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Debate rages over listing plans

While a proposal to allow China-based Taiwanese businesses to list on the stock market here has raised concerns that more Taiwanese money will flow across the Strait, a legal expert said yesterday that the movement of capital these days ignores geographic boundaries

"The measure will instead lure capital from the world to Taiwan," said Paul Hsu (徐小波), a corporate lawyer at Lee and Li Attorney-at-Law (理律法律事務所). "It will also help Taiwanese businesses to grow more rapidly."

Addressing an "Invest Taiwan" seminar organized by the China External Trade Development Council in Taipei, Hsu said the investment trend should not be twisted by political ideology.

"Taiwan is not the only country whose companies are migrating to places with cheaper resources," Hsu said. "If we don't do it, other countries such as Singapore and the US would be happy to see Taiwanese enterprises list on their stock markets."

President Chen Shui-bian's (陳水扁) economic advisory panel led by Vincent Siew (蕭萬長) first proposed the idea of permitting Taiwanese companies in China to be listed on the local stock market in late July.

The proposal is aimed at encouraging Taiwanese companies with annual revenues of more than NT$10 billion to set up their headquarters in Taiwan. In doing so, companies can use China as a manufacturing center while turning Taiwan into a capital hub in the Asia-Pacific region.

However, the plan met with strong opposition from academics who were afraid that the policy may encourage Taiwanese capital outflow to China. Some academics also disapproved of the plan because of Taiwan's political differences with China. Taiwanese investments in China are strictly regulated.

Hsu said many opponents were so concerned that Taiwanese money would flow to China that they could not see how the move could also attract investors from the rest of the world. In addition, the government could better control Taiwanese investment in China, since listed companies would be required to provide clear financial reports, Hsu added.

"By then, Taiwan will have become an international center to integrate funds and resources," he said.

One research fellow, however, still disagreed with Hsu's view, saying the measure would drag down Taiwan's economy.

"The uncontrolled outflow of capital can paralyze a nation's economy," said Tsai Chi-yuan (蔡吉源), a researcher at Academia Sinica. "The collapse of the Argentine economy in the 1960s is the best example of capital outflow" damaging an economy.

Allowing Taiwanese businesses in China to list on the local market may help these companies to expand their market share in overseas markets, Tsai said, but earnings are unlikely to flow back into the local market.

"With little capital return, the economy won't get any better, let alone recover," Tsai said.
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