In both Taiwan and China in recent years, businesses have quietly built a massive network of roads, ports, airports–a multibillion-dollar shadow network of facilities for the day the two sides finally strike a deal. Indirect trade through Hong Kong and other transfer points is booming, but these hotels, restaurants and conference centers are often empty. Overeager cities on the mainland are surviving because they can draw from a huge domestic market. Yet even they still need direct links if they want to become international hubs. Taiwanese entrepreneurs are worse off: those who launched projects in hopes of a rush of mainland business are now desperately casting about for new customers.
The massive network is a reminder that when it comes to Taiwan-China relations, even the flow of capital can’t cut through political tensions. Since Taiwanese President Chen Shui-bian does not accept that Taiwan is part of one China, as defined by Beijing, there are no high-level official negotiations over direct links. Thousands of local businessmen are hoping he moderates his position in his second term. During his Inauguration speech last Thursday, Chen did indeed take a softer tone but offered no new proposals. Predictions on when a deal may be cut range widely, from the end of 2004 to next decade, or beyond.
Until that happens, an army of companies and bureaucracies will remain in limbo. And with overcapacity standing as a key threat to healthy economic growth on both sides of the strait, this is a lobby Chen will be hard-pressed to ignore. The problem is particularly acute in cities positioned to be the key transit links between China and Taiwan, places like Kaohsiung and Taichung in Taiwan and Xiamen and Fuzhou in southern China. “Our level of competitiveness will decrease without direct links,” says Kaohsiung Mayor Frank Hsieh. “We’ll have to find other businesses, like fisheries and shipbuilding.”
To many, direct links have seemed inevitable since the early 1980s, when China began opening up to the world. Taiwan trade in China has grown from $46 million in 1978 to $46 billion in 2003, and new projects built for even greater business–like the Taipei 101 skyscraper, the world’s tallest building–are going up all the time. In Taichung, developer and chamber of commerce head Lai Cheng-I plans a downtown conference center and luxury hotel. “I’ll go ahead and build it,” he said. “Three links is just a matter of time.”
The same has been said in Xiamen for decades. In 1983 the city opened an airport that can handle 10 million passengers a year, but now processes less than half as many. (The same is true in Fuzhou, where the new airport is running at one third of its 12-million-passenger capacity.) “Ten years ago, for the sake of three links, we even built golf courses and figured businessmen from Taiwan would be able to fly here and play golf because it would be cheaper than golfing in Taiwan,” says Liao Chaocheng, Xiamen’s head of Taiwan affairs. “Now the price is more or less on the same on both sides, but there’s nothing we can do. We just have to wait.” Xiamen Airlines has been inviting other airlines from China and abroad to fill all those empty slots, but “hasn’t been so successful,” says company executive Yan Changzheng.
Frustrated businessmen are trying to jump-start the diplomacy. Xiamen Airlines president Wu Rongan, for example, meets frequently with Taiwan counterparts and forwards ideas to the president’s office. To assuage Taipei’s fears of mainland spying and sneak attacks, he has offered to fly routes that avoid militarily sensitive areas on Taiwan. “I’m not doing this only for money, but in the interest of all Chinese,” says Wu, 62, who can recall hiding under his bed as a child when fighting flared between the mainland and Taiwan. “I’ve been working on it since 1986 and nothing has happened, so I’m a little disappointed.”
Other entrepreneurs have quit waiting, and are starting to look for customers from outside China. Kaohsiung recently broke ground on a mall that will be Asia’s largest when it opens in 2005, part of the city’s new ambition to become an Asiawide shopping hub. The city of Taichung built tourist attractions like a huge park that holds an annual Cherry Festival in anticipation of direct links, and is now marketing them to a global audience, as well as building new ones. Taichung Mayor Jason Hu is lobbying Taipei for $400 million to help construct a branch of the Guggenheim Museum in his city. “You can’t just say, ‘I want three links, I want three links,’ and sit there and cry about it,” says Hu, a former foreign minister.
Still, none of those foreign markets has the potential of China’s. Chen might please some supporters by keeping the mainland at a distance. But delivering on direct links will probably be the defining issue of his second term–and one the players in the shadow network will be watching closely.
