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Taiwan to ease curbs on China investments
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Thu, Mar 06, 2008
The Straits Times
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TAIPEI - TAIWAN'S Cabinet said yesterday that it will relax a cap on company investments in China, a move long sought by businesses which complain that the current restrictions limit their competitiveness.
However, some observers saw the move as a political tactic to win votes for the ruling Democratic Progressive Party (DPP), which is trailing in polls in the run-up to the March 22 presidential election.
The government will also raise the investment ceiling for punishing companies that violated the restrictions, said Premier Chang Chun-hsiung after the Cabinet met yesterday morning.
'The flexible adjustment is to encourage Taiwan firms operating in China to take care of their China investments, while they increase investment in Taiwan,' he told reporters.
| He gave no time frame for the adjustment.
Companies that invested in the mainland without approval will be fined NT$50,000 (S$2,250) on investments valued at US$20 million (S$28 million) or less, the Economic Daily News reported yesterday. The previous investment ceiling for that fine was US$325,000.
Taiwan firms have invested more than US$100 billion in the mainland since the early 1990s. They are not allowed to invest more than 40 per cent of their net assets in China.
With the easing of restrictions, the 40 per cent cap could apply either to a company's net assets or its group's consolidated net assets, whichever is higher, a Cabinet statement said.
Mr Nigel Lee, a fund manager at National Investment Trust, called the changes largely cosmetic. 'It's just a pre-election move, and if a new party holds the presidency, then there could be more policy changes that could result in even looser restrictions,' he said.
Many have lobbied for the elimination of the investment ceilings altogether. Taiwan, which sees China as a political rival, had originally imposed the caps to prevent its companies from becoming over-reliant on the mainland.
Opposition Kuomintang's Mr Ma Ying-jeou, the front runner in the presidential race, questioned the timing of the move. 'Why does this come before the presidential vote? Why didn't the DPP government do it over the last eight years?' he said.
The latest opinion polls indicate that Mr Ma enjoys a 20 percentage point lead over DPP's Mr Frank Hsieh in their bid to succeed President Chen Shui-bian.
Mr Ma has pledged to help revive Taiwan's sluggish economy by easing controls on cross-strait civil exchanges.
Taiwan banned direct trade and transport links with China after their split in 1949 following a civil war, but started liberalising mainland-bound investments in the early 1990s.
REUTERS, AGENCE FRANCE-PRESSE, BLOOMBERG
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