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China Watch: Slowed China-Taiwan Trade Talks Have Investors on Hold

Some have already put down their money, presuming things at least won't get worse. Starwood Hotels & Resorts Worldwide (HOT) W Hotels has opened a glittery tower in Taipei since 2008, while its overseas hospitality rivals pursue hotels in mountainous scenic spots popular with tourists from China. Share prices of Starwood Hotels & Resorts Worldwide have held steady since this time in 2011.

U.S. high-tech giants such as Google (GOOG - Get Report) and Qualcomm (QCOM - Get Report) have also announced massive projects in Taiwan within the past two years.

Share prices of both have risen significantly over the same period. Their pro-Taiwan decisions rested in part on the island's economic stability, which depends on firm links with China. Before it started linking up with China, Taiwan had lagged newly industrialized peers such as South Korea and members of the Association of Southeast Asian Nations.

Japanese high-tech firms leery of the risks of doing business in China but keen to keep a channel open to the giant market are considering expansions or partial relocation to Taiwan as its ties with Beijing improve, one analyst in Taipei adds.

There are no guarantees, but the investor protection agreements on this month's negotiation agenda could be the key that opens doors to major new investments.

Those pacts would offer legal guarantees to investors from one side with interests on the other -- particularly important in the absence of diplomatic relations.

Separately, this month, a Taiwanese financial regulator said it had approved two Chinese banks, Bank of China (3988.HK) and Bank of Communications (3328.HK) to set up offices in Taipei. Though they can do only limited business for now, their permits show that the trend still seems to be toward more open relations.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
At the time of publication, the author had no positions in any of the stocks mentioned.
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