Taiwan's trade bans send wrong signal

Taiwan's announcement to place new restrictions on investment in mainland China is bound to strain cross-straits relations. The latest restriction, which becomes effective from July 1, the day Hong Kong returns to China, has obvious political undertones and will add to the existing strains in bilateral ties.

Economic Minister Wang Chih-kang said Taipei would consider lifting the ceiling of U.S.$50 million on any single project if Beijing renounced the right to take the island by force. China has reserved the right to use force if Taiwan strikes out on the path of independence, and it is most unlikely that Beijing would be ready to surrender that right against what it considers a legitimate part of China.

Had Taiwan not made this a condition for lifting the ceiling on investment, perhaps the new move might have been considered inconsequential by Beijing, which appears to have sufficient sources of investment, particularly from Europe, whose states are involved in an unseemly scramble to establish themselves in China.

President Lee Teng-hui previously talked of curbing Taiwanese cross-straits economic activity, but did not actually spell out what Taipei intended to do. Now it appears Taipei is particularly concerned about investment in large-scale infrastructure projects of strategic value that can enhance China's economic and, possibly even, military capability.

But why is Taipei doing this right now? Its choice of when to impose restrictions suggests it is to do with China's recovery of Hong Kong and the consequent enhancement of the country's territorial integrity. If so, it seems a rather futile gesture, particularly since such restrictions on investment are difficult to police in a world where capital moves so easily and freely.

And if this is done in a moment of pique, it will hurt Taiwan more than it is likely to hurt China.

-- The Standard, Hong Kong