Strait talk

4 May 2009 By John Foley Follow @johnsfoley

Financial turmoil has brought the two closer. Taiwan, its economy slammed by a 30% fall in exports, will gain from opening up to Chinese capital and tourists. Investors will welcome the reduced political risk. China may yet win with finance what threats of force didn t get.

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China and Taiwan announced closer cooperation in financial services, travel and investments following their third round of crossstraits talks. Among the proposals are an increase in direct flights, from 108 per week to 270, and a joint regulatory framework for banking and financial services.

China claims sovereignty over democratically governed Taiwan, and most countries do not officially recognise the island as a fully independent country. President Ma Yingjeou took office in May 2008 pledging to improve relations with the mainland.

Under new plans, China's foreign investment firms in the mainland may also be allowed to invest directly in Taiwanese stocks and futures. Taiwan's major TSEC50 index rose 14% over the two trading days following the announcement on April 29.

Separately, China Mobile said it planned to buy a 12% stake in Far Eastone, a Taiwanese telecoms firm, and launch a joint venture for business customers travelling between Taiwan and the mainland. The investment had not yet been approved by regulators.

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