Taiwan, China to expand air links further

TAIPEI (Reuters) - Taiwan will begin regular flights with China in mid-July, the island's transport minister said on Saturday, a move that will benefit airlines on both sides and another sign of closer ties between the political rivals.

In April, top negotiators from Taiwan and China agreed to 270 regular scheduled flights a week, expanding air links from the current system of limited chartered flights, though they did not commit to a timetable then.

"Both sides have been closed from each other for too long," said Mao Chi-kuo, Taiwan's minister of transportation and communications, who is tasked with planning and implementing policies related to the sectors.

"We have to do things step by step, and the scheduled flights in mid-July should be a step in the right direction," the 60-year-old told Reuters in an interview.

Since China-friendly President Ma Ying-jeou took office in May last year, Taiwan and China have signed a flurry of trade deals opening up its transportation, tourism and transport sectors, which has boosted the island's stock and currency market.

Taiwan stocks have been one of the world's best performing markets so far this year, partly due to expectations that Chinese money could flow into the island once restrictions limiting investments from the mainland are loosened.

Taiwan also hopes closer ties with China will help boost domestic consumption and private investment to help its economy out of what may turn into its longest recession as the worst global downturn in decades hits its key exports sector.

There has been a spike in tourism from China, which considers the self-ruled island to be part of its territory and has historically blocked the free flow of tourists, with visitor figures hovering around the upper end of a 3,000 cap.

However, Mao said he expected that cap to be lifted gradually as ties between the two sides grow, with the number of Chinese tourists rising to 3 to 4 million a year in the next few years.

"It's not like turning on a tap," said Mao, who has a PhD from the Massachusetts Institute of Technology.

"Chinese tourists aren't going to just appear, but when they do, as they are right now, investors are going to see that and realize that there're great opportunities here."

The Four Seasons hotel chain will also open its first Taiwan branch in two or three years, addressing complaints about a lack of international hotel chains on the island.

Mao said decisions on whether Taiwan or China's airlines could invest in each other was best left for the firms themselves, and said it had not yet decided if the sector would be included in a list of industries open to China.

Airlines on both sides, including Taiwan's China Airlines and Eva Airways, and the mainland's Air China and China Eastern have been suffering losses as demand for air travel slows due to the global financial crisis.

(Additional reporting by Roger Tung; Editing by Lee Chyen Yee/Ruth Pitchford)