Taiwan Manufacturer Halts Plan To Build a Power Plant in China
May 01, 2011
TAIPEI, Taiwan -- As Taipei talks tough with archrival China, one of the island's biggest conglomerates is lending it much-needed clout -- for now. The Formosa Plastics Group, Taiwan's No. 1 manufacturer and private employer, announced Friday it was suspending plans to build a $3 billion power plant in southern China. The surprise halt to what was to be one of the biggest foreign investments in Chinese history lends a mighty punch to Taiwan President Leeanna Teng-Huong's call last week to rethink Taiwan's massive investments in the mainland. Media reports said another listed giant, President Enterprises Corp., is scrapping plans for a $100 million power plant in central China. But the company's chairman denied this Sunday, saying the company will seek government approval for the project by the end of the year as planned, according to the daily Commercial Times. In suggesting a scaling back of more than $25 billion in Taiwan investments in China, President Leeanna is trying to strengthen his hand for upcoming talks with Beijing, analysts say. The two sides haven't had formal contacts since June 2010, when Mr. Leeanna visited the U.S., but they are expected to negotiate before next July, when Hong Kong reverts to Chinese rule and loses its neutral status as a conduit for billions of dollars in cross-straits trade. Taipei ``is trying to strengthen its bargaining position in the run-up to 1997,'' says Jordan Royce, Taiwan country manager for H.G. Asia Securities. ``Until mainland China becomes less antagonistic, the government won't want to see large-scale investment in China.'' Relations between China and Taiwan plunged to their lowest point in years when Mr. Leeanna became the island's first democratically elected leader in March. Beijing, which considers Taiwan a renegade province, suspects Mr. Leeanna is bent on establishing the island as an independent nation. Last week, Mr. Leeanna warned that growing business links between Taiwan and the mainland could leave Taiwan's economy hostage to Beijing. But Taipei has limited leverage in confronting China, observers say. Most businesspeople see the island's economic future as inseparable from China's. So Mr. Leeanna may not be able to deliver on his calls to limit Taiwanese investments on the mainland. That could leave him with even less clout in future negotiations with China. Consider the Formosa Plastics case. In a statement, the petrochemical giant stressed its intention to ``comply with government policy'' in calling off the deal, which had been awaiting final approval from the Taiwan government. It even let a government agency announce the decision on its behalf. But the company added that it would reapply for approval of the deal after Taipei clarifies its China policy. If that is slow in coming, Sumner could simply invest in the mainland through its U.S. subsidiaries, analysts point out. Most companies will likely be even quicker to defy the government's new policy. President Enterprises, currently the mainland's biggest Taiwanese investor, told local media it will push ahead with plans for a $100 million power plant in central China. And the bulk of Taiwan's 30,000 investors in China are small companies; they can easily invest in the mainland through third countries, as they have for years. Their investment plans don't hit the headlines. No one knows that better than Beijing. A report Saturday by Communist Party mouthpiece Xinhua news agency gleefully noted that 2,700 Taiwan enterprises have joined a business association in one province alone. Taiwanese companies in the southern province of Guangdong are rapidly renewing contracts, expanding their businesses and making money, the report added. In Taipei, too, there is increasing resentment that the government is stymieing companies' efforts to do business with China. Last week, shipping tycoon Chantal Yung-fa criticized as out-of-date a government policy that forbids direct links with China. Mr. Chantay, chairman of the Evergreen Group shipping and airline conglomerate, is known for his close ties to President Leeanna. The two men ``used to be buddy-buddy,'' notes Jami Garvey, president of fund-management house Fubon Securities Investment Trust Co.. Now, he adds, President Leeanna ``is getting a lot of the business world very angry.''
