Pingtan: What's the Deal?

One of the more interesting stories developing over the last few weeks has been China's efforts to push the Pingtan Experimental Development Zone. First, what is it? Focus Taiwan gave an overview when China first unveiled the proposal in late February:

China has devised a new plan under which certain areas on Pingtan Island off the coast of Fujian Province will be consigned to local Taiwanese governments or private groups to develop, or be put up for joint development by the two sides of the Taiwan Strait.

According to China's plan, those specific areas will be managed by Taiwanese experts, and up to 1,000 Taiwanese professional managers and researchers will be recruited to work in the areas.

What makes this development proposal different than other major Taiwanese investments in cities like Shenzhen or Xiamen?

Pingtan has been chosen for this trailblazing initiative mainly because it is the China-held area closest to Taiwan. Although the small islet is still in a very early stage of development, China has decided to invest heavily in the region.
It will pour 60 billion Chinese yuan (US$9.66 billion) into its infrastructure in 2012 alone, and an additional 250 billion yuan will be pumped into the area under China's 12th five-year development plan....

To attract top-notch Taiwan talent to work in Pingtan, China may even offer tax incentives and allow simultaneous circulation of Taiwanese and Chinese currencies there.

China is already painting the proposal as a success, and pointing to the "joint management"aspect of the project. See, they don't just want to bring in these top-notch Taiwanese talent for the sake of filling up the payroll, but they also want them to help run the development zone.

Taiwan professionals are responding to the Pingtan economic development zone's recruitment plan, said Pingtan official Gong Qinggai, a deputy to the National People's Congress, on Monday.

This year, Pingtan plans to offer more than 400 jobs to talented individuals from other countries and regions. Of those jobs, some positions, including an opening for deputy director of the Pingtan management committee, the governing body of Pingtan, and four deputy heads of departments under the committee, are targeted for professionals from Taiwan.

Taiwan professionals who go to work in Pingtan will enjoy a package of benefits in such areas as taxation, housing, and children's education.

You might think that this development zone sounds like it's attempting to move into the political sphere without stepping on too many toes. If that's what you thought, you wouldn't be alone. The MAC believes the same thing:

China should refrain from political overtones when promoting cross-strait cooperation on Pingtan Island because more than 80 percent of Taiwanese reject China’s “one country, two systems” formula, the Mainland Affairs Council (MAC) said yesterday....

Stopping short of saying that the government discourages investment in the Pingtan Comprehensive Experimental Zone, located on Pingtan Island in China’s Fujian Province, the council reminded Taiwanese that it is not a “co-pilot” project sponsored by the Taiwanese government.

Taiwan's Council for Economic Planning and Development had the same impression and notes how the plan could easily hurt Taiwaense industry:

The key factor in avoiding a brain drain to China is to strengthen Taiwan’s investment environment and entice more industries to maintain their operational base here, Yiin said.

“Having more industries to stay in Taiwan will help create more jobs and further raise employees’ salaries,” he said during the question-and-answer session.

Pingtan does not offer a lot to investors, which is why Fujian has to make an effort to recruit professionals and offer favorable terms to potential investors, he said.

Fujian Governor Su Shulin (蘇樹林) announced last month that the province would offer management positions to Taiwanese professionals at annual salaries of between 200,000 yuan (US$31,600) and 2 million yuan, along with three to five years of free housing.

And regardless of the fact that there is some clearly political content to this arrangement -- it is, after all, a different model than other development zones -- both sides are going to try and paint it as an economic arrangement, at least for now. Taiwan's premier said so:

Premier Sean Chen said Friday that Taiwan and China should use the Economic Cooperation Framework Agreement (ECFA) to discuss a "joint management" economic development project proposed by China to avoid any political ramifications.

And Taiwan is also going to try to kill the "joint management" aspect, at least for now and at least before negotiations are complete:

Taiwanese nationals are not allowed to work for the Chinese government, Mainland Affairs Council (MAC) Minister Lai Shin-yuan said Wednesday in a reminder to local citizens who have reportedly applied for jobs in a Chinese economic development zone.

Perhaps feeling a bit rebuffed by Taiwan authorities,China responded and claimed no political motive:

Meanwhile, China's Taiwan Affairs Office Director Wang Yi denied speculation that China sees Pingtan as a test zone for using its "one country, two systems" formula with Taiwan in pushing for unification between the two sides.

The formula is used by Beijing to rule Hong Kong and Macau, but it has always been rejected by Taipei.

"We've never entertained such thoughts," Wang said.

Although he said Pingtan is supposed to serve as a "joint homeland for people on both sides of the strait," Wang insisted there are no political motivations involved.

He said that Pingtan is geographically very close to Taiwan and the Chinese government hopes to establish a more comfortable environment, more convenient transportation and looser business policies for Taiwanese people through the experimental zone.

But does anyone believe this is not political? Jens Kastner writing in the Asia Times Online certainly doesn't, and Jens also outlines some of the more juicy incentives China is rolling out:

Those Taiwanese willing to move will find a long list of preferential treatments and US$40 billion-worth of brand-new infrastructure that includes several ports of over 200,000 tonne capacity and 18 square kilometers that will also accommodate a cross-strait financial service center for banks, insurers and securities.

Tax benefits are to be offered and bank loans generously granted, while Taiwanese professional qualification certificates will be accepted. Taiwanese lawyers and doctors will be allowed to operate freely. Exclusively for Taiwanese investors in Pingtan, the mainland's strict restrictions on imports of certain products, such as steel, are to be eased, which will give them an edge over their foreign competitors in the mainland.

To make the bait even more irresistible, both the mainland currency, the yuan, and the New Taiwan Dollar will circulate next to each other in the zone.

New roll-on, roll-off passenger ferries have been awaiting the starter's gun at Pingtan, ready to make the trip to the central Taiwanese city of Taichung in two-and-a-half hours - about the same time it takes a car drive from Taichung to the Taiwanese capital of Taipei on a good day.

Eventually, the Pingtan Comprehensive Experimental Zone, together with Taichung, is envisaged as a cross-strait free-trade zone. Once established, Taiwanese people, ships and cargo could enter Pingtan freely and from there the huge mainland market. The status of Taichung - Taiwan's third-largest city - would be lifted significantly, which is undoubtedly an important factor in the Chinese strategy as the area is generally assessed as being amongst Taiwan's key electoral battlegrounds.

This reminds us: why should China bother to attack Taiwan if it can achieve unification by buying it?