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DE RUEHGZ #7360/01 1630845
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R 120845Z JUN 06
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 0698
INFO RUEHOO/CHINA POSTS COLLECTIVE
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UNCLAS SECTION 01 OF 02 GUANGZHOU 017360 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON PREL CH TW
SUBJECT: Capitalizing on Taiwan Cache: The Fuzhou Cross- 
Strait Trade Fair 
 
REF: (A) GUANGZHOU 14846; (B) 05 GUANGZHOU 26419; (C) 05 
 
GUANGZHOU 8926 
 
(U) This message is sensitive but unclassified.  Please 
handle accordingly. 
 
¶1. (SBU) Summary: Taiwan-based and -invested companies 
displayed their wares to an eager crowd at Fuzhou's annual 
Cross-Strait Trade Fair.  Taiwan agricultural produce 
occupied a prominent spot at the fair, following on China's 
2005 elimination of tariffs on ten types of agricultural 
imports from Taiwan.  Mainland customers are willing to pay 
higher prices for Taiwan produce, liquor, and other products 
because of the higher quality associated with them.  Chiang 
Pin-Kung, Vice Chair of Taiwan's Kuomintang (KMT) party, 
spoke at the fair's opening ceremony about the need for 
closer cooperation between the two sides and his hope that 
direct links would eventually be established.  End summary. 
 
Background on Fujian-Taiwan Trade and the Fair 
--------------------------------------------- - 
 
¶2. (U) Taiwan is Fujian's largest source of imports and its 
third largest trading partner.  More than 10,000 Taiwan- 
invested enterprises are based in Fujian, according a speech 
given at the fair by Fujian Vice Governor Huang Xiaojing. 
Fujian imports from and exports to Taiwan have both been 
growing by 30-40 percent per annum in recent years and the 
Fujian-Taiwan trade volume reached USD 5 billion in 2005. 
Fujian and Taiwan have passenger "mini-links" between the 
Fujian port cities of Xiamen and Mawei and the Taiwan 
islands of Kinmen (Jinmen) and Matsu (Mazu) (see reftel A). 
Other Fujian cities, including Fuzhou, Xiamen, Zhangzhou, 
Quanzhou, Putian, and Ningde, have cargo "mini-links" to 
Jinmen and Matsu.  The annual number of Taiwan visits to 
Fujian topped 500,000 in 2005. 
 
¶3. (U) According to trade fair press reports, 185 exhibitors 
were present at the fair, 153 of which were enterprises 
based in Taiwan or with Taiwanese investment based in the 
mainland.  Foreign attendees, most of whom came from Hong 
Kong, Taiwan and ASEAN nations, signed 275 cooperation 
projects with a total foreign investment of USD 1.5 billion. 
However, U.S. investment at the fair, which totaled USD 129 
million, for the first time exceeded ASEAN investment, 
valued at USD 59 million.  Chinalco Ruimin Co. Ltd, China's 
leading manufacturer of fabricated aluminum, received the 
single largest foreign investment, worth USD 75 million. 
 
Taiwan KMT Vice Chair: Agricultural Cooperation and Direct 
Links 
--------------------------------------------- ----------- 
 
¶4. (U) KMT Vice Chair Chiang Pin-Kung, who led the KMT's 
first official delegation to mainland China in March 2005, 
spoke at the opening ceremony of the trade fair.  He was 
treated as the special guest of honor, second only to Fujian 
Governor Huang Xiaojing in terms of protocol.  In his speech 
Chiang said his ancestral roots lie in Fujian, as do those 
of 80 percent of Taiwanese.  He described economic ties 
between Fujian and the mainland as strong, and said no 
Taiwan enterprise could afford to miss out on the mainland's 
business opportunities, and called for more joint exchanges 
between Fujian and Taiwan to utilize comparative advantages. 
Chiang also highlighted the importance of the mini-links 
between Taiwan and the mainland, as well as chartered direct 
flights during the Spring Festival.  He added that he looked 
forward to the day when direct postal, passenger, and 
shipping links will make Fujian an even more valuable trade 
partner with Taiwan. 
 
¶5. (U) Chiang also spotlighted efforts to increase cross- 
strait agricultural trade, saying that Fujian has set up a 
marketing center to help Taiwan companies sell their 
agricultural produce in Fujian.  In addition, Fujian's 
Taiwan Agricultural Experiment Zone, which originally 
covered only Fuzhou and Zhangzhou cities, has been expanded 
to the entire province (see reftel B). 
 
Taiwan Produce and Liquor: A Special Appeal 
------------------------------------------- 
 
¶6. (SBU) One of the largest exhibitors at the fair was 
Chaoda Modern Agriculture Group, a mainland-based company 
that operates 30 farms in South China and is listed on the 
Hong Kong Stock Exchange.  The company sells itself as an 
ecologically sensitive and organic grower of fruit and 
 
GUANGZHOU 00017360  002 OF 002 
 
 
vegetables.  Chaoda also imports Taiwan produce -- indeed, 
after China eliminated import tariffs on ten different kinds 
of Taiwan fruits and vegetables in spring 2005, Chaoda 
imported the first batch and sold them at the cross-strait 
fair.  (Note: The zero-tariff policy for some Taiwan produce 
came in the wake a visit to the mainland by former KMT chair 
Lien Chan.  End note.)  Sales of Taiwan fruit in the 
mainland have reportedly surged despite their higher cost 
than domestically grown fruit.  When asked why, a Chaoda 
sales representative at the fair said Taiwan fruit is of a 
higher quality than mainland fruit and thus demands a higher 
price.  He said mainland Chinese, especially southerners, 
value fresh produce -- motioning to the large crowds of 
customers around his booths. 
 
¶7. (SBU) Exhibition booths for products from the Taiwan-held 
islands of Matsu, Kinmen, and Penghu all held prominent 
spots in the main hall of the fair.  In the Matsu area, 
three different makers of sorghum liquor competed for 
customers.  A sales representative for the Matsu Chungkao 
brand, who was born and raised on Matsu (which has a 
population of less than 10,000), said his company decided to 
come to the fair after observing the success of its two 
rivals in their mainland sales.  He described the fair as 
primarily an opportunity to build a brand name in the 
mainland market.  When asked why the company does not 
produce its liquor on the mainland to reduce costs, he 
scoffed and said the different climates would significantly 
compromise quality.  He described the mainland's import 
procedures are fairly straightforward but added that tariffs 
are still too high for his product. 
 
A Sign of the Times: C. Straits Cafe 
------------------------------------ 
 
¶8. (SBU) A rapidly growing restaurant chain on the mainland, 
¶C. Straits Cafe (Liangan Kafe) has found success by 
embracing the issue of Taiwan-mainland relations.  The 
company is owned by a married couple, in which the husband 
is from Taiwan and the wife is from the mainland (Hangzhou). 
The company, founded 12 years ago, has over 300 restaurants 
on the mainland and plans to reach 500 by the end of 2006. 
When asked whether the association with Taiwan has brought 
any negative repercussions, a regional marketing manager 
said the contrary is true, as the company has handled the 
cross-strait issue to its advantage.  She said the owners 
are both adamant supporters of reunification and oppose 
Taiwan's independence movement.  Indeed, the company's logo 
has an arch spanning its two sides and the restaurants are 
adorned with a slogan that reads "successful communication 
begins with two sides." 
 
Comment 
------- 
 
¶9. (SBU) Though the trade fair included exhibitors from a 
wide array of industries, including Taiwan high-tech 
companies and mainland industrial parks, those selling 
agricultural goods are enjoying increasing prominence since 
the mainland's 2005 tariff cuts.  The Taiwan cache clearly 
resonates for mainland customers, and is an opportunity for 
Taiwan SMEs to find a market on the mainland if they have 
not already.  C. Straits Cafe has hit the right notes 
politically for business on the mainland.  Not surprisingly, 
with a message that is unabashedly pro-reunification, the 
company does not operate any restaurants in Taiwan. 
 
DONG