Based on the principle of not mixing politics with business, Beijing has been actively encouraging Taiwan investment in the mainland despite lingering political tension across the Taiwan Straits.

The policy stems from a strong belief that closer economic ties will benefit and help accelerate eventual reunification of the mainland and Taiwan.

Thanks to the long-standing strategy, both sides of the Straits have become economically intertwined over the past two decades.

But a small number of Taiwan investors have abused the policy for their own economic as well as political gains. They have funded pro-independence politicians with profits earned on the mainland.

The support of these business people played a significant role in helping Chen Shui-bian and his pro-independence Democratic Progressive Party (DPP) win the "presidential" elections in 2000 and 2004.

The grave situation, which threatens the mainland's efforts to push for reunification, prompted Beijing to issue a more stern warning on May 24 this year.

Zhang Mingqing, spokesman with the Taiwan Affairs Office of the State Council, told a news conference that the mainland "does not welcome people who make money on the mainland and return to Taiwan to support independence."

A week later, the overseas edition of People's Daily sharply criticized Hsu Wen-lung, founder of Taiwan's Chi Mei Group, as an example of pro-independence business people. Chi Mei runs a massive petrochemical complex in Zhenjiang, a city in East China's Jiangsu Province.

The newspaper ran a front-page commentary accusing Hsu of using profits from his petrochemical and electronics businesses on the mainland to fund pro-independence politicians, including Chen.

Hsu, who openly supported Chen's campaign in 2002 and 2004 and became one of his policy advisers, has frequently advocated formal independence for the island.

Hsu is also a close friend of former Taiwan leader Lee Teng-hui, the spiritual leader of Taiwan's separatist forces.

"The mainland very much welcomes the majority of Taiwan business people who love the motherland," the People's Daily said, adding that their businesses would get preferential treatment.

"However, there are indeed a small number of people who take the money they make on the mainland and support Taiwan independence," it said.

"The mainland has said early on that we do not welcome these sort of Taiwan business people."

Mainland researchers on Taiwan studies say Beijing's tougher stand on mainland-based Taiwan investors who have thrown heavy weight behind Taiwan independence has sound legal base.

Zhu Lei, a researcher with the Institute of Taiwan Studies under the Chinese Academy of Social Sciences, says it is illegal for Taiwan investors on the mainland to engage in pro-independence activities.

The preamble of the Constitution of the People's Republic of China stipulates: "Taiwan is part of the sacred territory of the People's Republic of China. It is the lofty duty of the entire Chinese people, including our compatriots in Taiwan, to accomplish the great task of reunifying the motherland."

Meanwhile, Articles 103 and 113 of the Criminal Law of the People's Republic of China also have provisions about crimes of "instigating dismemberment of the State and undermining reunification of the motherland."

"So if a handful of business people, whether mainland or Taiwan residents, support Taiwan independence and engage in separatist activities, their actions will go against the Chinese laws and should be strictly banned," Zhu says.

The researcher condemns pro-independence Taiwan investors for undermining cross-Straits peace and development while making huge profits on the mainland.

"In the long term, the Chinese Government will have to stop their abuse that impair the environment for economic development on both sides of the Straits," Zhu notes.

"Only by doing so can Beijing guarantee a stable condition for sustainable development of most Taiwan businesses on the mainland."

Call for punishment

Xu Bodong, director of the Institute of Taiwan Studies at Beijing Union University, goes further, suggesting pro-independence Taiwan investors be handed severe punishment.

"Given the pressing task of curbing Taiwan independence at present, Beijing will not allow anybody to make money in the mainland and then return to the island to support pro-independence forces," says Xu.

Xu disclosed that a number of mainland researchers on across-Straits studies together with pro-reunification Taiwan investors have long urged punishment for pro-independence Taiwan business people.

"It is high time that we should mobilize all resources, including economic measures, to crack down on pro-independence forces," Xu says.

Despite Taipei's rigid limits on Taiwan investment on the mainland, bilateral economic relations have grown stronger since 1978.

According to statistics from the Ministry of Commerce, Taiwan investors have so far funded more than 70,000 projects on the mainland, with a contracted investment of more than US$80 billion.

Indirect cross-Straits trade volume jumped to a record high of US$58.4 billion in 2003 despite the impact of SARS (severe acute respiratory syndrome).

The mainland, which together with Hong Kong bought 34.5 per cent of Taiwan's exports in 2003, has become the island's biggest export market.

Meanwhile, the mainland has been the largest source of Taiwan's trade surplus, with the island reaping a trade surplus of US$150 billion over the past 20 years. That figure accounts for more than 80 per cent of Taiwan's total trade surplus in the same period.

Economists estimate the mainland contributed to more than 70 per cent of Taiwan's economic growth last year.

The island's growing economic dependence on the mainland explains why the Taiwan stock market was sent into a panic on June 3 when a mainland researcher speculated about economic sanctions against the island.

Are sanctions possible?

Wang Jianmin, another researcher with the Institute of Taiwan Studies under the Chinese Academy of Social Sciences, stated in an online article that the mainland may not rule out exercising economic sanctions against Taiwan in a bid to fight independence.

The Weighted Price Index of the Taiwan Stock Exchange immediately plunged by more than 200 points on that day, signalling the vulnerability of the Taiwan economy.

"If the mainland decided to impose an economic sanction against Taiwan such as limiting or even banning imports from the island, Taiwan's overseas trade sector would be the first to suffer and see a one-third drop in its exports," Wang wrote.

"Then the manufacturing and production sector would be hit causing mass shutdowns among these firms and a major economic recession."

The worst scenario, the researcher hypothesized, is that the Taiwan economy would go into chaos and be paralyzed in two months if the mainland imposed an economic blockade on the island.

Although imposing economic sanctions against Taiwan would hurt economic interests on the mainland, the mainland, with its large economic size, surely could afford that cost, according to Wang.

"Based on the above-mentioned observation, Taiwan independence goes against the fundamental interests of Taiwan people and will go nowhere," Wang claims.

"If the Taiwan authorities make any risky pro-independence moves, the mainland can resort to economic sanctions rather than the use of force to deal a heavy blow to the Taiwan economy."

But Cao Xiaoheng, director of the Institute of Taiwan Economics of Tianjin-based Nankai University, still appears optimistic about closer cross-Straits economic relations despite the contentious opinion.

"After all, the mainland criticism over pro-independence Taiwan investors only targets a very small number of people. We have every reason to believe Taiwan investment on the mainland will not be affected in general," he says.

As proof of Cao's confidence, Li Weiyi, another spokesman with the Taiwan Affairs Office said at a June 18 media conference that the legitimate rights and interests of most of mainland-based Taiwan investors will be well protected.

The official also denied speculation that some local Taiwan affairs offices in South China have started a probe into political inclinations of Taiwan investors on the mainland.

Li stressed that mainland criticism targets only a very small number of Taiwan business people who openly support "Taiwan independence" while reaping economic benefits on the mainland.

"We will continue to encourage Taiwan compatriots to invest in the mainland, provide them with help and service and protect their legitimate rights and interests," he said.

"Our long-standing policy of encouraging cross-Straits economic and trade exchanges has not altered."

His comments were believed to be aimed at easing worries among Taiwan investors about investing into the mainland as the Taiwan authorities have taken advantage of the incident to discourage Taiwanese investment in the mainland.

Taiwan entrepreneurs are even urged by Taipei to divert their investment into Southeast Asian nations to ensure the safety of their investment.

Cao, however, says he does not fear an outflow of Taiwan investment from the mainland because the mainland remains the magnet and most favoured investment destination for Taiwan investors.

Cao stresses that he strongly believes cross-Straits economic and trade ties as well as reunification between Taiwan and the mainland will suffer little from a very small number of pro-independence Taiwan investors.

"The reunification will happen at the right time as long as cross-Straits economic ties grow stronger," he says. "After all, nobody can stand in the way of an inevitable result," he adds.

Beijing's tougher stand supported

Mainland-based Taiwan investors have expressed understanding of Beijing's criticism of pro-independence business people.

Most of them believe their investment on the mainland will be left unaffected by the incident.

Chang Han-wen, president of the Dongguan Taiwan Businessmen Association, says Hsu Wen-lung is just one exceptional example.

"It is not safe to say there are no pro-independence people among mainland-based Taiwan investors, but they are very few," says Chang.

He was one of the first Taiwan investors who invested in Dongguan of South China's Guangdong Province, where there are now more than 6,000 Taiwan-funded enterprises.

Like Chang, most mainland-based Taiwan investors say Beijing has done nothing wrong to criticize or even punish those who have made money on the mainland and then go back to support Taiwan independence on the island.

"The mainland has every right to do so because no government in the world will first give you the chance to make profits and then allow you to hurt its interests," says a Beijing-based Taiwan businessman who declined to be named.

"Since the Taiwan investors have come to do business here, they should concentrate on their business and not involve themselves in politics."

In fact, most mainland-based Taiwan business people remain politically neutral and distance themselves from politics, according to Chang.

That, however, does not mean these investors do not have their own political views, he adds.

Chang says he strongly believes that up to 80 per cent of mainland-based Taiwan investors support the so-called pan-blue camp, which consists of the opposition Kuomintang Party (KMT), People First Party and the New Party.

The pan-blue camp backs keeping Taiwan's status quo and focusing on resurrecting the island's flagging economy for the benefit of the Taiwan people.

In contrast, the pan-green camp, formed by the ruling Democratic Progressive Party (DPP) and Taiwan Solidarity Union, have joined efforts to pursue a separatist agenda, fueling tension in cross-Straits relations.

"It has been a consensus among most mainland-based Taiwan investors that only across-Straits peace and stability can ensure a stable development of their businesses," Chang says.

"That's why we hope for a peaceful cross-Straits relationship and an early realization of direct three links between both sides of the Straits."

Going against the hope of almost all mainland-based Taiwan investors, the Taiwan authorities led by Chen Shui-bian have been pushing hard for splittism to endanger bilateral ties.

Meanwhile, Taipei has done little to lift its decades-old ban on the much-needed establishment of the three direct links -- trade, transportation and postal services -- across the Straits.

The great disappointment propelled hundreds of thousands of Taiwan investors to fly home from the mainland to vote in the "presidential" elections in March.

Some 180,000 mainland-based business people returned to cast their ballots and the bulk were believed to have voted against Chen.

The move contrasted with their little enthusiasm in the island's previous "presidential" elections. They used to believe that the polls had nothing to do with their mainland business.

"Mainland-based Taiwan investors had long been contemplating changing their indifferent attitude because they did not want to see the bad cross-Straits situation continue," says Chang.

(China Daily June 22, 2004)