By Bloomberg News - Jan 13, 2012 10:49 AM GMT+0700
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The flags of Taiwan are displayed in Taipei. Photographer: Ashley Pon/Bloomberg
Jan. 13 (Bloomberg) -- Taiwan’s 18 million voters will decide the course of relations with China for the next four years tomorrow as they choose between the incumbent president and an opposition leader critical of his push for closer ties with the mainland. Bloomberg's Stephen Engle reports. (Source: Bloomberg)
Jan. 13 (Bloomberg) -- Douglas Paal, vice president for studies at the Carnegie Endowment for International Peace and formerly head of the American Institute in Taiwan, the de facto U.S. embassy, talks about Taiwan's presidential election and its implications for the island's relations with China and the U.S. Financial assets have rallied in the island before tomorrow's contest between President Ma Ying-jeou of the Kuomintang Party, who has championed closer ties with China, and Tsai Ing-wen, chairwoman of the opposition Democratic Progressive Party. Paal speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Taiwan’s 18 million voters will decide the course of relations with China for the next four years tomorrow as they choose between the incumbent president and an opposition leader critical of his push for closer ties with the mainland.
President Ma Ying-jeou, 61, who heads the Kuomintang Party, says that a surge in two-way trade, investment and tourism across the Taiwan Strait helped propel growth to 6.6 percent in the first quarter of last year. His main opponent, the Democratic Progressive Party’s Tsai Ing-wen, counters that the links Ma engineered with the mainland risk eroding Taiwan’s autonomy.
A Ma win may offer a mandate to forge ahead with agreements expanding cross-strait trade and investment. A victory for Tsai, who has blamed a growing wealth divide on jobs being lost to the mainland, could set back cross-strait relations in a year that will also see the start of a leadership change in China.
“Ma’s biggest legacy in the past three and a half years is he’s signed 16 agreements with China,” said Chang Wu-ueh, a professor of political science at Taipei’s Tamkang University. “The reason why he still runs such a tight race with Tsai is because most people don’t feel the immediate benefits of the improved China-Taiwan relations, and not everyone regards the cross-strait issue as the deciding matter for their vote.”
Closing Time
Voting stations are open from 8 a.m. to 4 p.m., with tallies posted on the Central Election Commission website after they close. Voters must be at least 20 years old.
Ma was widening his narrow lead over Tsai, 55, in public opinion polls taken prior to a blackout period for voter surveys that began Jan. 4. Taiwanese law bars publication or release of polls 10 days prior to presidential elections.
“Right now both sides are showing -- on the incumbent side, a little bit of self confidence, on the challenger side, a little bit of nervousness,” Douglas Paal, formerly head of the American Institute in Taiwan, the de facto U.S. embassy, said on Bloomberg TV today.
Airlines doubled the number of extra flights from China to Taiwan this year to handle demand from passengers returning home for the Lunar New Year and to vote in the elections, in which absentee balloting isn’t allowed.
Airlines added 20 flights in the first eight days of the traditional holiday travel period last year, according to data provided by the Civil Aeronautics Administration. This year, they added 101 flights in the first five days up to the Jan. 14 election.
Market Bets
Markets may be assuming a Ma victory. Option traders are increasing bullish bets on an exchange-traded fund tracking Taiwan stocks. The ratio of calls to buy the iShares MSCI Taiwan Index Fund versus puts to sell rose to 3.39-to-1 on Jan. 9 and touched 3.47 on Jan. 6, the highest level since March 2008, two months before Ma was sworn in for his first term.
Investors may respond positively to a Ma victory “given what is widely perceived to be a more market-friendly stance on cross-strait policies and potentially fewer uncertainties in terms of policy direction,” Shirla Sum, an economist in Hong Kong at Goldman Sachs Group Inc., wrote in a Jan. 11 note.
Under Ma’s administration, a six-decade ban on direct air, sea and postal links with the mainland came to an end. The two sides signed a trade agreement in 2010 that reduced tariffs and paved the way for Cathay Financial Holding Co. and Fubon Financial Holding Co., Taiwan’s largest listed financial- services companies, to expand business in China.
Two-Way Trade
Two-way trade reached $160 billion last year, a 10 percent increase from 2010, according to Chinese customs statistics.
The Taiwan Stock Exchange’s Taiex Index (TWSE) has tracked the performance of the MSCI Asia Pacific Index (MXAP) of equities under Ma, whereas it lagged behind under predecessor Chen Shui-bian, who advocated independence. Since Ma took office in 2008, the Taiwanese gauge is down 23 percent, against the 25 percent drop for the MSCI measure. Under Chen, the Taiex was up 1.9 percent while the Asia Pacific index climbed 35 percent.
“I said my first four-year term would be to put Taiwan back on track,” Ma told reporters yesterday in Taipei. “My second term is to make Taiwan a leading global economy.”
China regards Taiwan, a nation of 23 million people ruled separately since a civil war ended in 1949, as its own territory and criticized a push by the DPP’s Chen to seek sovereignty during his 2000-08 tenure. Chinese officials have said relations would suffer if Tsai wins.
China ‘Basket’
In a campaign rally today, Tsai said that if she wins the presidency, her first task will be ensuring stable cross-straits ties with China.
“The new government will accept all existing agreements and hope to build new cross-strait consensus and reach new agreements with China that will benefit both sides,” she said.
As China (CNGDPYOY)’s economy slows, Taiwan’s growth also is moderating, with the island’s gross domestic product rising 3.4 percent in the quarter through September. Nomura Holdings Inc. forecasts GDP will drop 0.3 percent in the current quarter from a year ago.
Also seeking the presidency is James Soong, head of the People First Party, a member of the Kuomintang-led coalition in parliament. Soong, who also supports closer ties with China and could take votes away from Ma, was trailing in public opinion polls taken prior to the blackout period.
New Parliament
Taiwan’s voters also choose a new parliament tomorrow, the first time the two elections have been held on the same day. The ruling KMT kept control of Taiwan’s Legislative Yuan when the opposition DPP held the presidency from 2000-2008. The division of power resulted in delays in implementing government policies, from financial-sector consolidation to defense purchases.
This year, a party split in control of the presidency and the 113-seat legislature could jeopardize passage of a fiscal stimulus package, Nomura analysts led by Alistair Newton wrote in a Jan. 6 note.
The winner must have a plurality of votes, and there is no run-off election. The new president takes office in May for a four-year term, and, like in the U.S., can serve a maximum of two four-year terms.
To contact Bloomberg News staff for this story: Michael Forsythe in Beijing at mforsythe@bloomberg.net
To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net
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