“I believe,” said Flannery, “that some of what President Ma Ying-jeou is trying to do will come to pass. This will have a positive effect on the economy. After all, Taiwan is right on the doorstep of one of the world’s key economic growth locomotives: China.”

Flannery sees the property market in Taiwan recovering. “Supply is tight and depending on how you define grade-A office space, vacancy rates are only 4 percent to 8 percent in Taipei. If there is a big increase in interest among new companies to come to the city than that will feed directly into the market.”

To gain influence in Taiwan, he also thinks that China will try to develop closer ties with major land-owning families and corporations on the island.

Comparing the Taiwanese property and tourism markets to those in Hong Kong, Flannery explained that, perhaps, like the former British colony, Taiwan would experience a boom in these two sectors because of liberalized investment and travel restrictions.

“The number of Chinese tourists to Hong Kong,” said Flannery, “increased from 2.3 million in 1997 to 13.6 million in 2006.”

This hope has propelled strong growth in tourism stocks (up 80 percent this year). “There is an expectation that, starting July, the Chinese government will let more Chinese tourists come to Taiwan. If things go well, the numbers allowed to visit will be revised upward. Also, there is a hope that if travel restrictions are lifted that more Taiwanese who have built up business in China will be able to return to spend more time back here.”

Despite the downturn in stock prices, Flannery is confident that Taiwan’s high-tech players will remain successful. “New gadgets, especially wireless devices, are constantly being developed, and Taiwan has retained its niche as the partner of choice for major contract manufacturers.”

He attributed success to the ability of Taiwanese high-tech players to come up with designs on their own. “A long-term shift is taking place,” said Flannery, “with companies like HTC starting to market their own brands.”

The technology sector is, however, facing leadership challenges. “Looking at the demographics,” said Flannery, “the pioneers in the high-tech sector are not young anymore. What is going to be the next source of vitality?” he asked.

He recommended that the Taiwanese government do more to attract foreign talent. “Taiwan should make it easier for foreign small and medium-sized enterprises to set up shop on the island, and for those that do to be able to get to China easily.”

Many Taiwanese businesspeople, stressed Flannery, are prospering in China. He also believes that China will court rich Taiwanese. At the same time, he observed that many of the Taiwanese companies that are achieving the most in China are those headed by owners who descended from mainland families. “These people have an affinity for doing business in China; they get it.”

It is for precisely this reason that he sees great potential for Taiwanese brands to develop in the Chinese market. He pointed to those in the food and beverage industry as being particularly noteworthy.

Likewise, great opportunities could present themselves to Taiwanese banks if they are given the same access to the Chinese market that was granted to second-tier banks in Hong Kong.

Regarding taxes, Flannery points to “lots of proxy holdings in the market,” which mean that ownership of major corporations is not easy to sort out.

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