China: Trade with Taiwan and Gas Pipe Lines

China is close to announcing a trade pact with Taiwan. This can be considered a monumental move. As China Daily states:

The first round of the Economic Cooperation Framework Agreement (ECFA) talks took place in Beijing in January, followed by the second round two months later in Taipei. Both the mainland and Taiwan have expressed a willingness to sign the ECFA before the end of June.Regarded as a landmark trade pact, signing the ECFA is a crucial bid to normalize cross-Straits economic relationships, as well as a significant step toward building trust to resolve political and military differences.

It is not all positive since the Taiwan opposition states:

However, critics of the pact, including the pro-independent Democratic Progressive Party (DPP), claimed a flood of cheap mainland imports could destroy Taiwan's economy and view the deal as paving the way for a political takeover by the mainland.

Tang and several senior mainland officials have repeatedly stressed that the ECFA is "purely an economic issue", in which the mainland will benefit substantially less than Taiwan.

This could open the gates for significant equalization of relationships, which has been building for a while.

A second report is the announcement of an eastern looking gas pipeline.

China and Kazakhstan have signed a deal to build and finance a natural gas pipeline and deepen their cooperation on nuclear energy, extending the two countries' ties on resources. Under the agreement signed on Saturday during a visit by Chinese President Hu Jintao, the two countries will build a 1,400-km gas pipeline. It will link with an existing gas pipeline running between China and Central Asia. The project will help meet gas demand in southern Kazakhstan. Feasibility studies will also be undertaken, looking at increasing gas exports to China from the Caspian Sea area and other Central Asian countries through the pipeline, China National Petroleum Corp (CNPC) said on Sunday.

Analysts said the deal underlines the importance of energy cooperation between China and central Asian countries, which are rich in natural resources. "These countries will play an increasingly important role in China's overseas energy strategy," said Xia Yishan, an expert at the China Institute of International Studies.

China signed a deal with Uzbekistan last Wednesday to buy 10 billion cubic meters of natural gas per year from the country. Both countries also signed a memorandum of understanding to expand their cooperation on gas.

The issue here is that gas now will head eastward and may divert flows that are now going to Europe. It may pose a flow threat to European users.