TAIPEI — Taiwan and China have taken a great leap forward by inaugurating regularly scheduled passenger flights, mail and shipping links between their shores, ending a 60-year ban on formal direct links begun when Generalissimo Chiang Kai-shek retreated with his army to Taiwan after the fall of China to the communists in 1949.
This story first appeared in the December 24, 2008 issue of WWD. Subscribe Today.
In recent decades, Taiwan has kept the ban on the “three links” in place, while turning a blind eye to investment by Taiwan companies in China. Many of China’s textile giants were founded by Taiwan businessmen who went there seeking low-cost labor as their home workforce became middle class.
Taiwan textile and clothing manufacturers will benefit greatly from the opening of links as they will no longer need to cross the 100-mile-wide Taiwan Strait by flying via a third destination, usually Hong Kong. The two countries now allow 108 direct flights a week.
Restrictions imposed by the two governments are lopsided. Taiwanese people have long been openly welcomed to travel or invest in China, while Taiwan has been slow to reciprocate.
Taiwan business could save around $3 billion New Taiwan dollars, or $89.8 million a year on flights, while shipping companies would save around half that, according to Taiwan’s Ministry of Transportation and Communications.
How fast these benefits will be realized is difficult to predict.
Last July, Taiwan allowed Chinese tourists to directly fly to Taiwan by chartered flights, and the island’s luxury retailers were optimistic there would be a boom in sales of luxury goods. But the island has yet to become a tourism mecca for Mainlanders for several reasons. Taiwan will only allow Chinese people to arrive by chartered flights, while the Chinese government is believed to be discouraging travelers through an onerous and costly application process. Also, Chinese tourists are obligated to participate in costly package tours with closely controlled itineraries, which allow for little if any shopping time. Tours start at around 8,000 yuan, or about $1,171, which is roughly equivalent to what Chinese travelers pay to visit Europe.
“We don’t see any obvious progress in fact,” said Michael Liu, assistant vice president and spokesman for Taipei101, the world’s tallest building and home of the 101 Mall, a major showcase for Western luxury brands. “We see two or three groups of 50 or 60 a day. Those would be average numbers.
“They look for what they cannot buy in China…things they have seen in magazines,” Liu said. “Here we have a better selection….I’d also say prices are 10 to 20 percent cheaper in Taiwan due to China’s import duty.”
Ironically, more Mainland Chinese people visited Taiwan under the old rules, initiated in 2002, that allowed visas to be granted to Mainland Chinese people for business meetings, academic conferences and official business, provided they came via a third country. A total of 297,000 Mainland Chinese people visited the island between 2002 and 2007, and of these, 82,000 came last year.
While Taiwan’s Ministry of Transportation and Communications said more than 200,000 Taiwanese people, mainly business travelers, have used the direct flights to visit Mainland China, the Worker’s Daily of China reported that only 21,000 Mainland Chinese tourists had made the reverse journey as of mid-October. That figure fell well short of the new rules’ quota, which would accommodate upwards of 625,000 arrivals each year.
Despite these frustrations, Taiwan’s luxury retailers have been investing in retail space. Taipei101 earlier this year opened a Coral Showcase on its 88th floor. “It’s huge,” said Taipei101’s Liu. “It occupies two-thirds of a floor. Our tenants are ready. Taiwan coral and jade are popular with Mainland Chinese. The tourist traffic just isn’t here yet.”
To assure Chinese shoppers are treated fairly, Taiwan’s government has restrictions on shopping. “Image is the big concern for the government,” said Harrison Lee, a seasoned travel guide. “We used to take several shopping breaks a day, but now the guidelines state one stop per day. We can only take them to approved stores, and these must have a travel shopping assurance certificate (TSAC).”
Lee has noted the regional variations in how Chinese tourists spend their money. Tourists from Guangzhou don’t shop much. “They’ve seen it all — way too sophisticated,” he said, adding visitors from Beijing are fans of coral jewelry from Taiwan, while those from Shanghai like the glass ornaments of Liuligongfang.
“They’re not all rich,” cautioned Lee. “There are two extremes. The big spenders are officials and businessmen. But another group travels widely. They’re teachers and doctors — in China, they’re not paid a lot — but they’ve been to Europe. They want to see the world, but they don’t spend much.”