 3-no policy in 1979 no contact, no negotiation, no compromise New Realities in 1980s flying geese pattern of development New Realities in 1980s Mutually reinforcing dynamic Taiwan business community lobbied for lifting restriction bypassed regulations to satisfy commercial demand Taiwan government regulated exchanges legalize what is already taking place expansion of trade and investment New Realities in 1980s In 1983, Beijings Guidance on Taiwanese Investment in Special Econo. Zones and Related Favorable Policies in 1988, Beijings Regulations for Encouraging Investment by Taiwan Compatriots in 1989, 2 investment zones in Fujian Province, across from Taiwan People-to-people contacts In mid-1980s, Taiwan visitors traveled illegally to the mainland via Hong Kong in 1987, Taiwan government allowed citizens to visit relatives on mainland Semi-official contacts Straits Exchange Foundation was established in Taipei in 1991 Association for Relations Across the Taiwan Straits was established in Beijing in 1991 meeting between the 2 organizations in Singapore in 1993 one China expressed differently Regulations on investment In 1990, Taiwans Regulations on Indirect Investment or Technical Cooperation in the Mainland Area mostly in labor-intensive industries investment projects worth over 1 million US$ required prior approval investment projects worth over 50 million US$ are prohibited Restrictions on investment Then Taiwan president Lee Teng-hui go south policy in 1993 attempt to divert investment away from mainland China to Southeast Asia be patient, go slow policy in 1996 prohibited investment in certain sectors capped investment projects at 50 million US$ reduced Taiwans equity in mainland joint ventures to 30% Investment fits mutual needs Taiwan needs to relocate manufacturing to lower labor cost to take advantage of the huge market to gain higher returns on capital mainland needs capital, technology, and management expertise Both joined WTO in 2001 Growing business pressures and WTO commitments pressure on establishing direct links and reducing barriers to trade and investment three links direct mail, trade, and transportation mini-links between mainland and offshore islands under Taiwans control Future development Taiwan may lift strict restrictions on investment and imports from mainland concern over Taiwans security interdependence and independence mainland Chinas coastal regions and Taiwan may become indistinguishable may become further integrated economically