Wednesday, March 29, 2006

Taiwan to Open China Investment

The Financial Times reports:

Ms Tsai would not specify which industries she was referring to but Taiwanese companies have been waiting for years for the government to lift restrictions on mainland investments in sectors such as banking, petrochemicals and chip-packaging. Apart from sectoral bans, businesses are restricted by a ceiling that limits mainland investments by listed companies at 40 per cent of their net worth. Ms Tsai said the government had started to discuss changes to the ceiling but this had not reached the stage of policy considerations yet. Ms Tsai, who is seen as the architect of many conservative policies on cross-Strait trade and investment in the 1990s and heads a cabinet panel on economic issues, defended the tighter controls.

“This will not result in cutting off investment in China but will slow it down a little, at best,” she said. “It aims to enable Taiwan’s economy to react faster to changes in China.”

The government plans to lower the percentage of China investments in Taiwan’s total outward foreign direct investment in order to reduce the island’s economic dependence on its politically hostile neighbour.


The policy is part of a larger drive to diversify Taiwan's investments away from its mortal enemy across the Strait. It was by-lined Kthrin Hille, who managed to go a whole article without hacking on Chen Shui-bian, for once.

9 comments:

Anonymous said...

How far can Chen really go to diversify in the face of market forces? Isn't he on a hiding to nothing?

Michael Turton said...

What "market forces?" AFAIK market forces are one thing that impel diversification. Costs in China are rising, electricity shortages remain a problem, the government is corrupt and unreliable, etc. Those too are "market forces." That is why lots of Taiwanese have been shifting to Vietnam recently.

This policy originated under the KMT, and recognizes the underlying threat that China poses to Taiwan. I don't know how successful it will be, but it is certainly worth attempting.

Sun Bin said...

1) the policy originate from LTH's KMT, let's not confuse LTH with MYJ's KMT. this is not fair to those who do not know taiwan too well.

2) impact of LTH's diversification (southward) policy: huge loss during the financial crisis in 1997-99 in indonesia, philippines.
conclusion: decision best left to businessmen themselves.

Anonymous said...

common language, family ties, mature investments, amortised costs, size of domestic market, yr competitors are there/heading there etc......those market forces

Michael Turton said...

Sun, the major difference between the KMT now and then is that it now opposes all the policies it historically supported, since the DPP supports them. If the DPP supported curing cancer, the KMT would object. Not dealing with China goes back to 1949, when Chiang got defeated. It is not an LTH issue. The KMT split in the 1990s over the issue, and those who were for more mainland investment left to form the New Party and to follow Soong. BTW, Ma Ying-jeou's policy of not unifying until China is democratic is Lee Teng-hui's. Also, Ma's 30-50 year peace idea is James Soong's from the 2000 election. There's no "MYJ KMT" -- that is merely a fantasy of the MYJ-as-Messiah crowd.

Michael

Michael Turton said...

common language, family ties, mature investments, amortised costs, size of domestic market, yr competitors are there/heading there etc......those market forces

So, there are market forces pulling in both directions. Some pull to China, some don't.

Michael

Anonymous said...

but most are heading due west...that's the giant sucking sound you hear. Its not coming from Hanoi. Political forces and market forces sometimes coincide - I just don't see it happening much at all in this case. Business will always find a go-around.

Michael Turton said...

That's probably true.

el spencer said...

Interesting that they mention banking in the article. I've read a lot over the past couple of years how the banking industry in China is shaky and could be where the country overheats. Could Taiwan's expertise in financial services help improve the banking infrastructure over there? I don't know much about all of that, but I do know that if Taiwan wants to help change to a "service" economy, they could probably help by spreading their services to the Mainland.