China and Taiwan Deepen Economic Ties

China and Taiwan have deepened economic ties which helps improve cross-strait relations. From Joy C. Shaw of the Wall Street Journal:

“The two sides also agreed in principle to allow investment from mainland China in Taiwan.

Representatives of Taiwan’s semiofficial Straits Exchange Foundation and its Chinese counterpart, the Association for Relations Across the Taiwan Straits, or ARATS, reached the agreements on Sunday in the third round of formal negotiations since Ma Ying-jeou became Taiwan’s president in May 2008, elected on a pledge to improve the island’s flagging economy through better relations with China.

Taiwan insurance firms already have joint ventures in China, but banks and brokerages are allowed only representative offices on the mainland, which means they can’t conduct profitmaking business. Taiwan doesn’t permit Chinese banks any presence on the island.
Fu Don-cheng, deputy minister of Taiwan’s Mainland Affairs Council, the government’s top China-policy body, told a news conference in Nanjing that Taiwan will issue guidelines to allow Chinese investment in Taiwan in one to two months. Taiwan businesses are among the largest investors in China.

To pave the way for expanded financial flows, the longtime rivals said they will gradually build a foreign-exchange clearing system. Analysts say the lack of such a system has been a major hindrance to financial-market exchanges, such as allowing Chinese investors to buy Taiwanese shares directly.

Although the Chinese economy seems to be coming out of a shallow recession, the Taiwanese economy is still lagging behind in its GDP growth- thus these improved financial ties are crucial to boosting both economies as well as helping China further develop and improve upon its financial sector. Despite the political tension between China and Taiwan, the economic relations between the two areas have greatly improved which in turn is crucial to stability of the region as economic ties among Asian countries have grown more complex and integrated over recent years.

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