Chu Shuang-te is scrambling to finish building a restaurant in Taipei 101, the world’s second-tallest skyscraper, for Michelin-starred chain Din Tai Fung. He aims to open in time for Taiwan’s next wave of Chinese tourists.
“We’ve been working overtime since March,” said Chu, a manager at the dumpling specialist, as a 30-strong construction crew clattered drills behind him. Taiwan is about to permit more Chinese visitors and the restaurant wants to open in July to make the most of the opportunity, Din Tai Fung said.
Taiwan is preparing to allow individual tourists from China for the first time since a civil war ended in 1949, hoping they will throng attractions such as the 106-story tower. The move, due as early as this month, may take Chinese arrivals to 4 million next year from less than 200,000 in 2008, when a ban on group trips was lifted, according to Barclays Capital estimates.
“Resurgent tourist spending as millions more Chinese visit Taiwan will boost consumption and real-estate investment, similar to the pattern seen in Singapore since 2004,” said Wai Ho Leong, an economist at Barclays Capital in Singapore. “The island’s pursuit of closer commercial ties with China is crucial to raising its long-term economic growth potential.”
Taiwanese President Ma Ying-jeou, aiming for re-election in January on a platform of improved economic links that opponents view as a threat to autonomy, has said tourism is booming since he let Chinese visit in organized groups. Allowing individuals will spur $4 billon of investment into the industry in the next five years, said Chiang Pin-kung, Taiwan’s top China negotiator.
Shares to Gain
Formosa International Hotels Corp. (2707) and Ambassador Hotel (2704) are among the companies that will gain and their shares are worth buying, Fubon Securities Co. Ltd. said.
Taipei-based Formosa, Taiwan’s biggest listed hotel company, will climb about 8 percent to NT$630 ($22) over the next six months, while Ambassador will jump 12 percent to NT$54, according to Fubon.
Enmity between Taiwan and China has eased since Ma took office in May 2008, dropping his predecessor’s pro-independence stance and improving commercial ties with the world’s fastest- growing major economy.
The two sides on Jan. 1 cut import taxes on more than 800 products under their first trade treaty, and will meet in Taipei on June 8 to review the 15 agreements signed since Ma came to power, according to Taiwan’s Mainland Affairs Council.
Overtaking Japan
China, which views Taiwan as part of its territory, overtook Japan last year as the island’s largest source of tourist arrivals with 1.63 million visitors, up 68 percent from 2009. The daily quota for Chinese traveling in groups is 4,000, and the Taipei-based United Daily News reported May 18 the initial limit for individuals will be 500.
“We believe that once the individual visitor scheme starts, the daily limit and other conditions will be loosened, benefiting the Taiwan hotel sector and retailers in the long term,” Yoshihiko Kawashima, an analyst at Daiwa-Cathay Capital Markets Co. Ltd., wrote in a research note in April.
Marriott International Inc. and Starwood Hotels & Resorts Worldwide Inc. (HOT) are among global hoteliers increasing capacity in Taiwan. Marriott, the largest publicly traded U.S. lodging chain, is working with Taiwanese businessman B. V. Riu on a NT$6.2 billion, 352-room franchise agreement.
Taiwan’s Taiex Tourist Index, which tracks eight companies, has surged 42 percent in the past year, according to data compiled by Bloomberg. The benchmark Taiex stock index has jumped 24 percent in the same period.
Economic Growth
Taiwan’s export-led economic growth quickened to a 24-year high of 10.88 percent in 2010 after a recession the previous year. Officials have raised interest rates and approved property and luxury taxes to curb price pressures, while increasing wages to help people cope with higher costs.
The more than 2 million Chinese visitors to Taiwan since 2008 have delivered an NT$100 billion economic benefit, said Chiang, chairman of the Straits Exchange Foundation.
Building on such gains depends on sustaining the thaw in ties. China has more than 1,000 missiles deployed at locations opposite Taiwan, according to the U.S. Department of Defense, and has threatened to invade if the island declares independence.
“There are political and military risks,” said Chang Wu- ueh, a professor of political science at Taipei’s Tamkang University. “Ma needs to assure Taiwanese people that he is improving ties with China and protecting Taiwan’s autonomy.”
Political Risk
The opposition Democratic Progressive Party candidate for president, Tsai Ing-wen, has accused Ma of selling Taiwan short with a policy of rapprochement “boxed in a frame set by China.”
The pro-independence DPP governed from 2000 until Ma’s Kuomintang took power in 2008. The DPP rallied tens of thousands of people in Taipei last year to protest the trade accord, saying it risked giving China too much sway over Taiwan.
Companies are betting tourism growth will weather political risks. China is Taiwan’s biggest trading partner and investment destination, adding pressure for detente.
Taipei-based Ambassador, Taiwan’s second-largest listed lodging company, plans to open a 162-room hotel in the capital this year and another with 220 rooms in 2013.
“Chinese tourists are going to help retailers and boost domestic consumption,” said Bill Chen, a vice president at Ambassador. “They will benefit everyone, not just hotels.”
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