China, Taiwan agree flights at first talks in years

By Ben Blanchard

BEIJING (Reuters) - China and Taiwan signed a landmark deal on Friday to launch regular flights between the long-time rivals as politics was put aside in favor of practicalities in the first such talks in almost a decade.

Apart from special holidays, there have been no regular direct flights since 1949, when China's defeated Nationalists fled to the island amid civil war with the Communists.

China has claimed sovereignty over self-ruled and democratic Taiwan ever since and has pledged to bring the island under its control, by force if necessary.

But the election of Taiwan President Ma Ying-jeou, who won by a landslide in March on pledges to boost the local economy by improving trade with China, has suddenly warmed relations.

Though political issues such as letting Taiwan join international bodies like the World Health Organization were not officially on the agenda, Taiwan's chief negotiator P.K. Chiang said he did bring up such questions.

"The question of international space does not take second priority to the normalization of trade ties," Chiang told a news conference in Beijing.

Chiang also told Chinese President Hu Jintao that Taiwan and China should work together internationally.

"We believe that both sides have a lot of opportunities to cooperate in the international sphere, both sides can help each other to raise their international influence," Chiang said.

Chiang later told reporters that Hu had responded: "We understand Taiwan compatriots' feelings on this issue".

Still, both Beijing and Taipei will be pleased to have signed the flights agreement.

"This is good for Ma Ying-jeou because he wants to deliver in his first 100 days," said Joseph Cheng, political science professor at City University of Hong Kong.

"Beijing is eager to win the hearts of the Taiwan people."

MARKET IMPACT

Goldman Sachs forecast Taiwan GDP growth to slow to 4.5 percent this year from 5.7 percent in 2007, but to rise to 4.8 percent next year "as the economic impact from the progress on cross-Strait policies comes to fruition".

Chinese shares in Xiamen International Airport, which is located in Fujian province across from Taiwan and could benefit from air links, gained 1.18 percent on Friday, outperforming a three percent drop on the overall market.