Sinomania!

The Beijing-Taipei Economic Cooperation Framework Agreement (ECFA) went into effect Sunday and will lower tariffs on 539 Taiwan originating products and 267 mainland Chinese products and open financial and other economic sectors to investors on both sides of the Straits of Taiwan. Already (official) cross straits trade exceeds $100 billion (US dollars). Expect that sum to expand greatly over the medium term....

Yangzijiang Shipbuilding (registered in Singapore but with all operations on China mainland) surged 7% today when it opened on the Taiwan Stock Exchange. The interest in shares shows that the long list of mainland firms eyeing a Taiwan listing may reap rich awards when listing becomes easier and directly possible as China and Taiwan merge their already closely related economies...

The Taiwan legislature on Wednesday approved the landmark Economic Cooperation Framework Agreement (ECFA) between Taiwan island and mainland China although neither side has yet had concluding high-level talks and exactly when the agreement goes into effect is undecided. Nonetheless, moving forward with ECFA is a huge development and begins the long process of economic absorption of Taiwan...

China Mobile and Taipei based Far EasTone signed a memorandum of understanding to develop a TD-LTE (time-division long-term evolution) network on Taiwan and cooperate in 4G applications and supply chain including Softbank, Vodafone, and Verizon. The move is part of the opening of Taiwan's telecom sector to mainland investment that began some months ago....

Taiwan's Financial Supervisory Commission - the Taipei government's financial regulator - approved direct investment by mainland Chinese banks, brokerages, and insurance companies in Taiwan. Several Chinese financial businesses are interested in setting up branches on Taiwan and investing in Taiwan companies. Bank of China and Bank of Communications are known to seek expansion to Taiwan. Taiwan news sources say the Commission still needs to inform the Executive Yuan and Taiwan's parliament but the new rules could be in place as soon as next week....

Mainland China based brokerages and insurance companies may be allowed to directly invest in Taiwan financial institutions according to the Taiwan Financial Supervisory Commission. A final decision has not been approved. Moving forward, Chinese banks famously awash with capital to spend, may be allowed to invest in Taiwan's financial businesses as part of the big Economic Framework Agreement still under consideration....

Now that the Obama administration will fulfill W's promise of high-tech weaponry to Taiwan it is important to review just where the USA and China stand on the issue.

The Taiwan Relations Act does imply if not compel the USA to supply arms to Taiwan for its defense. As Taipei and Beijing rapidly detangle 60+ years of separation with historic cooperation it can be argued just what is Taiwan defending itself against? But the 1982 Sino-American communique says the USA will end arms sales to Taiwan. Specifically,

6. Having in mind the foregoing statements of both sides, the United States
Government states that it does not seek to carry out a long-term policy of arms
sales to Taiwan, that its arms sales to Taiwan will not exceed, either in
qualitative or in quantitative terms, the level of those supplied in recent
years since the establishment of diplomatic relations between the United States
and China, and that it intends to reduce gradually its sales of arms to Taiwan,
leading over a period of time to a final resolution. In so stating, the United
States acknowledges China's consistent position regarding the thorough
settlement of this issue.

7. In order to bring about, over a period of
time, a final settlement of the question of United States arms sales to Taiwan,
which is an issue rooted in history, the two governments will make every effort
to adopt measures and create conditions conducive to the thorough settlement of
this issue.

The foregoing was agreed to by both sides NEARLY 30 YEARS AGO. The only people benefitting from the latest arms deal are three corporations, perennial Pentagon suppliers Boeing, Lockheed-Martin, and United Technologies. It is time for the USA to stop fanning flames and work toward peace by ending arms sales to Taiwan.

Preliminary talks on trade issues between Beijing and Taipei will occur during Christmas week. The meetings are expected to determine a timeframe for formal talks on the Economic Cooperation Framework Agreement or ECFA. ECFA could be a limited free trade agreement and sweep away decades of restrictions between Chinese investors on both sides of the contentious Taiwan Straits. The ever vocal opposition Democratic Progressive Party (DPP) on Taiwan is spinning a thunderous media cycle claiming ECFA would cost millions of jobs and end Taiwan's independence. But even American allies of the DPP admit a trade agreement would diffuse the dangerous tensions and military buildup in the region.

I fully expect ECFA to happen in some form well before 2012 the year of Beijing's Communist Party congress and Taiwan's next presidential election. And once it does come to pass it will be high time for the US federal government to honor its commitment in the Sino-US joint communique of 17 August 1982 and end arms sales to Taiwan. The recent bruhaha on both sides of the Straits over the discovery of a Chinese blogger that the Obama administration is possibly pushing United Technologies sale of Blackhawk helicopters to Taipei is a perfect example of how 27 years later the US continues to fan flames in the region.

The 1982 communique says:

6. Having in mind the foregoing statements of both sides, the United States Government states that it does not seek to carry out a long-term policy of arms sales to Taiwan, that its arms sales to Taiwan will not exceed, either in qualitative or in quantitative terms, the level of those supplied in recent years since the establishment of diplomatic relations between the United States and China, and that it intends to reduce gradually its sales of arms to Taiwan, leading over a period of time to a final resolution. In so stating, the United States acknowledges China's consistent position regarding the thorough settlement of this issue.

7. In order to bring about, over a period of time, a final settlement of the question of United States arms sales to Taiwan, which is an issue rooted in history, the two governments will make every effort to adopt measures and create conditions conducive to the thorough settlement of this issue.

Auto associations from China and Taiwan met in Taipei this week and agreed to cooperate in enhancing Taiwan's lagging auto industry. Private automaker Chery Automobile is already producing its A3 sedan in Taiwan and plans to introduce the larger A5 and A6 soon. Chery wants to work with Taiwan carmaker Auto21 according to reports. Yulon Motor, one of Taiwan's top automakers, signed an agreement this month with Geely Automotive to develop an economy car next year.

Taiwan's auto industry is dominated by a few firms, including Yulon, that are all part owned by Japanese auto majors including a tie-up with Ford/Mazda. While Taiwan carmakers excel at parts production the domestic industry suffers from declining sales and a saturated domestic market. The Chinese joint ventures will be aimed at exporting back to the mainland and also exporting from Taiwan to foreign markets.....

Fubon Financial, part of a big Taiwan insurance conglomerate, China State Development and Investment Corp., and a financial business controlled by Fujian Province, will set up and own roughly equal shares of a new private equity joint venture to invest in cross-straits enterprises. The private equity firm, name unknown at this time, will be initially capitalized at 3 billion Yuan (just shy of half a billion US dollars) and comes ahead of the still-debated financial pact between the mainland and Taiwan.....

Effective immediately journalists from Mainland China will no longer be restricted on Taiwan. Media staff may lease office space and increase the size of their bureaus. Most important they no longer must inform Taipei government of their movements. There are 5 national level and 2 provincial media outlets currently based on Taiwan. Ball in Beijing's court now....

Chinese television is reporting that over 500 million people will travel throughout the nation during the National Day "Golden Week." China has two "Golden Weeks" - week long national holidays - one at Chinese New Year (still officially called Spring Festival) and one around National Day (the Chinese equivalent of July 4 for Americans). For the first time mainland Chinese may travel to Taiwan (the government on Taiwan still observes the "double ten" anniversary or October 10 that commemorates the Wuchang uprising against the Qing Dynasty).

This year's Golden Week is special as it is the 60th anniversary of the founding of the People's Republic. New China has now cycled through all the elements of the Chinese calendar and is back where it began in 1949 in the hard working year of the Earth Ox....

The ex-President of Taiwan from 2000-2008, the man who survived a last minute "assasination" attempt on the eve of the 2004 election, the man former US President George W Bush said he would send the state of Texas to defend, the darling of the American Republican Party, has joined his former benefactor ex-US House Majority Leader Tom Delay in disgrace. Chen was found guility after a lengthy trial (and numerous hunger strikes and other antics) of corruption and embezzlement of millions from the state and from bribes. His punishment, life in prison....

It's back to the future with Taipei-Beijing relations as Taiwan dropped its annual UN membership ritual for the first time since 1992 the year Taiwan and China agreed to a consensus on bi-lateral relations based on acceptence of the "One China" principle. An independent Taiwan is looking increasingly unlikely as the economic integration with the mainland deepens every day....

Beijing's Civil Aviation Administration authority approved 270 direct flights (non-charter) between Taiwan and China on 32 routes covering most of the country and as far inland as Chengdu, Sichuan. The flights were anticipated and the move is a major step for cross straits peace.....

Wang Jianzhou, the Chairman of Hong Kong and New York listed China Mobile (NYSE: CHL) is making an emperor-like inspection tour of Taiwan and has met or will meet soon the heads of all Taiwan telecom and high tech majors (Chungwha Telecom, Acer, HTC), signed agreements to develop 4G technologies, and a contract with Taiwan pop star Jay Chou to be the company's spokesman. And a meeting with Taiwan vice economic minister may occur. China Mobile is still waiting for Taiwan's approval to acquire a stake in Far EasTone Telecom. The company is also not denying that it is pursuing a domestic Shanghai share listing next year to raise more funds. China Mobile is the largest cell phone company in the world in number of subscribers....

State controlled oil giants Sinopec of China mainland (NYSE: SNP) and Chinese Petroleum Corp. of Taiwan are teaming up for oil exploration and development off Australia. Units of the two oil majors are already jointly developing an offshore area in the Taiwan Straits.

Meanwhile, oil prices spiked up on news of all-time record imports of oil in China to 4.6 million barrels/day in July....

In another example of economic and financial cooperation between Beijing and Taipei, China UnionPay atm and credit cards will be accepted on Taiwan with a swiping ceremony possibly tomorrow (Friday). UnionPay is China's monopoly card issuer and has a growing network of ATMs around the world.....

Newland Computer Holdings of Fuzhou, Fujian Province, has acquired the controlling stake in Taiwan based Dipu Tech in a cash deal approved by Chinese regulators. This small step is an example of the economic absorption method Beijing will use to slowly and inexorably blend Taiwan's economy with the mainland, the key process to eventual unification. It took 17 years (founding of the ShenZhen Special Economic Zone in 1980) to unite Hong Kong economically. It will most likely take much longer with Taiwan particularly if there is resistence from the USA....