Taiwan's third-largest telecoms service provider, Far EasTone Telecommunications Co. announced Wednesday that it plans to sell a 12% stake to China Mobile Ltd. for $528 million, the largest cross-strait business deal in over 60 years. The two companies also announced plans to partner in China and offer roaming services and technology upgrades for their networks, which will strengthen FarEasTone's position in Taiwan. This would be the first direct investment by a Chinese state-owned company in Taiwan in six decades. "It is especially significant," says Dr. Edward Chow, a professor at National Chengchi University, "as the communications industry has long been considered to have a bearing on the national defense."
News of the deal follows close on the heels of another major breakthrough in China-Taiwan relations. After over 10 years of trying, Taiwan received invitation on Wednesday to attend the United Nations World Health Assembly (WHA) as an observer in the 62nd meeting of the World Health Organization's governance body in May. It will be the first time that Taiwan, an island of 23 million people, has been allowed to participate in a United Nations body since it lost its U.N. seat to China in 1971. Taiwan has been pushing for an invitation every year since 1997, only to have their application be repeatedly blocked by China, which sees the democratic island as a Chinese province and therefore ineligible to participate alongside other sovereign states. "It's an inevitable development," says Political Scientist Yang Tai-shuenn of Taipei's Chinese Culture University. "The pressure from the international community has been accumulating. Health is a universal value China cannot continue to reject."
News of the telecom merger and the WHA entry sent Taiwan stocks up over 6% on Wednesday. Global economists responded by immediately upgrading Taiwan's economic outlook; Goldman Sachs added 1% to its forecast for next year's growth rate to 3.5%. JP Morgan also said that the direct flights, tourists, and recent financial agreements are a key to Taiwan's long-term structural growth. "This will also open up a wave or mergers and acquisitions between companies in Taiwan and China," said Chow. "The next industry to watch will be financial industry." (Read about Chinese tourists in Taiwan.)
Taiwan and China relations have warmed greatly since Ma Ying-jeou became Taiwan's president last May. Since then, China and Taiwan have held three rounds of unprecedented talks the first in 60 years to agree on milestones like establishing direct flights between Taiwan and China and opening Taiwan tourism to Chinese citizens. Last weekend, they agreed to enable each other's banks to set up branches on either side of the Strait, and more than double the number of weekly direct flights that started last year. Before Ma's time, passengers traveling from Taipei to Shanghai had to go through a third city like Hong Kong, which made an 80-minute trip a 7-hour long haul. "The increase of mutual trust between Taiwan and China is also one of the key reasons for our entrance in the WHA," said Taiwan's Health Minister Dr. Yeh Ching-Chuan on Wednesday.
Yang says China's nod to let Taiwan in this time was a gesture of goodwill. The WHA is a relatively low-risk international body for China to allow Taiwan to enter, as it is a health body, without strong political implications that could allow Taiwan to be treated as an independent nation. Taiwan has been invited to participate under the agreed upon name "Chinese Taipei" the same name Taiwan uses for its Olympic team. To health officials in Taiwan, the invitation did not come a moment too soon. The swine flu is expected to be the focus of the May 18-27 meeting in Geneva. "We will now be able to get firsthand information and assistance, and also provide our experience," said Dr. Yeh. With its experience fighting SARS, Taiwan is considered one of the more well prepared places for outbreaks of communicable diseases. On Tuesday, health experts began inspecting air passengers from North America before they disembark from their planes, and keeping anyone with flu-like symptoms for further tests. At least this year, Taiwan will be able to fully join the fight against swine flu. "With the recent outbreak, " Dr. Yeh said Wednesday, "the whole world needs to fight this together."