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Mainland, Taiwan financial co-op mutual benefits amid global downturn

  BEIJING, March 8 (Xinhua) -- Financial cooperation between the Chinese mainland and Taiwan has came into the spotlight these days as Chinese Premier promised to facilitate the signing of "comprehensive agreement on economic cooperation" between the two sides.

  While reporting the work of his government to lawmakers on Thursday, Premier Wen said the mainland hopes to "gradually establish economic cooperation mechanisms tailored to both sides of the Straits".

  These remarks, seen by many as positive signs for the two sides to enhance cooperation in meeting challenges brought about by the global financial turmoil, have fueled sizzling discussions among lawmakers and political advisors gathering here for their national annual sessions.

  RECIPROCAL COOPERATION

  "External trade has always been key to Taiwan's economic growth, contributing as much as 68 percent," said a scholar on Taiwan issues, Wu Nengyuan.

  "Drastic drop in external demand especially in the European and the U. S. markets amid global downturn is a major problem of Taiwan," said Wu, a member of the National Committee of the Chinese People's Political Consultative Conference (CPPCC), the top political advisory body of the country.

  "Against this backdrop, it's especially significant that the two sides of the Taiwan Straits complement each other in boosting economic development," he said.

  Taiwan entered a recession in the latter half of last year as a result of the global economic slowdown.

  Apart from a 5-percent jobless rate last December, the highest for more than five years, Taiwan's gross domestic product contracted 1.02 percent year-on-year in the third quarter, the first drop in five years as domestic and external demand weakened, according to local statistics.

  "Taiwan should further explore the mainland market, now the world's third largest economy that has potential giant domestic demand," Wu said.

  The Chinese government's 4-trillion-yuan stimulus package and its program to subsidize electric appliances buyers in the rural areas will create more opportunities for Taiwan-funded companies on the mainland, according to Wu.

  "The development of Taiwan-funded companies can also help the mainland as they create more jobs," said Kai Qinghai, a deputy to the top legislature, the National People's Congress (NPC).

  According to Zheng Songyan, a NPC member and mayor of Fuzhou, capital of eastern Fujian Province, Taiwan has advanced technologies, good research capabilities and developed service sector, while the mainland excels in manufacturing industry.

  "The two sides should give full play to their advantages to explore both domestic and external markets," said Zheng, who promised that Taiwan compatriots can complete the business start-up procedures in his city in only a single day.

  PROMOTION OF TWO-WAY CASH FLOW

  "With the basic fulfillment of the 'three direct links' between the mainland and Taiwan, free exchanges of people and goods have been realized, but the flow of cash has not been achieved," said Kennedy Wong Ying Ho, a CPPCC National Committee member from Hong Kong.

  He suggested the island gradually open up some sectors to investors from the mainland, Hong Kong and Macao, saying "this is crucial to Taiwan's economic development."

  "Now there are still many restrictions on the free exchange of currency between the two sides, and the situation should be changed," he said.

  The mainland-based Association for Relations Across the Taiwan Straits (ARATS) and the Taiwan-based Straits Exchange Foundation (SEF), the two main negotiation bodies, held their first meeting in Beijing last June after the talks were suspended for almost 10 years. The second meeting was held in Taiwan in November.

  On Dec. 15, 2008, the mainland and Taiwan started historic direct flights, postal and shipping services, ending a 59-year ban on such links.

  Founded in 1991 and 1990 respectively, the ARATS and the SEF are authorized by the mainland and Taiwan to handle cross-Straits exchanges.

  FINANCIAL MOU

  Wu Nengyuan, the scholar on Taiwan issues, believed details on financial cooperation could not be discussed until a memorandum of understanding (MOU) on establishing the cross-Strait financial supervisory mechanism was signed.

  He hoped the two sides could sign a financial MOU, reach an agreement on investment guarantee system, and avoid double taxation on goods across the Straits this year.

  "This will remove obstacles and lay a foundation for the inking of a comprehensive agreement on economic cooperation between the mainland and Taiwan," he said.

  "Though there were different voices on the island, the mainland and Taiwan could hardly join hands to offset the impact of the global financial turmoil if the two sides failed to work together for normalization of economic relations," Wu said.

  Leong Vai Tac, a NPC National Committee member from Macao, said the signing of a comprehensive agreement on economic cooperation would enable both sides to know their needs and advantages.

  "It will help bring into play the integral functions of the regional economy across the Straits," he said.

  China's central bank governor Zhou Xiaochuan said earlier that the financial industry had kept with the pace of cross-Strait tourism and personnel exchange development.

  The mainland's top negotiator of Taiwan affairs Chen Yunlin said the two sides would hold negotiations this year on issues including regular flights, financial cooperation, joint crackdown on crimes and mutual investment.

  The ARATS and the SEF aimed to sign a series of agreements at a meeting in the first half of this year, according to Chen.

  TRIAL BASE

  Political advisors at the on-going session have proposed to build a "cross-Strait economic zone" covering Taiwan and the coastal of Fujian Province, which sees Taiwan across the Straits. They said the economic zone could serve as a "trial base" for the establishment of "economic cooperation mechanisms tailored to both sides of the Straits".

  "We just want to explore an economic cooperation mechanism that complies with the reality and meets the demand of both sides, and this is why we propose to set up the 'trial base'," said Zhang Huajun, one of the political advisors who made the joint proposal.

  Zhang and his colleagues suggested experiment on industrial policy coordination be allowed in the 'trial base'.

  He called for more efforts to launch major projects in the zone and apply more eased and flexible policies for economic integration across the Straits to pave way for further cooperation.