Could Hong Kong’s “one country, two systems” work with Taiwan?

    By Stephanie Johnson

Why China must resolve ties with Hong Kong and Taiwan 

Taiwan in brief

Taiwan split from China during the course of the civil war in 1949. China has since regarded Taiwan as a renegade province and its government as an illegitimate administration. China has long pushed for Taiwan to also accept the same “one country, two systems” policy that it has maintained with Hong Kong since 1997.

The policy allows Hong Kong some autonomy and a separate economic and judicial system, but places the country firmly under China’s ultimate authority. China’s aim in wanting to politically unify the two countries is to promote free flow of trade in goods and services between the two countries.

US investors can invest in the Taiwanese market through the iShares MSCI Taiwan (EWT). The EWT tracks the performance of the Taiwanese equity market just as the iShares China Large-Cap ETF (FXI), and the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR), and the iShares MSCI China Index Fund (MCHI) track China or the Vanguard FTSE Europe ETF (VGK) tracks Europe.

Trade relations between Taiwan and China

Over the years, Taiwan and China have had significant trade relations. In the last six years, the two countries have signed 21 trade, transit, and investment agreements. Moreover, economic exchanges between the two countries have surged up to $200 billion in trade, with China being Taiwan’s largest recipient of exports, and Taiwan being China’s fifth largest export destination.

Taiwan is one of the world’s largest exporters of semiconductors and other high-tech electronic components, and China wants to use this to its advantage by removing all trade barriers between the two nations. However, the young population of Taiwan sees their country losing more than it would gain, in the event of free trade with China.

Protests in Taiwan

For some time now, China has been pushing for a trade liberalization deal with Taiwan. In March, when the deal seemed to reach the stage of ratification, protestors in Taiwan took to the streets in protest and occupied the parliament in dissent. Protesters feared that the deal would increase Taiwan’s economic dependence on China and bring the prospect of political unification of the two countries closer.

SOURCE: YAHOO FINANCE