Taiwan turning point

For both political and security reasons, the Taiwanese government for years has kept strict official limits on trade and investment between it and the mainland. And for their own business reasons, Taiwanese companies consistently have found ways around the rules.

Now it appears Taipei is about to recognize this reality and scrap the rules or at least rewrite them substantially. If it does, and mainland China reciprocates, important cross-strait changes will be on the way. And their impact on Hong Kong would be significant.

The changes include establishing the so-called three links with the mainland, allowing direct trade, transport and communications between them. They also include scrapping Taiwan's "no haste, be patient" policy on business investment in China, which in theory limits the value of any single Taiwanese project to US$50 million or less. And there seems to be an effort to return to a form of the one-China policy first reached by Beijing and Taipei in 1992 but since shelved. Under its terms, the two sides agree there is only one China, but carefully avoid drafting a common interpretation about what that means.

Meantime, various advisers in and out of the Government want to bring back some version of the 1992 one-China agreement to encourage progress on economic and other issues.

Much depends on Beijing. It has opposed closer links unless Taipei accepts a stricter definition of one-China, but that could change. Flexibility might erode Taiwan's deep suspicions about getting too close to the mainland, provided the Jiang Zemin government can be more innovative.

In the short term, Hong Kong could be the loser because so much trade and investment would no longer be channeled through the SAR. But over time, direct connections should promote economic growth throughout Greater China, with gains for all regions.

-- South China Morning Post, Hong Kong