Showing posts with label Chinese investment. Show all posts
Showing posts with label Chinese investment. Show all posts

Sunday, March 18, 2012

Taiwan to Liberalize Investment in Crown Jewel Firms by China

WSJ laconically reported:
The person, who asked not to be named, told Dow Jones Newswires the new rule--which will require final approval from the Cabinet--would allow Chinese investors to own up to a 50% stake in any Taiwanese tech firm, from 10% currently. The new rule would apply to companies including flat-panel and semiconductor manufacturers, the person added.
There's precious little investment from China in Taiwan, especially compared to the massive monies that Taiwanese have pumped into China, and even less into the tech sector. The move is ostensibly to permit Taiwan's capital-hungry firms to receive injections of lucre from China. Yet the pattern so far has been that there is no quid without a political pro quo from Beijing....

Another issue here is that approvals of such investments would likely be on a case-by-case basis. Readers will recall that back in 2009 Taiwan telecom giant FarEastOne inked a deal to sell a 12% share to a ginormous China firm, but the deal was never approved. I blogged on it at the time, citing an excellent piece by J Michael Cole on the Chinese firm's close ties to the government and state security entities.

It appears likely that the KMT Administration might promulgate such a law in order to appear as if it is doing something, but in fact throw up bureaucratic obstacles to concrete realization of the law. Even if the Ma government is sincere about letting Beijing's firms invest in Taiwan's tech sector, the turning over of a large chunk of a local crown jewel to Beijing may well spark the kind of public outcry that would kill the deal. If Beijing is smart its first investment will not be large and the usual connections to state security and investment firms will be lacking.
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Thursday, April 21, 2011

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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Friday, April 02, 2010

Witches Brew of Players in Nan Shan Deal

99% of the time, the photos I put next to posts have nothing to do with the post itself, I just randomly select them. But I had been talking with a pal about the financial mess, and he flipped me this highly appropriate pic. So enjoy...

Despite the huha over the China email hacking I commented on below, the most important news was the financial machinations of the Chinese groups involved with the Nanshan sale. The Taipei Times ran a front page piece on the 31st discussing the Nanshan sale. American International Group (AIG), an insurance company with deep historical links to Shanghai and pre-war China, sold Nan Shan to Primus Financial on Oct. 12 for US$2.15 billion. Primus Financial then filed an application with the Ministry of Economic Affairs' Investment Commission in November. On Feb. 12, Primus and China Strategic sent a revised application to provide more information on investors and funding sources (borrowed much of this description from Taipei Times report). Nanshan, BTW, insures more than 4 million Taiwanese, and is the largest insurance firm on the island. As the TT noted in an editorial today, this bit of financial arcana is like a window into Taiwan's future. The TT reported:
An electronic copy of a report obtained by the Taipei Times on the yet-to-be-approved sale of Nan Shan Life Insurance Co claims that the backers of the Hong Kong-based consortium led by Primus Financial Holding Ltd and China Strategic Holding may include individuals found guilty of financial irregularities as well as close relatives of senior members of the Chinese Communist Party.

The English translation of the report, which is dated March 10 and comes from the office of Democratic Progressive Party Legislator Pan Meng-an (潘孟安), also mentions risks of stock speculation and raises questions about the qualifications of major shareholders and the use of “shell” companies.
The report says, among other things:
  • Primus Pacific Partner (Hong Kong) Co Ltd (Primus Pacific) — which provided funding for Primus Financial — receives “some funding” from the state-owned Beijing Enterprises Holding Ltd
  • China Strategic is a pure holding company in poor financial shape
  • Among the individuals involved in China Strategic, which is backed by Chinese money, is a well-known Shandong-born Chinese speculator who is reportedly at large over his involvement in two cases of stock speculation and insider trading
  • The Shanghai-born Huan is the CEO of Primus Pacific and chairman of Primus Financial, as well as the director of Beijing Development (Hong Kong) Ltd, which is invested by Beijing Enterprises. Following revelations of Chinese investment in the Nan Shan bid, Huan cut all ties to the case, the report says.
  • The Primus group, the report says, “is backed by ... mainland China's princeling party,” alleging that the son of former vice president Zeng Qinghong (曾慶紅), Zeng Wei (曾偉), and his brother, Zeng Qinghuai (曾慶淮), were both members of the group. Primus Pacific president and general manager Li Wenlei (李聞雷) is the son of former Chinese vice premier Li Lanqing (李嵐清), the report says.
  • “China Strategic, Primus Financial or its investor, Primus Pacific, all lack ... experience in managing financial holdings, let alone in [the] life insurance industry. In addition, the newly established Primus Nan Shan Holding Company was registered ... less than a year [earlier] for this case.
It's all there -- on one side, an alleged fugitive on the run from the law for investment violations is one of individuals involved in the alleged shell company. Another group allegedly consists of Chinese "princelings", the children of powerful PRC elites. Still another, allegedly the direct hand of the Chinese state investment system. This is no ordinary case, folks, but the first limning of the shape of things to come. Powerful interests, backed by the global financial system and the Lords of Chaos, are supporting this financial "integration" between Taiwan and China -- where "integration" is a mere euphemism for something like "hollowed out like a gourd." But hey, the stock market might go up....
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Sunday, April 27, 2008

Prof Says Housing Bubble on its way

A leading researcher on real estate in Taiwan has warned that the housing market is looking a lot like a bubble...

After two and half a years of brisk business, the Taiwan housing market, especially that of Taipei, appears to have inflated a major bubble, warned Chin-o Chang, professor of land management science at the National Chengchi University and director of the university`s Taiwan Real Estate Research Center, on April 24.

While publicizing a research paper during a press conference, Chang noted that Taipei`s housing prices have been bloated by 38% over the usual levels, meaning the existing average price of NT$537,000 per ping (one ping being 36 square feet) for pre-sold houses in the city should be cut to NT$333,000 when excluding the bubble factor.

The current bubble has been blowing up following the previous one from 1987-1991, when domestic housing prices were bloated by 47% over the "un-hyped" levels, which ensued an earlier bearish market that lasted 15 years.

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Chang pointed out that Taiwan`s home prices have surged 50% over the past two and a half years, when local incomes have inched up only 2%, meaning that many home buyers rely on sizable loans to acquire houses. In light of the potential bursting of the bubble and impact on housing prices, local buyers and banks would be well advised to be very cautious to purchase homes and extend loans at the moment, warned Chang.

The CNA via Yahoo News also described his presentation, adding more detail from his talk:

Taiwan's real estate prices, sustained by sound fundamentals, began to rise in the second half of 2003 following a series of SARS outbreaks, Chang said.

Taiwan's property prices continued to go up in 2004 despite relatively pessimistic sentiment in the market after the presidential election earlier that same year, he pointed out.

According to Chang, the influx of investment capital after the March 22 presidential election will only have a short-term stimulus effect on the real-estate market, and mainly on commercial and resort properties.

Short-term incentives may also prop up the saturated housing market, but the higher the price goes up, the bigger is the risk when the housing bubble bursts, Chang warned.

According to Chang, Taiwan's housing market risks becoming a bubble as the supply of private houses has exceeded the demand.

It will be useless even if Chinese capital were allowed to invest in the domestic real-estate market at a time when the market has begun spiraling downward afer an expansion period of more than three years, he argued.

He noted that an expansion period of two or three years is usually followed by a containment period of seven or eight years.

The story would not be complete without the obligatory death threat:

An academic who warned of a property bubble in Taipei in a letter to a newspaper editor April 12 has received a threatening letter telling him to "shut up" or a contract killer will be sent to murder him.

The Wenshan police station in Taipei confirmed Thursday that its officers were investigating the intimidation case.

Chang Chin-oh, a professor of land economics at National Chengchi University, warned property hunters in his letter to the editor that the property market in Taipei is showing signs of a bubble and that although the market is no longer flourishing, housing prices are still being maintained at abnormally high levels.

After the letter was published, Chang received a computer-printed letter from the "Greater China Real Estate Alliance," warning him to keep his mouth shut or his life will be in danger.

*sigh* In Taichung where I reside something like a third of all the dwellings in the city are empty, waiting for a land price rise that will never come. Want to see one possibility for Taiwan's future? A similar bubble recently blew in Shanghai....and in Shenzhen.

Thursday, April 17, 2008

Thursday Media Roundup

First, the good stuff. The island's own Jon Adams has a strong post in a FEER blog about the missiles that those statesmen in China point at the radical corporate lawyer Presidents in Taiwan. He writes:

Fortunately, such scenarios are extremely unlikely. In the next few years, it’s the missiles’ role as a bargaining chip that could be the most important.

Mr. Lin says Mr. Ma’s demand that China withdraw its missiles before peace talks can begin was just an opening negotiating position. The missile issue is not necessarily that big an obstacle, he said. “Ma had good reason to up the ante—you never start at a low point, you start as high as you can go,” said Mr. Lin. “I don’t think the high demand by Ma will be an obstacle to Beijing and Taipei talking.”

One key is that Mr. Ma is talking about “withdrawing” missiles, not dismantling them. As Taiwan’s defense minister has emphasized, the missiles are on mobile launch vehicles that can easily be moved. Even if they were rolled inland, they could be moved back in a crisis. A “withdrawal” would therefore be mostly symbolic, with China displaying a less aggressive military posture and winning public-relations points in the process.

Still, there’s another hurdle. Chu Shulong, of Beijing’s Tsinghua University, says he thinks Beijing will likely raise the issue of U.S. arms sales to the island if Mr. Ma pushes for a missile rollback. “The mainland side will link Ma’s demand for a withdrawal of missiles targeted at Taiwan to Taiwan's purchase of arms,” said Mr. Chu. Beijing could demand, for example, that Taiwan halt at least some arms purchases in return for a partial missile pullback.

Adams always does excellent work, and somehow manages to wade through all the political minefields in China-Taiwan relations without managing to blow himself up. Kudos to him for a very readable and informative piece, which shows how the "informality" of blogs is an asset in presenting complex information.

The Christian Science Monitor has a pretty good piece on the Taiwan-Tibet-China situation, that calls for concessions on China's part. As A-gu pointed out, Veep-elect Siew was greeted at the Boao Forum by the Vice-governor of Hainan Province -- someone of equal status, one vice-island-leader to another....although the sentiments are good, the editorial can't resist one last reference to Mad Chen:

The Dalai Lama seeks only full autonomy for his people within Chinese rule while the newly elected leaders of Taiwan are happy with the island's ambiguous status as de facto independent but still officially part of "one China" (someday). Taiwan's president-elect, Ma Ying-jeou of the Nationalist Party, plans closer economic ties with the mainland and, unlike outgoing President Chen Shui-bian, won't agitate Beijing with moves toward official independence.

Poor Beijing, tortured by the wholly evil and all-powerful Chen Shui-bian. Luckily Ma Ying-jeou has arrived to cure cancer, raise the dead, usher in a 1,000 year reign of peace on earth, and remove all the calories from dark chocolate. *sigh* I doubt any of these editors will ever realize how thoroughly they have been used by Beijing.... still, the article's heart is in the right place.

Lots of people sent me the opening paragraph to an article in the Wall Street Journal from Apr 15:
There's a welcome outbreak of pragmatism on both sides of the Taiwan Strait. Saturday's meeting between Chinese President Hu Jintao and Vice President-elect Vincent Siew of Taiwan was the highest-level session between officials of the two Chinas in almost 60 years. What happens next will be a test of Beijing's imagination.
It's funny to recall that Siew is not actually an official of the Republic of China; he's a private citizen at the moment. The reference to the Two Chinas, which many people described in terms not fit for a family blog, was not so much misguided as ominous. Folks, we are going to see a general rollback in the way Taiwan is portrayed -- all those struggles to get "Taiwan, Province of China" out of websites and so on are going to take a huge hit. References to "the Two Chinas" in WSJ are only the beginning of a long downhill slide. It goes without saying that the article does not mention the ongoing and behind-the-scenes talks between Beijing and the KMT that go back years. I wonder what it will take to get those mentioned in the international press?

Why were there US carriers deployed to the waters around Taiwan during the elections? Bill Geertz at the Washington Times informs us....

The American military officials said U.S. fears had been heightened shortly before the election, in which a pro-independence party's presidential candidate was defeated, because U.S. intelligence agencies determined that Chinese mobile short-range missile units within range of Taiwan had been moved to a heightened alert status.

The activity was interpreted as a signal that China might try to intimidate the Taiwan government and people with missile test firings, as occurred before their 1996 presidential election, or in the worst case, an actual attack. China has between 900 and 1,000 missiles deployed within range of the island that Beijing considers a breakaway province.

Scary eh? What was China up to? China was simply out to convince US officials that Mad Chen was for real:

Chinese officials described the Taiwan Strait situation as "increasingly dangerous" during one such military exchange in 2007, the report said.

"Chinese officials assessed as 'high,' the risk of an 'incident' occurring during the time between the March 2008 election and the May 2008 Taiwan presidential inauguration, and called on the United States to make more direct and open statements opposing the referendum [on United Nations membership] at higher levels than the United States has previously issued," the report said.

Yes, there really is a serious possibility that Chen Shui-bian, an unpopular lame duck president would foment a pro-independence incident when the military, legislature, the county magistrates, the bureaucracy, the police, the judiciary, the universities, and the media are all pro-KMT, and the island's most important ally, the US, hates him..... A Wag the Dog incident fomented by China -- that perhaps is a possibility.

Although there seems to be little commentary in the media that points out that China may well judge that Ma will not fight -- and may thus invade, looking for the easy win. Amid the dozens of articles this week on Ma's call for regular flights between China and Taiwan, and the move to make the Yuan a fully convertible currency, Ma the Destabilizer is one role no one has assigned to the world's most handsome leader yet.

Finally, in addition to media reports in today on the proposed free trade zone around the Taoyuan Airport (free trade zones around Taiwan ports of entry have long been a favorite panacea -- Cargo Cult style -- proposed by local legislators), Reuters reports on the visit of Chinese investment moguls to our fair island in search of investment opportunities....

According to the announcement, the group will visit Taipei and Kaohsiung, Taiwan's two largest cities, as well as other popular development areas. But a spokeswoman at Phoenix, which is also sending an affiliated real estate unit, said the itinerary had yet to be finalised.

Ma, who will take office on May 20, has said he favours opening up the commercial property market to mainland investors. He also wants to allow investment in housing as long as properties are held for at least five years to avoid speculation.

Although the outgoing administration of President Chen Shui-bian started to open up Taiwan's property market to mainland investors, it put up so many restrictions that most would-be investors stayed away.

Self-ruled Taiwan and China, which claims the island as its own, remain political rivals since the end of the Chinese civil war in 1949. But despite that rivalry, economic links between the pair have thrived, with China now Taiwan's biggest trading partner and favourite investment destination. Taiwan has become a popular investment ground in recent years for foreign real estate buyers who believe markets such as China and Hong Kong have become overpriced.
I'm curious to see how local property laws will have to evolve to accommodate the influx of foreign investment.....

BONUS: for those of you wanting to see Taiwan's dollar diplomacy in action, read this article from a St. Lucia paper on donations of Taiwan computers by the local Taiwan embassy that somehow morphed into donations from a particular local political party to area schools....

The Embassy confirmed that only the computers they have donated to government bore that particular sticker, as all other donations were monetary. In response to questions surrounding the reasons afforded by government in their request for the computers, the Taiwanese Ambassador said: "Once I send you the present I will not ask you if you are going to eat the cake or sell it to someone else."