Wednesday, 21 February, 2001, 11:57 GMT BBC News

Taiwan has had a rocky relationship with China over its status since its separation from the mainland in 1949 when the communists took power. China has argued that Taiwan is part of it - its "One China" principle.

Earlier this year, "mini-links" were established in trade, transport and postal services. For the first time in decades, ships travelled between Taiwan's Kinmen and Matsu islands and mainland China. In an exclusive interview with BBC News Online, Taiwan's Prime Minister, Chang Chun-hsiung, discusses progress in relations with China.

Do you see any possibility for the resolution of the "one China" principle?

In his inauguration speech on 20 May, 2000, President Chen Shui-bian emphasised that [both sides] "should uphold the principles of democracy and parity and build upon the existing foundations to jointly deal with the question of a future 'one China'."

This is a clear expression of the government's stance on the "one China" issue. The two sides differ on the...issue, and we must put aside controversy and find an acceptable consensus through dialogue and exchange.

Have the three "mini-links" made any difference to relations?

First, the "Three Small Links" policy is a step towards creating new opportunities for friendly cross-strait interactions [and to] bring prosperity to the Kinmen and Matsu area.

Second, we have been pleased by the flexible and pragmatic response from the Chinese mainland. The "Three Small Links" have taken cross-strait relations from antagonism toward a new era of co-existence...

We hope the two sides will begin with economic exchanges and co-operation under the principles of equality and reciprocity and then extend similar efforts to other areas.

I would like to call on the mainland authorities to open their hearts, set aside outdated thinking, and join us in creating a new environment.

Third, we are prepared to hold cross-strait consultations and hope that the mainland will make a positive and concrete response.

What is the current state of relations in terms of trade and economics?

Since 1987, when the [Taiwanese] government [began allowing] people from Taiwan to visit relatives on the Chinese mainland, cross-strait trade and economic relations have rapidly improved, and there have been impressive results:

• Trade - As of November 2000, total indirect trade with the Chinese mainland amounted to US$218bn. Compared to the same period last year, Taiwan-mainland trade increased 22.1%, reaching US$29bn from January to November 2000.

   

• Investments - Over the past two years... Taiwanese [investment in China] increased by 72% in 2000. Mainland statistics show that as of September 2000, the number of approved investments by Taiwan businessmen on the mainland had reached 45,729, totalling more than US$46.5bn. This made Taiwan the fourth largest outside investor on the mainland.

  By conservative estimates, more than 30,000 Taiwan factories or Taiwan-invested factories are operating on the Chinese mainland.... Taiwan businesses have created at least three million jobs for the mainland.

   

• Private visits - To date, there have been 17 million visits [from Taiwanese] to the mainland.

   

• Telecommunications - So far, over 186 million pieces of mail have been exchanged between the two sides.

   

China and Taiwan will soon be joining the World Trade Organisation. What impact will this have on relations?

Accession to the WTO will be a great challenge for both sides. After the rapid economic development of the past several decades, Taiwan has arrived at a pivotal juncture of economic transformation...

[It] will face the challenges of opening its domestic market, competition from both the Chinese mainland and the rest of the world, and industrial transformation following accession to the WTO.

After 20 years of economic reform, the Chinese mainland has gradually moved from a command economy to a market economy, and from an agricultural economy to an industrial economy.

Its service sector has also begun to develop. However, the Chinese mainland's economy has been facing many difficulties in recent years.

After accession to the WTO, it will encounter various systematic transformations, including the opening of its markets, unification and institutionalisation of its trading systems, cancellation of privileges given to state-run businesses, and reform of its foreign exchange regulatory mechanism.

All of these changes will further impact the mainland's economy. Therefore, the challenges for the Chinese mainland in an open market economy will be maintaining growth and social stability while avoiding possible political risks.

If both sides can overcome their own economic challenges, they will be able to increase the room of mutual support and benefit.