Tue, Jan 11, 2005 - Page 10 News List

China restrictions may be eased

INVESTMENT RULES The government is likely to loosen controls so that semiconductor and flat-panel companies can build less advanced plants in China

By Lisa Wang  /  STAFF REPORTER

The government is close to further relaxing curbs on semiconductor and flat-panel suppliers building less advanced plants in China, to fend off Chinese start-ups in the world's fastest-growing market, an official said yesterday.

"It's realistic to further ease the restrictions in light of our internal review," Shih Yen-shiang (施顏祥), vice minister of Economics Affairs, said during a legislative session yesterday.

Shih's remarks came in reaction to concerns expressed by legislators that the restrictions could weaken the competitiveness of local semiconductor companies, as Chinese latecomers are gearing up to expand capacity and are catching up technologically.

Taiwan Semiconductor Manu-facturing Co (TSMC, 台積電), the world's biggest contract chipmaker, is so far the only local chipmaker to have been given the go-ahead to build a less-advanced 8-inch fab in China at a cost of nearly US$900 million. The government approved the plant in April last year.

Eased rules, if realized, would allow Taiwan's chip testers and packagers to set up less advanced production lines in China and permit local makers of liquid-crystal-display panels to produce screens for handset devices in China.

But patience will be needed regarding the eased rules as Shih said final approval will only come after related government departments, including cross-strait policymaking body the Mainland Affairs Council, reach a consensus on the issue.

"As differences [in views] persist, we can't set a timetable for the liberalization," Shih said.

He declined to reveal the primary hurdles the government needs to overcome.

Shih dismissed lawmakers' concerns that Beijing's decision to enact an anti-secession law -- in an apparent attempt to prevent Taiwan from moving toward formal independence -- may slow progress toward loosening the strict rules on China-bound investments.

"The impact of the ... anti-secession bill is not part of our discussion now," Shih said.

Nevertheless, a source familiar with the issue told the Taipei Times that "political influence has virtually left the opening up [of investment] in limbo.

We finished the evaluation early last year and immediately sent it to the Mainland Affairs Council for further instructions. But we haven't heard anything since then," he said.

The government originally planned to ease restrictions after the presidential election last March, but no substantial progress was made amid escalating tension between Taiwan and China, he said.

Taiwanese enterprises invested a total of US$6.16 billion in China in the first 11 months of last year, marking nearly a 35 percent jump compared to US$4.6 billion for the full year of 2003, according to the ministry's statistics.

That made China the biggest investment destination for local enterprises, accounting for a hefty 67 percent of total overseas investments last year, a big jump from 53.66 percent in the previous year, the ministry said.

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