AS an investor, Jack Huang bet on both war and peace between Taiwan and China.
Before Taiwan's March 23 presidential election, swept by incumbent Lee Teng-hui, Mr. Huang bought stock in shipping companies and food-processing firms with large mainland investments.
This week, that paid off as Taiwan offered an olive branch to China and proposed to lift a 47-year-old ban on direct travel, trade, and communication with the mainland. In recent years, economic links across the Taiwan Strait have gone through Hong Kong. The British colony will revert to Chinese rule in 1997 and no longer be an independent conduit for Taiwan.
Showing caution, Huang, a millionaire and full-time investor, pulled out two-thirds of his funds during Chinese missile exercises last month intended to quiet pro-independence sentiment in the election run-up. Given Taiwan's sagging economy, weakened further by political uncertainty, Huang plans to hold back until the political fog over the Taiwan Strait clears.
"I don't want to gamble because the market could go up or down," he says. "I will keep waiting to watch what direction the [political] process will take."
Even as the crisis between Taiwan and China abates, Taiwanese investors and traders remain in limbo over the future course of their country's economy.
Taiwan's powerful economy was the victim of Chinese sabre-rattling before the election. The Taiwanese, China's second largest group of foreign investors after Hong Kong, are starting to get skittish. About 17 percent of Taiwan's gross domestic product depends on trade with China, analysts say.
Of 24 mainland investment projects totalling $140 million and approved by Taiwan's Ministry of Economic Affairs during the first two months of 1996, two-thirds have been cancelled or postponed. Indirect trade between Taiwan and China fell 24 percent to $1.5 billion in February. During the first two weeks of March, when the crisis prompted a bank run, Taiwanese cashed in $5 billion worth of Taiwanese dollar investments and sent the money abroad, the China News newspaper reported.
Taiwan posted a record $3.93 billion balance of payments deficit for 1995, compared to a $4.62 billion surplus the previous year. Foreign exchange reserves, still the world's second largest after Japan, plummeted during the second half of 1995.
Gold purchases jumped, and the government spent $1.6 billion to prop up the stock market in March. Prices on the exchange are off more than 30 percent since Mr. Lee, the Taiwanese president, visited the United States in June 1995 and enraged China.
Now, Lee says he is ready to ask the Taiwanese legislature to establish special trade districts for direct links to the mainland. Previously, Taipei demanded a formal peace treaty ending decades of threat and hostility first. China and Taiwan were divided by civil war in 1949. But Beijing still claims the island as part of China.
The weeks before Lee takes office on May 20 will be crucial to restoring investor confidence, Taiwanese analysts say.
"The question is whether the mainland will accept any of the proposals Lee has put forward," says Charng Kao, who researches mainland investment trends at the Chung-hua Institution for Economic Research.
"If Beijing is accepting, relations will improve and the psychological pressure will ease," continues the analyst. "If China doesn't accept them, the amount of investment will decrease and the investment already there will be withdrawn and go elsewhere."
Until Lee's US visit damaged cross-strait relations, Taiwan's economy was increasingly intertwined with the mainland. After the president came to power in 1988, he lifted bans on Taiwanese investment in China as long as it was indirect and allowed Taiwanese to travel to the mainland. Using quasi-governmental organizations, the first direct talks between the two rivals began.
Cashing in on China's economic boom, Taiwanese businessmen invested more than $30 billion by 1995, most in southern provinces just across the narrow straight, according to official Chinese figures. Taiwan's estimate is lower - about two-thirds of that amount. Trade rose steadily, jumping more than 27 percent to $21 billion in 1995, Taiwan says. Beijing says trade increased 9.5 percent to $18 billion.
Taiwanese executives say that despite tensions, the mainland remains attractive. Chiu Chen, a lawyer who works with Taiwanese wanting to invest on the mainland, says she plans to take 30 businessmen to Shangdong province to investigate real estate investments. So far, no one has pulled out.
"If there's an opportunity in China, everyone will still go," says Ms. Chiu, who maintains investors are more deterred by high taxes, lack of legal protections, and China's high risks. "This is a trend that can't be turned back. They will still go because China is the world's biggest market."
Still, others say that caution and uneasiness prevail. Officials at President Enterprises and Wei Chuan Foods, both major food processing companies with $120 million and $16 million invested in China respectively, say they have no plans to withdraw from the mainland, although several projects are on hold until the future clears.