Blood brothers

Why Fujian province and Taiwan share close ties

Blood brothers

Fujian: many from Taiwan consider it their ancestral home

A trailblazer in early economic ties with the Taiwanese, Fujian province is hoping for a new era in cross-Strait relations. Only 150 kilometres apart, Taiwan and Fujian share a common language (Minnanese, the dialect spoken in most of Fujian, is similar to Taiwanese) and often a common blood (80% of the mainlanders that fled to Taiwan during the civil war are thought to have been from Fujian).

That meant that Xiamen was well positioned to welcome investment from across the Strait in 1980, when it became one of only four locations granted special economic zone (SEZ) status under Deng Xiaoping’s reforms.

The province has maintained its exclusive ties with the Taiwanese since, as the first to trial cross-Strait shipping and postal links. Hence the announcement this week that Xiamen’s SEZ will be expanded to cover the whole metropolitan area prompted excited coverage in the local media.

Fujian still attracts a large share of the Taiwanese money heading for the mainland. But it is no longer the leading recipient, with many Taiwanese firms opting for the Pearl River Delta region to the southwest or the Yangtze River Delta to the northeast instead.

Critics say provincial planners were slow to see the threat from Guangdong and Jiangsu, and didn’t grasp the importance of securing higher-value added industries such as electronics. This meant that Fujian has lost out to rival hubs, like Suzhou in Jiangsu, which has traded on its proximity to Shanghai (access to skilled labour, plentiful air transport capacity and streamlined custom procedures). Certainly, once manufacturing clusters have established themselves, it can be difficult to regain lost ground. When Acer invested in Suzhou in 1994, for example, 14 major suppliers followed in its wake.

Back in Xiamen at a similar time, there was grumbling about red tape and slow customs clearance. Then a national scandal exploded in 1999; with the city finding itself embroiled in reputedly the country’s largest smuggling scam. Yuanhua, a local firm run by Lai Changxing (see Expo Diary page 15) was caught skimming off billions of dollars in import licence scams. More than 300 locals ended up on trial, many of them government officials.

It’s an episode that the province prefers to put behind it. And looking ahead, the Fujianese have much greater ambitions than the extension of Xiamen’s trading zone announced this month. For most of the last decade the local government has been promoting the idea of a much larger Western Taiwan Straits Economic Zone, with Fujian at its heart.

The idea is that the zone will focus on attracting Taiwanese businesses, and deepening economic ties between Fujian and its offshore neighbour. Endorsement of the proposals by the State Council last year has made the pitch to potential investors an easier one. That’s because the green light conferred additional dollars for infrastructural investment of the type that Fujian needs to maintain pace with its rivals, including the construction of the country’s first undersea tunnel, upgrades to three of its deepwater harbours, and the opening of a spanking new high-speed rail link between Fuzhou and Xiamen, with connections all the way up to Shanghai.

But the ultimate goal is to secure a batch of preferential (and exclusive) policies with which to win over the next round of Taiwanese investment for the province.

In its favour is Beijing’s political agenda, which prioritises further economic integration between the mainland and Taiwan.

But others are reserving judgement on the scheme’s likely success until the scope of the preferential trade or investment treatment (if any) becomes clearer. The practicalities of pursuing a new provincial-level SEZ strategy also look daunting. How, for example, would a trade area of that scale be segregated from adjoining regions?

Of course, the signing of the ECFA looks like a boon for cross-Strait trade generally, and Fujian will expect to be one of the first to profit. But proximity to Taiwan may not be quite the factor it once was, now that the island’s firms have got used to looking further afield. Take the news this week that Taiwanese firm Hon Hai (parent to Foxconn) has already decided to head inland from Guangdong to Henan, in search of lower wages for its workers.

A common language, perhaps. But money may talk more persuasively than any shared dialect.

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