The government is considering lifting the investment ceiling for Taiwanese companies in China to 40 percent of their asset value to encourage local firms to trade on local stock markets, a government official said yesterday.
The move is a response to calls from scores of Taiwanese companies -- most of which are approaching the investment ceiling -- to relax restrictions on expansion in the fast-growing Chinese market.
"We are in the initial stage of making the adjustment," Investment Commission head Huang Chin-tan (
Currently, local companies are allowed to invest up to between 20 and 40 percent of the value of their assets in China, depending on the size of the firm.
To get around this limitation, a growing number of local companies are trading on the Hong Kong or Chinese stock markets rather than the local stock market, said Chang Ming-ping (張銘斌), another commission official.
Foxconn International Holdings Ltd (富士康), a handset manufacturing affiliate of Hon Hai Precision Industry Co (鴻海精密), is the latest firm to list in Hong Kong. In 2003, Zhejiang King Refrigeration Industry Co (浙江國祥製冷) was the first Taiwanese-controlled company to debut in a Chinese bourse.
"The plan to revamp this 10-year-old rule aims to encourage Taiwanese companies to raise funds for recapitalizing their Chinese units by selling shares in the local stock markets, which in turn will inject a new flow of cash into the markets," Chang said.
Chang added that the measure would help slow the relocation of Taiwanese firms overseas.
But Huang said the new rule would not be implemented in the short term because the commission still needed to discuss the matter with the Mainland Affairs Council.
In contrast to the cautious move toward lifting restrictions on China-bound investment, the commission is ramping up scrutiny of illegal investment as a part of the government's reaction to Beijing's "Anti-Secession" Law, which was enacted in March.
Huang said the draft rules say companies would need permission before acquiring a stake exceeding 10 percent in a company -- including those registered in locations such as the Cayman Islands, but which have operations in China.
They would also need permission to those companies, Huang said.
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