China reaches across the sea to Taiwan

Teresa Poole in Xiamen reports on how boomingbusiness is the driving force behind sea links

In the annals of historic sea voyages, the journey of the 2,597- tonne Chinese container ship, Sheng Da, lacks a certain element of romance. But when the vessel docked in the Taiwanese port of Kaohsiung recently, the smiling but silent mainland crew dressed in yellow outfits, its arrival marked the first direct ship crossing between China and Taiwan since 1949.

Political symbolism took priority over shipping timetables on the routing; the Sheng Da had sailed from the mainland coastal city of Xiamen that morning but hung around just outside Kaohsiung port for five hours waiting for the sun to set so that, according to naval protocol, it could enter harbour without hoisting the Taiwan flag. The unloading of cargo containers at dusk on 19 April for trans-shipment to third countries was the sort of unlikely political milestone which so characterises the volatile non- relationship between Peking and an island state which it still considers a renegade province.

It is just one year since the People's Liberation Army was lobbing missiles into the seas around Kaohsiung in the run-up to Taiwan's presidential elections. Since then, Peking has instead concentrated on winning the hearts and minds of Taiwanese businessmen, knowing that economic links may prove a more potent weapon than military hardware. Across the Strait in Taipei, President Lee Teng-hui, who last August warned that too much Taiwan investment on the mainland would jeopardise "national security", has been fighting a rear-guard action. Restrictions on mainland investment have been steadily tightened and, taking a heavy hint, Taiwan's biggest private company, Formosa Plastics, put on hold its stake in a pounds 2 billion power station in China's south-eastern Fujian province.

In Xiamen, the southern Fujian city which faces Taiwan, the evolving relationship between the mainland and Taiwan is evident in the shape of acres of sprawling factories. For decades, this was China's front-line city in the mainland's war of attrition with Taiwan, with the Taipei-controlled island of Jinmen (Quemoy) lying just offshore. When military bombardment stopped in the mid-Sixties, the noisy propaganda war took over, with shells containing political leaflets.

At Hulishan Fortress in Xiamen, a former restricted military zone turned seaside tourist attraction, Chinese mainlanders still pay two yuan (17p) a time to stare through a telescope at distant islands decked with what is left of the Taiwanese propaganda. But Taiwanese people are hardly a novelty on this side of the Strait; an estimated 5,000 Taiwan businessmen now live in Xiamen, managing 1,300 local Taiwan enterprises into which $2 billion of Taiwanese money has been sunk over the past decade.

Regardless of the politics, the mainland offered much cheaper labour when Taipei's ban on private visits was dropped in 1987. At the wholly Taiwan-owned Everlead Shoe Company in Xiamen, for example, 3,000 mainland peasant girls are turning out boxloads of Cobbly Cuddlers "shoes you can live in" for export to a generation of American women whose sartorial priority, it is probably fair to say, is comfort not fashion.

Much of Taiwan's low-level manufacturing has now been shifted to the mainland. The Taiwanese manager of Everlead, Sue Jane Cheng, said the company's seven Xiamen assembly lines expect to produce 8 million shoes this year, all destined for the US. Mainland labour costs were one-tenth that on Taiwan, she explained.

Taiwan businessmen in Xiamen are just as keen as the mainland government to see direct links across the Strait. The new trans-shipment cargo service between Xiamen and Kaohsiung port represents an uneasy compromise between China's demand for the "san tong" (three links) - shipping, air and postal - and President Lee's fear that economic over-dependence on mainland links is a political time-bomb.

At this stage, to Peking's chagrin, only trans-shipment is allowed which means goods crossing the Taiwan Strait cannot go in or out of Taiwan itself, but must originate from or be destined for third countries. Peking hopes this will be the thin end of the wedge in forcing full links on Taipei, with the return of Hong Kong on 30 June providing a new trump card. At the moment the British colony provides the missing direct link for most of Taiwan's trade and investment with the mainland, and virtually all Taiwanese capital and goods to and from the mainland passes through the territory. But, with two months to go, Peking is stalling over discussions about arrangements after the handover.

"The central government will not take advantage of the return of Hong Kong to pressurise Taiwan," protests Fan Xizhou, deputy director of the Taiwan Research Institute at Xiamen University. Then he states the more ominous reality: "If the central government really wants to pressurise Taiwan, it can take advantage of the shipping between Hong Kong and Taiwan."

President Lee finds himself caught in a pincer movement between the fierce lobbying by Taiwan businessmen who want to step up mainland investment, and the threats and blandishments of Peking. Not even last year's missile tests shook the onward march of Taiwan investors into China. In Xiamen, there was still a 20 per cent increase in Taiwan investment in 1996, according to Chinese figures. "Businessmen are always relatively cautious," said Wu Jie, at the Xiamen Foreign Investment Executive Committee. "But it is in the nature of businessmen to make profits even if they know their opportunity is rather risky either economically or politically."

Ms Cheng, at Everlead, described the feelings of Taiwanese during the missile tests: "Of course, certainly we felt slightly uncomfortable inside. But we were not terribly nervous about it, because we did not think it was for real."