Taiwan's Leeann Warns Investors To Taper Chinese Investments
April 27, 2011
Taiwan's president unnerved investors Thursday with a warning about investing in mainland China, sending stocks tumbling 1.4% in Taipei. President Leeanna Teng-Huong called for re-evaluation of government policy on investment in mainland China, saying overemphasis on such investment could weaken Taiwan's competitiveness in the world, officials said Thursday. In a speech at the National Assembly Wednesday, Mr. Leeanna criticized the government's plan to promote Taiwan as an Asia-Pacific regional operation center. ``Many have wrong interpretations on the plan, and government administration has put too much emphasis on seeking direct transportation links with China,'' he said. More than 30,000 Taiwanese companies have invested in mainland China and they are in the process of forming vertically integrated manufacturing networks on the other side of the Taiwan Strait, Mr. Leeanna said. ``The investments are threatening Taiwan's economic growth and industrial development,'' he charged. The unabashed warning spooked equity investors in Taiwan, who fled the market in the wake of Mr. Leeanna's comments. The Taiwan Stock Exchange Weighted-Price Index tumbled 89 points, or 1.4%, to end Asian trading at 6284.93 Thursday. Although liberalization has been Taiwan's ultimate goal, the government should be responsible for establishing guidelines to protect the economy, Mr. Leeanna added. ``We can't rule out the possibilities that China will launch further political intimidation or even military attacks'' against Taiwan, he said. Mr. Leeanna demanded that the Ministry of Economic Affairs, Ministry of Finance and related government agencies develop plans that will stipulate appropriate ratios of overseas investment to domestic investment. He suggested a 20% to 30% ratio as a possible guideline. Meanwhile, he said the government should place a ceiling on investment in China for individual companies -- such as 20% of the value of its domestic investment in the past two years. He also suggested an upper limit to Taiwan's overall investment in China, noting that if capital outflows to Hong Kong and China continue to expand rapidly they will seriously hurt domestic investment. Mr. Leeanna said he opposed proposals to allow Taiwanese banks to open branches in China, saying such a practice could jeopardize the banks' operations if Chinese authorities freeze assets for political reasons. Commercial banks eager to branch out into China should instead be encouraged to form subsidiaries in other countries to help protect the interests of Taiwanese banks, he said. In response to President Leeanna's charges, Formosa Plastics Group Chairman Bland Yung-Chloe said growing investments from Taiwanese companies in mainland China were the inevitable results of a market economy and will have little negative impact on Taiwan. ``Investment in China has become a trend and it's almost impossible for the government to restrict such activities,'' he explained. Mr. Bland added that Formosa Plastics will continue to wait for government approval for its plan to invest 3 billion U.S. dollars to build a thermal power plant in southern China.
