Chinese money inflows -- the game begins

Commonwealth magazine had a couple of good pieces this week on the growing Chinese presence in the property markets here in Taiwan....

Driving at 60 kph into the hills beyond the Beitou rapid transit station, the minibus negotiates a couple of mountain curves, passing the Kuo-Hua Golf Course in the district of Siaopingding before coming to a halt at the ongoing construction site of Nan Kuo Village, a mountainside luxury housing development with expansive sea views. The luxury villas overlooking the mouth of the Danshui River and Taipei 101 are going for NT$800,000 per ping (about NT$242,400/sq. meter), and with the smallest units covering 256 pings (a ping equals 3.3 square meters), entry into this community will set you back several million bucks. A number of Chinese clients have already ponied up, looking to become the new neighbors in Greater Taipei.


"Selling Taiwanese property to mainlanders is really just too easy," says one Chinese realtor. In Taiwan, you're not only buying a good living standard and good views, you're also buying rights to the land in perpetuity.


Relative to the residential property usage rights limits of 70 years in China and 99 years in Hong Kong, Taiwan's excellent system of individual property rights protections has become a major selling point since the opening of direct links and the subsequent signing of the Economic Cooperation Framework Agreement. And the newly wealthy Chinese merchant class does not shy away from high prices. To illustrate, initial sales of units in the Huang Hsiang F4 Building, a luxury residential complex along Songren Rd. in Taipei's Xinyi District that may fetch as much as NT$2.5 million per ping (about NT$758,000 per sq. meter), have been set aside for Chinese businesspeople.

What will be the effects? The article notes that since Hong Kong since its partnership agreement with Beijing, the property market has soared, with per-ping land prices tripling or more. Even after the US financial industry wrecked the world economy, the Hong Kong property market has continued to routinely set records, fed by Chinese demand. The second article notes how Chinese investment is already at work in Taiwan:

They have penetrated the computer and electronics, optoelectronics, banking and property markets, adding a new variable to Taiwan's competitive environment and quietly entering the lives of Taiwan's people. The online games children play, the houses and hotels we live in, our neighbors, the media we are exposed to and even our jobs – could all be under the shadow of Chinese ownership.


Since Chinese investment in Taiwan was liberalized in July 2009, the Ministry of Economic Affairs' Investment Commission has approved 120 Chinese investment projects with pledged investment of US$140 million as of the end of February.


The US$12.2 billion invested by Taiwanese businesses in China last year was nearly 100 times that amount (and cumulative Taiwanese investment there is nearly 1,000 times the amount). The numbers appear lopsided, but China's investment in Taiwan is actually far greater than the nominal figures would suggest. Through their use of a global network of subsidiaries and affiliates, Chinese enterprises have grabbed stakes in Taiwan in many different sectors, including those that have yet to be legally opened to Chinese investment.


A number of big Chinese corporate names have entered Taiwan through affiliates in third countries (taking stakes of less than 30 percent). Many made plays of this nature even before investment permit regulations for Chinese investors were issued in 2009. Lenovo invested through the PC department of IBM Netherlands. Alibaba established a presence through its Singapore subsidiary, and telecom services provider Huawei Technologies Co. set up a Taiwanese branch office through its Hong Kong subsidiary.

The effects on Taiwanese firms have yet to be felt. There has also been Chinese money quietly flowing into the property development now going on in Taichung, I have heard from two independent sources. Dunno if that is true. But it is clear that Taiwan's investment regulations and restrictions are easy to skirt and Chinese are pros at doing so. For years Chinese firms took money out China and funneled it through the Caribbean to return it to China as "foreign investment" and receive the tax breaks for being "foreign".
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Daily Links:

• ISS passes visible at night from Taichung for early May.
• Steve Yates, former Asia official in the Bush Administration, interviewed on TVBS
• Open letter signatories rip Ma Administration for response, bogus investigation of them.
• Statistical study suggests that during the Cold War the White House leaked info on secret coups to Wall Street so it could benefit by speculating on US firms.

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