May 2011

Neighbor to neighbor

By Gavin Crawford

Warming cross-strait relations has helped speed up Fuzhou's economic development

The coastal city of Fuzhou, located about 2 kilometers from Taiwan's shoreline, has become one of the main beneficiaries of warming cross-strait relations.

The election of Taiwan's President Ma Ying-jeou in 2008 marked the start of a period of relative stability between China and Taiwan, with both sides agreeing to focus on economic cooperation as a common denominator. In 2010, cross-strait trade reached US$145 billion, a 37% rise from a year earlier.

The signing of the Economic Cooperation Framework Agreement (ECFA) in June 2010 saw tariffs removed from 539 Taiwanese export categories and 267 Chinese products entering Taiwan. And with 83,406 Taiwan-invested projects operating in the mainland, and a further 208 projects approved in January alone, the Ministry of Commerce estimates that Taiwan investments presently account for 5% of all accumulated foreign capital in mainland China. For Fujian province, Taiwan has long been its biggest trading partner and source of investment.

"Fuzhou – as with Xiamen, Zhangzhou and Quanzhou – can be seen as urban cluster recipients of increased cross-straits trade and Taiwanese investment," said Angang Hu, director of the Center of China Studies at Tsinghua University.


This hasn't always been the case. Outmaneuvered by the superior infrastructure of nearby Jiangsu, Zhejiang and Guangdong provinces, Fujian until recently has had to actively compete for Taiwanese investments. The province was often a third or fourth choice for Taiwan companies seeking a mainland foothold.

Now, improving cross-straits relations are being seized as an opportunity for regional economic development – and largely to the benefit of Fuzhou. In 2010, an estimated 2,930 Taiwan-funded projects had been established in the city.

To better serve Taiwanese investments, in 2009 Beijing ordered an overhaul of the Western Taiwan Straits Economic Zone (WTSEZ) – an area originally conceived in 2004 that encompasses nine major Fujian cities and 11 cities in neighboring provinces.

A number of infrastructure developments are in the works: Five new expressways will soon connect Fuzhou with other cities in the WTSEZ, a deep sea port is being constructed to help Fuzhou become a major cargo hub, and the existing high-speed rail link connecting the city with Xiamen is being further upgraded to cut journey times to just over an hour.

To boost Fuzhou-Taiwan economic cooperation further, the city has said it will promote the relaxation of restrictions on Taiwanese investment in the city, increase land use for Fuzhou-Taiwan cooperation, and strengthen Taiwan-related associations.

Discover Fuzhou
The Shangri-La Hotel Fuzhou reported a 36.6% year-on-year increase of Taiwanese visitors last year – attributing the growth to increased cross-strait economic cooperation and the addition of several direct flights to and from Taipei.
Even so, Fuzhou still struggles to compete with Xiamen for inbound tourists. "The area surrounding Fuzhou City is the hot spring capital of China, but people are not really aware of that and the city remains in the shadows of places like Xiamen," said Peter Hildebrand, managing director of the Westin Fuzhou. "For the moment, Fuzhou remains undiscovered."

Despite its infrastructure developments, the city has not yet flourished as an inbound tourist destination. The Shangri-La Hotel Fuzhou, for example, posted a 20% year-on-year decline in tour group occupancy in 2010.

But Hildebrand said this set to change. "So much infrastructure is being built because of warming relations, and things like the high-speed rail link from Xiamen will help [tourism grow]," he said.

At the same time, outbound travel from Fuzhou to Taiwan is a burgeoning market for both sides of the Strait.

"Fuzhou can be viewed as a gateway for cultural exchanges between Taiwan and the mainland: People on both sides are relatives, compatriots and tourists," said Dong Shanjing, an associate at Fujian Kanghui International Tourism Service.
Chinese tourists have also shown an interest in traveling to Taiwan, which many see as a destination with excellent tourism attractions. One Fuzhou travel agent, who asked to remain anonymous, described it as a win-win relationship: "We expand our business; and the more that our customers go to Taiwan, the more it develops Taiwan's economy."