US embassy cable - 05TAIPEI3100

C O N F I D E N T I A L TAIPEI 003100 
 
SIPDIS 
 
DEPT FOR EAP/TC 
DEPT PASS AIT/W 
 
E.O. 12958: DECL: 07/21/2015 
TAGS: ECON, EAIR, EINV, PREL, TW, CH, Transportation, Cross Strait Economics 
SUBJECT: CROSS-STRAIT ECONOMIC INITIATIVES STILL ON HOLD 
 
REF: A. TAIPEI 2654 
     B. TAIPEI 2732 
     C. TAIPEI 2881 
 
Classified By: AIT Director Douglas H. Paal, Reason 1.5 d 
 
1. (C) Taiwan National Security Council Senior Advisor Chen 
Chung-shin told econoff July 20 that progress on cross- 
Strait economic initiatives was unlikely until late August 
or into the fall.  On prospects for cross-Strait charter 
flight discussions, Chen said that Taiwan and PRC 
authorities had been exchanging positions informally 
through scholars and other indirect contacts.  Although 
both sides have publicly expressed willingness to proceed 
with both passenger flights and cargo flights, Chen said 
that they still differed on which kind of flight should be 
given priority.  However, he expressed optimism that there 
would be progress by the end of August and the two sides 
could proceed toward discussions using the Macao model 
whereby industry organizations assisted by government 
officials in an unofficial capacity would conduct 
negotiations. 
 
2. (C) On liberalization of Taiwan regulations governing 
cross-Strait investment, Chen indicated that progress was 
unlikely before the fall.  He explained that further delay 
was due to the PRC engagement of the opposition Kuomintang 
(KMT) on cross-Strait economic issues that sought to 
portray the ruling Democratic Progressive Party (DPP) as 
unable to manage economic issues.  Chen argued that, under 
these circumstances, the DPP government could not be seen 
to yield to such pressure from the PRC and KMT.  He 
predicted that Taiwan might be able to lift restrictions on 
investment in small-size TFT-LCD panel manufacturing and 
semiconductor packaging and testing sometime this fall. 
However, he said that restrictions on manufacturing 
semiconductors with feature size finer than 0.25 microns 
were more complicated because of technology transfer 
concerns and would likely be subject to additional delays. 
He also indicated that opening petrochemical investment in 
naptha cracker facilities would take longer because of the 
amount of capital involved in such investments (Note: AIT/T 
will report on the impact of naptha cracker restrictions 
septel.  End note.) 
PAAL