Taiwan Investment in Mainland Develops to Second Upsurge: Economic Analysis

This article written by Tian Ge says that Taiwan investment in the mainland of the motherland has reached a second upsurge since the early 1990s. According to statistics from relevant department of the Taiwan authorities, the amount of funds "approved" to be invested in the mainland had hit US$2.014 billion in the first 10 months of this year, up 98 percent over last year's same period.

Taiwan Plagued by Political and Economic Chaos

The article says that the further heating up of Taiwan investment in the mainland is due to the motherland's imminent entry into the WTO, the political and economic chaos on the island also constitutes a major reason explaining why Taiwan businesspeople have been prompted to make up their minds to leave the island.

Since the beginning of this year, the article continues, Taiwan has been plagued by utter political chaos. Since Chen Shui-bian came to office in May, despite the huge funds of US$18 billion injected by the Taiwan authorities, the Taiwan stock market has plunged 50 percent. Around US$15 billion in foreign exchange has flowed out of the island. Morgan Stanley has forecasted that the economic growth of Taiwan will be adjusted from 6 percent to 4.5 percent. British Economist recently pointed out that the danger of a financial crisis was likely to break out in Taiwan.

The article adds that in the recent past, Taiwan stock market was worried about the outbreak of a financial storm, and had the misgiving that the scandal of the political circle would lead to political instability, this shows the obvious insufficiency of investors' confidence.

The article reveals that in a sense, large numbers of Taiwan businessmen have been "driven" to move out of the island. The announcement of the Taiwan authorities concerning suspension of the construction of the fourth nuclear power station has not only brought on a "political storm" in the political arena, but will also possibly lead to a rise in electricity price and the shortfall of power supply, this has evoked strong resentment among the entrepreneurs, especially the industrial circle. Taiwan's power cut has affected a dozen or so factories and firms, incurring an initially estimated loss of over NT$300 million.

Wang Yung-ching Breaks Silence

The article says that on November 18, Wang Wen-hsiang, son of the board chairman Wang Yung-ching of a Taiwan plastic industry company and general manager of the Shanghai Hongli Semiconductor Manufacturing Company, announced at the foundation stone laying ceremony held in the Shanghai Pudong Zhangjiang High-tech Park, that his company involves a total investment of US$1.63 billion. This is a major strategic move taken by the Wang's consortium of investing in the mainland of the motherland.

When interviewed by the media on November 17, Wang Yung-ching broke the silence, pointing out that the reason for Taiwan's existing economic problem lies in the fact that it failed to properly handle the relations between the two sides of the Taiwan Straits, when the cross-Strait relations are correctly handled, more than half of its economic problems will be settled, other problems can be technically overcome.

He expressed the view that Taiwan authorities worry that the money invested in the mainland by Taiwan enterprises would not be retrieved, but it was difficult for the Taiwan authorities to prevent Taiwan businessmen from investing in the mainland and other places, currently around 95 percent of Taiwan enterprises have invested in the mainland.

Wang Yung-ching indicated that Taiwan enterprises mostly use stocks as a pledge or borrow money with land, now the real estate market is depressed, and the stock market is poorly operated, Taiwan's failing to properly handle these matters will likely spark a financial storm in the proper of Taiwan.

In fact, the article says, since the beginning of this year, there has been a continual heating up of the rush for occupying markets in the mainland. According to statistics released by the Taiwan "economic ministry", the total value of Taiwan's investment in the mainland had topped US$2 billion in the first 10 months of this year, with the growth rate standing at 98 percent. An analysis reveals that Taiwan businessmen mainly invested in electronic and electric appliances industries in the mainland, accounting for 55.2 percent of the total, second was the basic metal manufacturing industry, for 7.16 percent of the total.

The materials published by the relevant Taiwan department show that there was a mounting momentum of making investments by Taiwan companies in larger projects in the mainland of the motherland.

Anxious Because of Ineffective Policy "Adopting Patience Instead of Impatience"

The article is of the view that Taiwan authorities are today still clinging to their policy of "adopting patience instead of impatience", but this cannot stop Taiwan businessmen from investing in the mainland. In the opinion of people in Taiwan's economic circle, the wave of going to invest in the mainland is irresistible.

An official with the Taiwan economic department indicated helplessly that a second upsurge of Taiwan investment in the mainland had emerged, but the authorities could not forcibly keep those wanting to leave to remain on the island and bankrupt their companies. It is estimated that the Taiwan authorities would again impose restriction on Taiwan investments in the mainland.

The article reveals that Taiwan scholars have pointed out Taiwan's overseas investments have obviously shifted from the Southeast Asian region to the mainland of the motherland. Particularly after the outbreak of the Asian financial storm, labor-intensive manufacturing industry had been shifted to the mainland, which was a tactic taken by Taiwan businessmen in Southeast Asia to maintain their competitiveness.

A report from China Time says that a deputy research fellow, Huang Chao-jen, with the Southeast Asia research office of the comprehensive research institute in Taiwan, pointed out that over the past five years, Taiwan factories and firms have gone to invest in the Philippines, Singapore, Malaysia, Indonesia and Thailand, especially investing in electronic information, textile and chemical industries.

However, attracted by the mainland's opening policy and the preferential treatment provided for investment, those Taiwan businessmen who formerly maintained a wait-and-see attitude have now unhesitatingly taken the risk of going to invest and shift their products to be produced in the mainland.

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