China is the top trading partner for both Korea and Taiwan, whose economies heavily depend on trade. For both countries, China accounts for more than 20 percent of trade volume. But over the past year, China and Taiwan have grown closer in terms of business, politics and culture -- a honeymoon that is fast becoming a threat to Korea's industrial competitiveness.

Korea's market share of LCD TVs in China, which are among Korea's top exports, clearly demonstrates the phenomenon. According to market researcher DisplaySearch, Korean manufacturers saw their share of the Chinese market plummet to 6.7 percent in the first quarter of this year, from 16.7 percent in the same period a year ago. In contrast, Chinese companies' market share rose from 55.6 percent to 77.5 percent.

Korean-made LCD panels had a 46.2 percent share of the Chinese market in the first quarter last year, but that fell to 29.7 percent in the first three months this year. And Taiwanese companies filled the gap, with their share rising from 35.6 percent to 56.5 percent.

The Taiwanese government is coming up with a raft of measures after allowing Chinese capital directly into 192 industries in Taiwan last Wednesday. The traditional cross-straits style of economic cooperation, where Taiwanese technology fused with Chinese manpower, has now entered a phase where China's huge capital is being invested to build production plants in Taiwan and taking part in the island's high-tech industries. "The latest measure will have the effect of killing three birds with one stone by providing much-needed capital to Taiwan, improving cross-straits relations and boosting Taiwan's international credibility and competitiveness," wrote the island's United Daily News.

Korean business officials are paying close attention to an Economic Cooperation Framework Agreement that China and Taiwan plan to sign later this year. The ECFA aims to abolish tariffs, promote free exchange of products, labor and funds, open up trade and prevent double taxation. Among the top 50 products China imported last year, Taiwan and Korea overlapped in 34, from manufactured goods to basic materials.

"So far Korea has been fighting on a single battlefront, but closer relations between China and Taiwan will subject Korea to attack from both sides," said Lee Min-ho, the director of the Korean trade office in Taiwan. "The government and private sector must put their heads together and come up with measures before Korea's key industries making semiconductors, home appliances, petrochemicals, machinery and automotive parts are impacted harder."

The new closeness between China and Taiwan can be felt on the streets of the island. According to the Taiwan Immigration Office, 269,000 mainland Chinese visited from January to May of this year. That is already three times the 89,200 who came last year. Hong Kong's Wen Wei Po daily on Sunday said since July last year, when China and Taiwan allowed direct flights to each side, 4,008 flights ferried 1.6 million people from one side to the other, with an average of 80.2 percent of the seats filled.

The paper also reported that the 365,550 visitors from mainland China led to an economic effect worth US$18 billion. On July 4 last year, 36 chartered flights took off from 13 cities on both sides of the strait, for the first time in 59 years. Less than a year later, 270 flights connect 27 cities on both sides. Sixty-three Chinese ports are also directly linked to 11 ports in Taiwan.

The two sides have agreed to conduct joint explorations of oil fields in other countries, while mainland companies are either acquiring or merging with their counterparts in Taiwan. China and Taiwan are also cooperating in the political, cultural, social, labor, academic and military fields.