BEIJING : China's strong economic growth, especially in its initial years of reform, was due largely to investments from Taiwan.

With three decades of experience in China, Taiwanese businesses have witnessed how the country has evolved.

Alin Chiang first came to China in 1986. Armed with only a suitcase and a computer, Chiang was looking to expand his family's luggage business first set up by his father and uncle.

China was so new to capitalism then that officials at the Beijing airport did not know what to do when Chiang said he wanted to rent an illuminated signpost near the passenger terminal.

So apart from paying a minimal sum for electricity bills, Chiang paid no rental whatsoever. In the mid-1980s, Chiang sold his luggage bags for 500 yuan each - that was enough to purchase half a village house at that time.

Chiang, who is now the Managing Director of Crown Enterprise Ltd, said: "When we first came, ordinary Chinese were poor and their only luxury items were bags knitted together with blue, white and red plastic strings.

"But now, if we sell our bags at that price, the Chinese will say it is low-class and low quality."

Chiang quickly realised that given the lack of high-end products, Chinese were willing to pay for quality. A factory was set up in Guangdong in 1992, and the company now produces a wide range of luggage and other travelling-related items.

To keep ahead of the competition, the company comes up with traditional Chinese designs, as well as hires designers from Europe and America.

While the company is able to keep abreast of the competition, other Taiwanese businesses in China - especially those located in the Pearl River Delta - are not so lucky.

Since January, over 10,000 Taiwanese firms have closed down, due largely to the strong Chinese currency, and the new labour contract law, both of which have increased operating costs.

However, this is unlikely to stem the flow of Taiwanese businesses, many of whom will find ways to survive.

After all, Taiwanese investments have been pouring into China even during tense moments, such as the 1995 missile crisis, the outbreak of SARS, and during the go-slow policy advocated by Taiwan.

Professor Sun Yan, Department of International Relations, Peking University, said: "In the past eight years, Taiwan has tried to cool down cross-strait economic ties, and this has created a negative impact on Taiwan's economy.

"During the recent Taiwan elections, the question that was raised is that Taiwan's survival hinges on its economy, its economy hinges on the cross-strait situation, and cross-strait situation hinges on the extent of opening up and restriction."

With the electoral victory of President Ma Ying-jeou in March this year, economic ties are expected to further improve.

Even though Taiwanese businesses are often subjected to the whims of political changes, they are also often in a position to push for changes, except in areas which are deemed sensitive, such as in the area of national security.

However, no matter how cross-straits ties have fluctuated over the past three decades, one thing is certain - economic ties are so tightly and inextricably linked that it is increasingly clear that economics will dictate politics, and not vice-versa. - CNA/ms