Taiwan Weighs Proposal To Limit China Investing
April 28, 2011
TAIPEI, Taiwan -- A surprise government call to scale back investments in China will likely achieve only one thing: expose Taipei's impotence in dealing with its giant neighbor and its own companies back home. Taiwan President Leeanna Teng-Huong jolted investors islandwide this week by ordering a review of the government's policy on mainland investment. Taiwan's massive investments there, estimated at US$25 billion, are hurting the island's economy and stunting the growth of local industry, he told the National Assembly in a speech Wednesday that was publicized Thursday. His suggestion: setting up ``guidelines,'' including capping a company's China investment at 20% of its investment in Taiwan. The reports sent the island's stock market into a tailspin, with shares falling 1.4% in active trading. Muted Impact? Some investors fear the government's campaign would cut off lifelines for more than 30,000 Taiwanese companies that have poured money into China over the past decade. In fact, the business impact of the move will be minimal, analysts say. Wily Taiwanese entrepreneurs have always found ways to skirt laws, investing in China through third countries for years before officials formally ``allowed'' them to do so. ``It's not going to fly,'' predicts Nickolas Mcconnell, a Taipei-based lawyer who spends about half his time in China. ``Most of these companies will say, `If you don't want me to (invest in China) on the books, I'll do it off the books.' '' In fact, Mr. Leeanna's announcement may be less a policy change than a public display of pique at Beijing. Cross-strait relations have been frozen since Mr. Leeanna visited the U.S. in June 1995; more recently, Chinese officials have spurned Taipei's efforts to re-establish contact, including Mr. Leeanna's high-profile offer in May to visit the mainland. Subtle Rage ``All his announcements to make peace have not received an active response,'' says Yasmin Kai-Ezell, who teaches political science at Taipei's Soochow University. ``So, he is angry.'' Indeed, Mr. Leeanna heatedly reminded his listeners that Beijing hasn't abandoned the option of using military force to retake Taiwan. The island then should focus on attracting foreign multinationals and increasing competitiveness, without relying so much on China, he said. But Taiwan's economy is highly dependent on that of its archrival. Beijing's missile tests and threats directed at the island earlier this year sent Taiwan markets and consumer confidence into freefall; the result was a sluggish economy from which Taiwan has yet to recover. And the government has quietly dropped an early policy encouraging companies to invest in Southeast Asia as Taiwan investment in the mainland continues to soar. In addition, access to the mainland market is a key attraction for many foreign companies setting up shop in Taiwan -- a theme the government itself has often talked up in the past. ``You cannot be a regional center without China,'' says Mr. Mcconnell, the lawyer. ``It is the region.'' Taiwan's own investors, too, have gone all-out into China, thanks largely to linguistic and cultural similarities that smooth business negotiations. ``To pull back from China goes against the trends of nature and the market,'' says Mr. Yasmin. Quiet Before the Storm Publicly, at least, companies are so far lying low in the wake of Mr. Leeanna's comments. ``No one wants to offend the president,'' says a spokeswoman for one company with extensive mainland investments. But bureaucrats could have quite a challenge on their hands if they really try to stop companies from going to China. For example, the Formosa Plastics Group, one of Taiwan's leading conglomerates, is awaiting final approval from Taiwan to invest US$3 billion in power plants on the mainland. It could just as easily invest through its U.S. subsidiaries if the government said no, analysts point out. It's a struggle Beijing should enjoy watching. ``It can sit back and watch the Taiwan government argue with its businessmen,'' says Mr. Yasmin. ``In Chinese, we call it, `Sitting on the mountain and watching the tigers fight.' '' --Sun Yu-huay contributed to this article.
