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International relations

Taiwan's pro-Beijing mayors spur hopes of Chinese tourist boom

Tsai's re-election bid at risk as new local leaders seek closer mainland ties

A tourist in the southern Taiwan city of Kaohsiung (photo by Cheng Ting-fang)

KAOHSIUNG, Taiwan -- Hotelier PK Yang Cheng-chen rode a tourism boom for nearly a decade, thanks to a stream of wealthy Chinese visitors. But his business plans began to unravel after President Tsai Ing-wen came to power in 2016.

"Demand fell off a cliff over the past two years," Yang told the Nikkei Asian Review. "Most of my local hotel peers are losing money and are even considering exiting the business."

Beijing responded to the election of Tsai -- from the pro-independence Democratic Progressive Party -- by taking measures such as withholding visas to hurt Taiwan's economy. Chinese visitors to the island have almost halved, forcing Yang to put up for sale two of his three hotels in Taiwan's south.

But another political twist has put the entrepreneur's selling plans on hold.

Han Guo-yu of the China-friendly Kuomintang party won the mayoral election for the southern city of Kaohsiung in November, one of a series of midterm defeats across the island for Tsai's DPP. Han won the poll on a pledge to improve economic ties with Beijing, and a formal acknowledgment of the "1992 Consensus" that posits that Taiwan is part of China -- a concept with different interpretations on either side of the Taiwan Strait.

While the economic benefits of an increase in visitors and business from China would be welcomed across the island, it also puts Tsai in a difficult position. Earlier this month she rebuffed Chinese President Xi Jinping's call for eventual reunification with the mainland, and the electorate will be weighing the pros and cons of her cool stance toward China ahead of next year's presidential election.

Yang, the 53-year-old hotelier, is happy with the rise of pro-China forces for now. He said he would hold onto his properties in the hope that the new political environment will bring Chinese visitors back to the city.

"I will wait and see if things improve in the next 14 months," he said.

Taiwanese hotelier PK Yang Cheng-chen at his Nest hotel in Kaohsiung  (photo by Cheng Ting-fang)

The number of Chinese visiting Taiwan shrank from 4.18 million in 2015 to 2.73 million in 2017. In the first 11 months of last year, 2.46 million Chinese tourists visited the island -- around the same number as the previous year.

The tourism industry accounted for about 4.45% of the island's economy in 2017, according to the Taiwan Institute of Economic Research. And the slump hurts the hotel, restaurant, transport and retail sectors -- all of which feel the immediate impact of change. More than 160 hotels on the island are now up for sale, according to online real estate platform Ubee.

The decline stems from China's view of Taiwan as a wayward province and its strong opposition to any activities to promote the island's sovereignty. With Tsai not backing the 1992 consensus, Beijing has withheld tourist and business travel visas.

Tsai, who recently staunchly defended her China policy, is under pressure from both political rivals and colleagues in her Democratic Progressive Party after November's crushing midterm defeats. The setbacks in key cities across the island have also cast a shadow on her bid for re-election in a poll early next year, as well as emboldening friends of Beijing. The independent Taipei City Mayor Ko Wen-je -- a possible presidential challenger -- said last month that the two sides of the strait "belong to one family."

"Local cities are taking a different approach for China policy compared with the Tsai administration," said Pan Chao-min, a professor at Tunghai University's Graduate Institute of Political Science in Taiwan. "They want to take care of their cities by improving the economic relationship with China, which is causing a big headache for President Tsai as the central government has to keep its China policy consistent."

Chinese President Xi Jinping has recently been brandishing his nationalist credentials vis-à-vis Taiwan. He used a Jan. 2 speech to reiterate his push for eventual reunification, and sought to bypass Tsai's administration through talks with Beijing-friendly parties.

Tsai fired back an angry response the same day.

"We have not accepted the 1992 consensus," she told reporters. "The fundamental reason is because Beijing authorities' definition of the 1992 consensus is 'one China' and 'one country, two systems'."

She said Taipei is willing to sit down and talk to Beijing, but any cross-strait negotiation must be government-to-government. Tunghai University's Pan said her remarks were also aimed at city mayors who are seeking to independently forge closer ties with China.

"We don't oppose cross-strait exchanges, but I also need to call on local mayors to respect the national system," Tsai told a foreign media gathering on Saturday. "If some of the talks by local city mayors touch on issues of national system and national defense, the central government must supervise or even manage the situation."

New Kaohsiung mayor Han Guo-yu on his inauguration day on Dec. 25 (photo provided by the Kaohsiung city government.)

Sean King, senior vice president at business advisory firm Park Strategies, said China's Xi is just trying to wait out the DPP, in the hope that the KMT will win next year's Taiwan elections.

"He smells blood after the DPP was so roundly trounced in November's local elections," King said.

Han, the incoming mayor of Kaohsiung, sent 2,000 invitations to politicians, business executives, and TV celebrities to his inauguration on Christmas Day -- an event that thousands of civilians gathered by the city's river to witness. Many hotel and restaurant owners also attended the ceremony.

Wu Ying-liang, chairman of Kaohsiung Association of Travel Agents, said local travel agencies in the city have resumed hiring.

"Sentiment seems to have returned after the midterm election," Wu said. "I predict that Beijing is now likely to approve charter flights for Chinese group travelers to Kaohsiung, given the ruling city government has now turned to the Kuomintang."

Steven Pan, chairman of Formosa International Hotels -- Taiwan's leading hotel chain -- told the Nikkei Asian Review that he expected to see official groups of visitors coming back to the city after an absence of two years. Nelson Chang, CEO of LDC Hotels & Resorts Group and chairman of Taiwan Cement, said his group plans to increase investment in Kaohsiung.

Chinese authorities will ask tourist groups to visit cities that are more friendly to Beijing and avoid those controlled by the DPP, said Ubee founder Greg Yeh. "The mainland officials are good at using such kinds of tactics."

Even so, the total number of visitors to the island topped 11 million for the first time last year, with the fall in Chinese tourists covered by lower spending visitors from places such as Southeast Asia.

A vast majority of Taiwanese favor maintaining the status quo with the mainland, with those people split on whether to eventually move toward independence or unification, according to polls by the National Chengchi University's Election Study Center. The recent spat between Tsai and Xi is unlikely to have shaken people's convictions.

And New Power Party lawmaker Hsu Yung-ming -- a proponent of independence -- warned that local mayors may face a public backlash if they lean too much toward China.

"The interaction between local cities and China does not mean the central government needs to adjust its China policy," Hsu told Nikkei. "Based on historical experience, Taiwanese people do not want to be too close to China."

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