The pact, which took two years to negotiate, offers investors from the two sides formal channels for dispute arbitration, while falling short of a Taiwanese demand that arbitration take place under international oversight. It is the 17th economic agreement between the sides since China-friendly President Ma Ying-jeou took office in Taipei in May 2008.
"The agreement will encourage more mainland investment on Taiwan and give Taiwan investors more room to grow on the mainland," said Chinese negotiator Zheng Lizhong. "It's an important step in deepening economic cooperation."
Deals such as aviation agreements aimed at promoting the influx of several million Chinese tourists annually have added much needed revenues to Taiwan's treasury. But with this year's growth rate predicted to come in at less than 2 percent, broader tariff cutting and other trade promotion measures appear to have fallen short of Ma's promise that closer China ties would energize the Taiwan economy. The trade-reliant island is suffering from sagging demand for its trademark high-tech exports.
Chinese investment in Taiwan amounts to only about $300 million, far short of the more than $120 billion Taiwanese have invested in the mainland over the past 30 years. While the new pact could spur more Chinese investment in Taiwan, some restrictions aimed at preventing China's economic domination of the island remain in place.
Taiwan's opposition claims the new pact, like many of its predecessors, is helping to clear the way for increased Chinese economic influence on Taiwan, and setting the stage for an eventual Chinese political takeover of the island. That has been the ultimate goal of Beijing's Taiwan policy since the two sides split amid civil war in 1949.
Ma rejects the opposition's view, insisting that close economic ties with China are necessary for Taiwan and its 23 million people to avoid economic irrelevance, particularly as China moves to tighten commercial relations with longtime Taiwanese trading mainstays like Japan and South Korea.
But opponents point to Taiwan's continuing poor economic performance—its predicted 2012 GDP growth rate would make it one of Asia's most conspicuous economic laggards—as proof that Ma's highly vaunted China connection has failed to deliver the goods, and say the island needs greater balance in its trade ties.