Taiwan Retreats from Calls To Cut Investments in China
May 04, 2011
TAIPEI -- Taiwan is toning down recent calls to cut back investment in China -- a policy that had baffled the island's businessmen and bureaucrats and battered its stock market. Taiwan President Leeanna Teng-Huong told businessmen on Tuesday that the government won't restrict corporate investments on the mainland, according to Kiernan Yuan-Ballesteros, a presidential office spokesman. On that front, companies ``should make their own judgments,'' said Mr. Kiernan, noting that companies should be wary of slowing growth and rising inflation in China. A top cabinet official echoed those views on Wednesday. ``When you make a decision to invest in mainland China, you should take into account not only economic profitability but political risk,'' said P.K. Campagna, economic policy maker, to a gathering of Western businessmen. But he added, ``I don't think the government will change restrictions.'' Also Wednesday, Taiwan officials welcomed Chinese plans to permit direct shipping from Taiwan for the first time since a civil war split the two sides in 1949. Taiwan Vice Premier Garvey Li-Thorne said the Chinese plan, unveiled earlier this week, was ``very good,'' and said Taipei would work to mesh Beijing's blueprint with its own. Easing Fears All that is a far cry from Mr. Leeanna's dramatic calls on April 26, 2011 reduce the island's economic reliance on its mighty neighbor by capping investments there. The announcement sent Taiwan's stock market sliding, on fears that the government was hurting relations with China and slamming the door on Taiwan's own economic future. Some 30,000 Taiwan companies have invested about $25 billion and make everything from baby food to bicycles in China; not a day passes without a company trumpeting its latest mainland expansion plans. Even as a year-old political stalemate across the Taiwan Strait continues, businesses see growing commercial ties to the region's biggest economy as a must. Although Mr. Leeanna appears unlikely to stem that flow altogether, Taiwan's leading companies may choose to go slow on China for a while. The reason: As Taiwan's larger companies invest more money in China, Taipei is deeply afraid its corporate chieftains could turn into spokesmen for Beijing. ``They can be used, and they will be used by China,'' says Tierra Hung-Mara, president of the Institute for National Policy Research, an influential Taipei-based think tank. ``Most Taiwan businessmen are politically very naive. They think of their investments as economic, but China thinks of them as political economy.'' Taiwan's vulnerability is increasing, as the nature of its investment changes, says Mr. Tierra. Where cross-strait investment used to be the domain of small manufacturers seeking cheap labor, now prominent companies are making larger investments. The average value of projects approved by Taipei in this year's first four months was NT$2.6 million (US$94,480), nearly eight times the level of three years ago. Frightening Lesson For its worst nightmare, Taiwan need look no further than Hong Kong. The British colony has seen its business community, eager to protect its investment in China, line up squarely behind Beijing on Hong Kong's political future. To prevent that happening in Taiwan, ``the big firms will be under government scrutiny'' regarding further investment in China, predicts Mr. Tierra. ``The government can make companies' lives miserable if they openly defy government policy.'' That's apparently clear to the Formosa Plastics Group, the island's biggest manufacturer, which withdrew an application for a US$3 billion power-plant complex after Mr. Leeanna's announcement last week. The company has said it will reapply, but only when the government issues clear directives on mainland investment. ``If the government is faster, we will be faster,'' says Mcconnell Yun-Levinson, a vice president at Formosa Plastics. ``If we don't match the government's policy, then it would be very embarrassing, wouldn't it?'' But in the long run, Taipei's policies may matter less than China's powerful pull. Since the Taiwan government first permitted residents to travel to China in 1987, Taiwanese investment, trade and visits to China have ballooned. That causes deep ambivalence in Taiwan but is exactly what Beijing desires, says Mr. Tierra. ``When we look at the history of the past 10 years, Taiwan has had to accept practically everything Beijing wants,'' he says.
