May 16, 2008 / 5:48 AM / 9 years ago

Taiwan's new president means business - from China

<p>Taiwan's President-elect Ma Ying-jeou speaks during a news conference in Taipei in this April 14, 2008 file photo.Nicky Loh</p>

TAIPEI (Reuters) - Anthony Liao is hiring speakers of minor Chinese dialects at his Taipei travel agency, studying new destinations and ensuring a supply of buses as he gears for a surge of tourists from China, a relative rarity until now.

His Phoenix Tours International Ltd. agency is just one of hundreds of companies, airports and local governments equipping themselves for closer ties with China under president-elect Ma Ying-jeou, who takes office on Tuesday.

"We have to prepare for the arrival of mainland Chinese, as they've got a different mentality," said Liao. "Mainland China wants quality guarantees."

His industry is awaiting a much-touted tourism deal that would open Taiwan to 1.1 million Chinese tourists per year and launch regular cross-strait flights, helping to jump-start the service sector.

Liao's frantic, extensive preparations are typical of industries around the island, which are getting ready to receive Chinese property investors, currency traders and airlines if Ma fulfills his pledges to open trade links with China.

China has claimed sovereignty over self-ruled Taiwan since 1949, when Mao Zedong's Communists won the Chinese civil war and Chiang Kai-shek's Nationalists (KMT) fled to the island. Beijing has vowed to bring Taiwan under its rule, by force if necessary.

But a thaw in relations between the two sides over the past decades has led to heavy investment in China from Taiwan.

Lured by a common language, lower labor costs and a potentially huge consumer market, investors have poured an estimated $100 billion into the mainland.

The flow has been largely one way, however, with Chinese tourists and investors locked out of Taiwan due to tension between Beijing and outgoing President Chen Shui-bian.

Ma, who won by a landslide election victory in March on an economic revitalization platform, is pledging to put in place direct weekend Taiwan-China flights by July and allow up to 3,000 Chinese tourists in per day.

The roughly 750,000 Taiwan islanders with factories and other investments in China currently have to transit through Hong Kong or Macau, adding up to half a day onto their travel time.

Holiday-season charters began in January 2005, ending a ban Taiwan put in place after the civil war. But even those one-off flights must go through Hong Kong airspace, meaning many are roundabout and almost as time-consuming as making a transit stop.

BUSINESS DINNERS

Ma has also said he plans to make the Chinese yuan convertible with the Taiwan dollar, let Chinese buy Taiwan real estate and push for a common market.

"You can get the feeling from dinners that Ma has been attending that the private sector is very excited," said Tony Phoo, an economist with Standard Chartered.

Chinese real estate developers are waiting in the wings, along with banks and local government mega-projects.

"Demand for the yuan will start to take off after flights become regular," predicted Daniel Wu, chief investment officer of Chinatrust Financial, Taiwan's top credit card issuer, which plans to partner with HSBC once conversions are legal. "We want to get prepared for that as soon as possible."

In a possible sign of real estate deals to come, some China executives agreed this month to buy 12 high-end homes and a store for T$1.32 billion ($43 million) in the central city of Taichung.

The same city, Taiwan's third largest, is leaning on Chinese investors to develop a 66-hectare service segment of its high-tech machinery park and has embarked on a T$1.5 billion expansion of its airport to accommodate new tourists and returning Taiwan investors, Vice-Mayor James Hsiao said.

Anticipation of traffic from China is also driving plans for a 6,150-hectare commercial centre next to Taoyuan International Airport, which serves greater Taipei.

Airlines on both sides of the Taiwan Strait have been allocating staff and aircraft to offer non-stop cross-Strait flights, with the top two domestic carriers, China Airlines and Eva Airways, both standing by.

Shanghai-based China Eastern Airlines has also been "in active preparation" for direct flights, said airline spokesman Luo Zhuping.

But fears that Chinese tourists will not like Taiwan, that Chinese investors will drive up property prices and that Ma's pledges might fall flat lurk beneath the flurry of preparations.

Property prices have been rising steadily over the past two years as many anticipate a flood of new interest from China, raising concerns of a real estate bubble ahead.

Tour operators are also worried that a lack of preparation, such as a failure to provide sufficient mid-priced and budget hotels, could give Chinese tourists a bad impression.

Airlines dare not expand until Ma's pledges materialize, an industry executive in Taipei said, noting talk that the new president may have promised more than he can deliver. "We want to first take step one before talking about step two."

Additional reporting by Faith Hung in Taipei and Michael Wei in Beijing; editing by Doug Young and John Chalmers

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