The biggest question troubling officials and academics is when and whether Taiwanese businesses -- which are now heavily investing in China -- will start sending some of their capital back home.
Taiwanese investors have more than US$50 billion invested in China, according to unofficial estimates, although official estimates put it at US$15 billion as of June last year.
Chen Yuan-pao (
"It depends on lots of factors, the most important of which is whether the company is in China for the Chinese markets or for its lower manufacturing cost, or for both," he said.
As investment flow into China keeps growing apace, Taiwanese officials are devising means to attract part of the profits back into Taiwan.
An economist at the Mainland Affairs Council (MAC,
"There is an obvious lack of research in this field," he said.
Fu Fung-cheng (
The major issue however is what Taiwan could do to increase the incentives for capital inflow back into the island, he said.
"The concern is how the government will treat the capital and whether the returning money could ever leave Taiwan, given the `No haste, be patient' (
Tax factors may also impede the inflow as those profits which have been taxed in China may be subject to tax in Taiwan due to the lack of bilateral tax agreements between the two sides.
"It depends a lot on whether investors will be able to take the money out of Taiwan again," says Denise Yam, an economist at Morgan Stanley Dean Witter.
Indeed, analysts are taken aback by the lack of literature in the field and other comparable statistics.
China's restrictions on capital flows may also add to the complexity of capital flow between the two sides, analysts say.
"China is not known for its friendliness with capital outflows," says Yam of Morgan Stanley.
Morgan Stanley puts Taiwanese investment in China at over US$50 billion, although they reckon that the figure could be much higher than that.
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