Taiwan, China ties grow with direct trade links

TAIPEI (Reuters) - Taiwan and China launched direct daily passenger flights, new shipping routes and postal links on Monday for the first time since 1949 in a further thaw of once icy relations between the two political rivals.

The new links underscore how quickly ties have warmed under the island's pro-China President Ma Ying-jeou, who took office in May on a pledge to improve cooperation with Beijing.

"The direct routes to China can mean two things," Ma said at a ceremony amid shipping containers and tankers at Taiwan's Kaohsiung port, one of the world's busiest sea cargo hubs.

"One is that the two sides are reconciling and not going back to the animosity and conflicts of the past. The other is the economy -- sea and air cargo links can greatly reduce time and expenses."

China-Taiwan trade was worth $90 billion in 2007, according to official Taiwanese data, while there are 750,000 Taiwanese investors in the mainland.

Shipping links resumed after a six-decade hiatus when a vessel bound for Taiwan left the Chinese port of Tianjin after well-wishers threw confetti. A vessel headed for China sailed from Kaohsiung.

China has claimed sovereignty over self-ruled Taiwan since the end of the Chinese civil war in 1949 and vowed to bring the island under its rule, by force if necessary.

Tensions brought the two sides intermittently to the brink of war over the last six decades in what is considered potentially one of the most dangerous flashpoints in Asia.

But attention has turned to cementing ties since Ma took office. China's Xinhua News agency said in a commentary the new links would inject energy into cross-strait economic relations.

The linkages aim to boost two-way trade and build political trust, but are not expected to immediately lift Taiwan's moribund economy from the grip of the global financial crisis.

Flights between Taiwan and China, which are just 160 km (100 miles) apart, were previously routed via a third region, usually Hong Kong or Macau, because of a ban on regular direct links.

Cargo shipments also detoured through third countries or regions, raising costs for Taiwan firms doing business in China.

"(The links) should make the economies of both sides more competitive," said Alex Chiang, an associate politics professor at National Chengchi University in Taipei.

Taiwan and China agreed in November to the new links, which include up to 108 direct daily flights a week, 60 new cargo flights a month and a raft of new sea cargo routes.

Monday's daily charter flights, an increase from the Friday-through-Monday routine that began in July, will become scheduled daily flights next year, Ma has said.

HIGH STAKES FOR MA

The financial crisis has raised the stakes for Ma, with Taiwan's export-driven economy contracting in the third quarter. But few short-term gains are expected from the new links, which could end up denting the image of the island's president, who some critics accuse of getting too cozy with Beijing.

The five Taiwan airlines and nine from China face low demand for their direct flights because of the economic downturn. Analysts also say legal curbs to investment remain in China.

Between 1991 and 2007, Taiwan approved investments of $65 billion in China, according to official data, although experts say the total could exceed $100 billion because of capital routed to China through third-party locations such as Hong Kong.

Direct postal links between five Taiwan postal centres and eight China postal centres are expected to cut delivery time from the current seven to 10 days by sidestepping third countries. (For a factbox on the agreements, click on [nSP254025])

Taiwan expects ocean shippers to save T$1.2 billion ($36 million) a year and air passengers to save at least T$3 billion annually.

Shares in firms based in the Chinese city of Xiamen, near Taiwan, were strong on Monday because of the new links.

But Taiwan tourism shares .THOI rose only 0.97 percent while transportation shares .TTPI gained 2.56 percent, underperforming the broader market.

(For a related shipping story, click on [nTP163534])

($1 = T$33.199)

(Additional reporting by Lucy Hornby in Beijing, Editing by Dean Yates)