In the run up to Taiwan’s general election on January 16, the Democratic Progressive Party (DPP), which traditionally favours independence from China, is widely expected to win.

Trade between the two sides has vastly improved in the last decade. Taiwan’s leader Ma Ying-jeou, who steps down next year due to term limits, has made improving economic links with China a key policy since he took office in 2008.

“Next year’s election will be important,” says JLL Taiwan’s Managing Director Tony Chao. If the Democratic Progressive Party (DPP) gets into power, the push towards elimination of trade barriers with mainland China may slow, but will not stop as DPP leaders recognize the importance of maintaining and expanding economic ties between the two sides.

While nothing concrete came of the historic November 7 meeting in Singapore between Xi Jinping and Ma Ying-jeou, the leaders of Chinese mainland and Taiwan, the meeting symbolized the growing cooperation between the two sides.

Increasing cross-strait trade

According to the Council on Foreign Relations, in 1991, trade between mainland China and Taiwan reached only US$8 billion. By 2007, bilateral trade had surged to US$102 billion.

In 2009, Taiwan opened 100 industries to Chinese investors and talks of a free-trade agreement began, marking a watershed year for Taiwan-Chinese trade relations. Finally, in 2010, the two sides signed an Economic Cooperation Framework Agreement (ECFA).

While trade restrictions are still in place, Chinese mainland and Taiwanese businesses are seeing the advantages of a more open market. “In recent years, 130 companies have come to Taiwan,” Chao says.

Two sectors of the Taiwanese economy have benefited most from the improved economic relationship. High-tech industries have gone from strength to strength, according to Chao, and Taiwan now ranks second in the world for the manufacture of high-tech components for computers and other digital devices.

However, trade challenges still remain. Chao cites the example of one of China’s largest construction companies, which wants to undertake large development projects in Taiwan, but is facing opposition from restrictions that are still in place. He nevertheless believes the demand for both office and residential development may overcome the barriers in the future.

Tourism is also booming, and its positive effects are trickling down to retail businesses. “In 2009, only 300,000 tourists from mainland China visited Taiwan,” Chao says. “Last year, the number was closer to four million.” Chao adds that he believes visitors are impressed with what they discover in Taiwan, in particular the island’s beautiful scenery.

The report also showed that increasing visitor arrivals – many of them from mainland China – are driving hotel performance. According to the latest STR Global data up to the third quarter of 2015, revenue per available room (RevPAR) in Taipei’s luxury and upscale hotel sector increased 1 percent year on year to TWD 4,894 (US$150). The growth was supported by a four percentage point increase in occupancy to 68.8 percent. Taiwan is now working on its tourism credentials, aiming to draw 10 million tourists by this year-end.

Demand for commercial space in Taipei

According to Chao, Taiwan is on solid economic ground, despite the global economic uncertainty and the slowing exports amid falling demand and greater competition from China.

Strong leasing demand continues to be observed in the Grade A office market, as seen in JLL’s Taipei Property Snapshot for the third quarter of 2015. New leases this period were mostly by corporate tenants in the IT, high-tech and financial service sectors.

“In spite of the recent economic slowdown, vacancy rates are still low in Taipei,” Chao says. While the Grade A office vacancy rate stood at under 10 percent for the first two quarters of this year, it inched up slightly in the third quarter to 10.6 percent due to two new buildings coming on stream. Rent remained flat as most new leases signed this quarter had been negotiated as early as the end of 2014.

While the trade-reliant country is facing a changing economic landscape, its capital is nevertheless an international business centre and is fast building its reputation as an international finance hub. In JLL’s report Globalization and Competition: The New World of Cities, Taipei is listed among the new emerging world cities, alongside Beijing and Shanghai.

Writing in a recent Real Views story William McBryde, an analyst in the Global Research team at JLL, says: “The city is particularly noted for its efficient physical infrastructure and effective institutions and governance. As such, the city is one of the top ten globally in terms of corporate headquarters and one of the 40 largest destinations for real estate investment.”