Taiwan to China: Send Cash

More progress on cross-Straits relations: Taiwan has opened its markets to mainland Chinese investment. The new rules are in part a testament to the power of Chinese cash reserves (Taiwan’s economy shrank 10 percent year-on-year in the first quarter of 2009). But they also represent a significant, if pragmatic, step towards Taiwanese President MaYing-Jeou’s goal of closer economic ties, which have to date beenmainly one-way (from Taiwan to China). “Institutional” investment — by which I understand state-sponsored, but I might be mistaken — is limited to 10 percent of stock ownership, while limits on corporate ownership will be decided on a case-by-case basis. Some sectors — high-tech manufacturing — have been kept off-limits.

Curious time, then, for the U.S. to release a $45-million sale of 171 Stinger air-to-air missiles to Taiwan. The missiles will be outfitted to a batch of Apache attack helicopters, released last October, meant to “interdict a Chinese amphibious invasion force attempting to cross the Taiwan Strait.” I haven’t found any official Chinese response, so far. It will be interesting to see if the usual condemnations from Beijing over U.S. arms sales to Taiwan diminish as cross-Straits ties improve, or if Beijing instead tries to use the latter to leverage the former. It will also be interesting to see how Taiwan’s procurement requests shift as a function of improved relations as well. Both, taken together, will be a pretty good litmus test of how far-reaching the accelerating thaw really is.