Jul 18, 2008

Taiwan: Chinese Trade Opened

Sample ImageFollowing the trends of a Chinese-friendly leadership, Taiwan officials have announced relaxed restrictions on business in China.

Below is an article published by International Herald Tribune :

Taiwan approved plans Thursday [17 July 2008] to relax restrictions on how much Taiwanese companies can invest in China, responding to years of complaints that such limits hurt the companies' competitiveness.

One measure approved by the Taiwan cabinet will scrap all financial-based limits on investments in China for companies based in Taiwan, the cabinet said after a regular meeting.

In another major change, Taiwanese companies that have their headquarters outside Taiwan will be able to invest 60 percent of their net assets in China, the statement said.

Under existing rules, Taiwanese companies with net assets of less than 5 billion Taiwanese dollars, or $165 million, can invest up to 40 percent of their assets in China, regardless of where their headquarters is located.

The new regulations will take effect on Aug. 1 [2008].

"More trade opening with China is very conducive for Taiwan's economy because it will help improve the overall investment environment," said Fang Wenyen, an economist at KGI Securities.

The easing of restrictions could encourage companies to move their headquarters and other operations to Taiwan, Fang said.

The revised restrictions comes under a new China-friendly administration and follows years of complaints by Taiwanese companies that limits imposed on how much they could invest in China put them at a competitive disadvantage against other multinationals that face no such restrictions.

Relations across the Taiwan Strait were frosty under the previous Taiwan administration of President Chen Shui-bian, who left office in May [2008]. Chen's Democratic Progressive Party favors formal independence from China.

But Beijing-Taipei relations have improved markedly under the administration of President Ma Ying-jeou, a Nationalist. His government signed a landmark agreement in June allowing mainland Chinese tourists to visit Taiwan and setting up regular weekend charter flights across the Taiwan Strait.

Last month [June 2008], Ma's government also announced a series of changes allowing Taiwanese financial companies to invest more in the booming mainland Chinese market.

In approving the latest relaxation of investment restrictions, the cabinet also said Thursday [17 July 2008] that it planned to pass new rules allowing Chinese companies to invest in Taiwan-based manufacturing operations by the end of this year [2008].

It also said it would relax conditions for allowing foreign companies to list in Taiwan, though it did not specify if such a move would apply to companies based in mainland China.

In addition, it said that starting in 2009 it would work on rules allowing Taiwanese banks to set up branches in mainland China.