This record is a partial extract of the original cable. The full text of the original cable is not available.

170807Z Oct 05

UNCLAS SECTION 01 OF 03 TAIPEI 004207 
 
SIPDIS 
 
DEPT FOR EAP/TC 
DEPT PASS AIT/W 
COMMERCE FOR ITA/MAC/ASIA/MBMORGAN CABLE BOX 4431 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD EAIR EFIN ETTC PREL CH TW
SUBJECT: CROSS-STRAIT ECONOMIC ROUNDUP - THIRD QUARTER  2005 
 
REF: A. TAIPEI 2950 
 
     ¶B. TAIPEI 3408 
     ¶C. TAIPEI 3454 
     ¶D. TAIPEI 3717 
     ¶E. SHANGHAI 3290 
     ¶F. GUANGZHOU 27348 
 
Summary 
------- 
 
¶1. The third quarter of 2005 saw several noteworthy 
developments in cross-Strait relations on the following 
topics: 
 
--Travel Agent Association of Taiwan to coordinate 
discussions on tourism. 
--Ministry of Economic Affairs recommended liberalization 
of export controls on semiconductor manufacturing 
equipment. 
--PRC approved another Taiwan life insurance company to 
establish Mainland office. 
--Taiwan industry group continued cooperation with PRC on 
IT industry standards. 
--Taiwan raised fines for illegal investment in PRC. 
 
End summary. 
 
Travel and Transportation 
------------------------- 
 
¶2. The third quarter of this year saw several 
important steps in cross-Strait transportation and 
travel policy, including PRC and Taiwan approval for 
Taiwan airlines to pass through PRC airspace on 
flights to Europe and the Middle East and steps toward 
expanding the "mini-links" to include the Penghu 
Islands (refs C and D).  In addition, Mainland Affairs 
Council (MAC) Chairman Joseph Wu announced on July 28 
that the Travel Agent Association of Taiwan (TAAT) 
would be designated as the industry association to 
coordinate cross-Strait consultations on opening 
tourism to Mainland Chinese.  TAAT is an island-wide 
association made up of the Taipei Association of 
Travel Agents (TATA), the Provincial-level Taiwan 
Travel Agents Association, and the Kaohsiung 
Association of Travel Agents. On September 2, Wu 
invited these and other tourism industry associations 
to a meeting to discuss how to ensure quality services 
and social order with tourism liberalization.  Wu also 
reminded the associations that they should take care 
not to be used as propaganda tools while in the PRC 
for trade fairs or other business consultations, 
including the September 6 First Cross-Strait Xiamen 
Travel Exhibition (ref F).  During the exhibition, 
TAAT representatives met with officials from the China 
National Tourism Administration (CNTA) and, according 
to Taiwan press, discussed nomenclature issues in 
preparation for more formal consultations on cross- 
Strait tourism. 
 
¶3. Taiwan also made an abortive effort to expand 
flight service to Hong Kong.  Taiwan and Hong Kong 
authorities approved an application from Hong Kong 
Express Airways Ltd. (HKEA) to conduct five round trip 
charter flights between Hong Kong and Taichung 
September 3-7.  However, Hong Kong authorities decided 
not to approve additional flights.  According to 
Taiwan press report, Hong Kong authorities felt the 
flights had become a political issue in Taichung's 
December mayoral election. 
 
Trade 
----- 
 
¶4. On August 24, BOFT lifted import bans for 25 PRC 
products, including cellular phones.  In addition, 
BOFT has extended the temporary approval for imports 
of small-size (less than 14mm) hot press steel and 
non-alloy steel rods or bars to December 31, 2005. 
However, on September 9, BOFT announced that it would 
not extend the temporary approval for seven categories 
of mid-size (larger than 50mm) iron and steel plate 
imports from the current deadline of September 30. 
 
¶5. To comply with the latest changes to international 
export control standards under the Wassenaar 
Arrangement, Taiwan's Bureau of Foreign Trade (BOFT) 
revised Taiwan's export controls on September 14. 
Among the changes, Taiwan will now permit the export 
of semiconductor equipment capable of producing chips 
with feature size as fine as 0.18 microns to some 
areas not including the PRC.  However, MOEA 
recommended to the Executive Yuan (EY) that Taiwan 
relax such exports to the PRC as well.  This step 
would allow Taiwan semiconductor foundries to transfer 
their 0.18-micron equipment to the PRC, once 
investment regulations allow them to build that kind 
of factories there with that level of technology. 
 
Finance 
------- 
 
¶6. On July 28, Taiwan's Financial Supervisory 
Commission announced new regulations that would permit 
PRC professionals staying in Taiwan over six months 
for work-related purposes to apply for credit cards 
from Taiwan banks.  Although the new regulations will 
not affect many PRC visitors, they represent a small 
effort by the Taiwan government to make it easier for 
PRC employees of multinationals and Taiwan firms to 
come to Taiwan for medium- and long-term assignments. 
 
¶7. The PRC approved on August 2 a request from 
Taiwan's China Life Insurance Co. Ltd. to set up a 
representative office in Beijing.  China Life joined 
three other Taiwan insurance companies -- Cathay Life 
Insurance Co., Ltd, Shin Kong Life Insurance Co., Ltd. 
and Taiwan Life Insurance Co., Ltd. -- that have 
established representative offices in the PRC and are 
qualified to seek approval for insurance joint 
ventures with a mainland partner. 
 
Industrial Standards 
-------------------- 
 
¶8. After initiating discussion of IT industry 
standards with PRC authorities on July 5 (ref B), a 
delegation from the Taipei-based Sinocon Industrial 
Standards Foundation and Taipei Computer Association 
met September 28 with officials from the PRC's 
Ministry of Communications to discuss the 
establishment of an "MU" card (Multimedia card and USB 
insert card) promotion alliance.  According to Taiwan 
media reports, possible members of the alliance 
include China's Lenovo, Haier, and TLC and Taiwan's 
Acer, Asus, PowerChip and the Industrial Technology 
Research Institute (ITRI).  Taiwan industry 
representatives were in Beijing for the Eighth 
Beijing-Taiwan Science and Technology Forum and 
discussed other standards issues related to 3G 
cellular phones, radio frequency identification, and 
other technologies. 
 
Investment 
---------- 
 
¶9. On August 11, Taiwan's Ministry of Economic Affairs 
(MOEA) Investment Commission (IC) announced that the 
penalty for unapproved large-scale illegal investment 
in the PRC would be increased.  Unapproved investments 
valued higher than USD 10 million will face a penalty 
of 0.5 to 2.0 percent of the invested amount, up from 
0.5 to 1.0 percent. The IC will also strengthen its 
semi-annual inspection regime for approved investments 
to ensure that the amount invested matches the 
approved application.  To further strengthen 
enforcement, the IC announced on September 5 that it 
would increase the reward for informants of illegal 
investment activities from up to NTD 1 million to up 
to NTD 2 million (USD 60,000).  Nevertheless, these 
efforts appear to have had little impact.  In the 
first seven months of 2005, the IC issued fines in 281 
illegal investment cases with penalties totaling NTD 
2.2 million (USD 66,000) compared to NTD 30 million 
for all of 2004. 
 
China Helps Taiwan Investors 
---------------------------- 
 
¶10. During September, China made a number of official 
efforts to gain favor with Taiwan investors.  At a 
September 7 meeting in Beijing with the chairmen of 
over 100 local associations of Taiwan investors in the 
PRC, Vice Premier Wu Yi promised that the PRC would 
start to issue 3- to 5-year multiple-entry permits for 
Taiwan travelers.  She announced that the PRC would 
provide five-year loans totaling RMB 30 billion aimed 
at attracting Taiwan investors in major infrastructure 
and high-tech industries.  Wu also agreed that the new 
Shanghai school for children of Taiwan investors could 
use the term "Taiwan businessmen" (taishang) instead 
of "Taiwan compatriots" (taibao), allowing Taiwan's 
Ministry of Education to recognize its diplomas and 
subsidize tuition for Taiwanese students. 
 
Taiwan Investors Want Progress 
------------------------------ 
 
¶11. On the other side of the Strait, Taiwan Premier 
Frank Hsieh met on September 21 with Taiwan investors 
returned from the Mainland during the Mid-Autumn 
Festival.  According to media reports, many 
participants were disappointed by the lack of any new 
announcements on cross-Strait issues such as direct 
links, entry permits for Mainland visitors, or 
expansion of international flights to Taichung. 
PAAL