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Taiwan's Chen Endorses Economic Reforms

Taiwan President Chen Shui-bian says he fully supports a proposed set of history-making economic reforms that could significantly bolster investment and trade with Taiwan's main political rival, China. The move is being prompted by Taiwan's sputtering economy.

Taiwan's President Chen is calling for swift implementation of new economic reforms to give Taiwanese businesses greater flexibility to establish operations in China.

A 120-member government advisory group made the recommendations Sunday, after three days of intense discussions.

Among the committee's most urgently recommended change is a proposal to scrap Taipei's so-called "No haste, Be Patient" policy toward China investment. The policy, which restricts the amount of money Taiwanese companies could invest in the mainland, was adopted in the mid-1990s as a way to ensure that enough money stayed in Taiwan to support the local economy. At the time, Taiwan had one of the strongest economies in Asia.

But the current global slowdown has severely battered the island. Its industrial output in June was the worst in 26 years. Economist Chi Lo, at Standard Chartered Bank in Hong Kong, says, although Taiwanese businessmen have invested some $60 billion in China in the last decade - mostly through companies in Hong Kong - the restrictions have kept them from taking full advantage of China's low costs and booming economy.

"The current restrictions have increased investment and international trade cost for Taiwanese companies, and made such investments very inefficient," said Mr. Lo. "Relaxing those restrictions will allow more breathing space for the companies."

The advisory group is now urging the government to replace the "No haste, Be Patient" policy with one that encourages closer commercial ties with the mainland. The group also wants the government to remove the $50 million investment cap currently imposed on every Taiwanese company that wants to invest in China, allow banks to set up branches on the mainland, and allow mainland tourists to visit Taiwan.

Analysts say successful implementation of the proposals will depend on how Beijing responds to the plans, and whether the Taipei government can soothe public concerns that Taiwan may become too economically dependent on China.

Political tensions between Beijing and Taipei have hampered efforts to establish direct trade, transport and communication links, severed when Chinese nationalists fled to Taiwan after their defeat by the Communists in 1949. Beijing claims Taiwan as a sovereign part of China.