2010-07-02 [Source: PU World]

China and Taiwan signed a historical trade deal Tuesday to boost economic ties and further ease political tensions six decades after the rivals split amid civil war.

The deal, which namely the Economic Cooperation Framework Agreement (ECFA) was signed in the southern Chinese city of Chongqing, will remove tariffs within two years on 539 Taiwan export items to the mainland worth $13.84 billion as well as 267 mainland export items to Taiwan valued at $2.86 billion.

"This is a critical moment in the development of long-term relations. We should seize the opportunity to work together and build mutual trust," Chiang Pin-kung, chairman of Taiwan's semiofficial Straits Exchange Foundation, said ahead of the signing.

His Beijing counterpart, Chen Yunlin, Chairman of China's Association for Relations Across the Taiwan Strait (ARATS) called it an agreement of "equal consultation and mutual benefits."

However, for domestic PTMEG producers, the signing of ECFA, which leads to zero-tariff of PTMEG may further add pressure to them as their products already do not have price advantages. But for some Taiwan PTMEG producers, such as Dairen Chemical, they will become the direct beneficiary.

Relative statistics shows that by 2012, China's production capacity of PTMEG will approximately exceed 300,000 tons per annum. As spandex market consumes more than 95% of PTMEG, it is estimated that domestic demand for PTMEG is about 120,000 tons. PTMEG market has witnessed the capacity surplus situation, it's better for domestic producers to pursue non-spandex application for PTMEG so as to gain share in the market.