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Ex-Rechi boss uses ad to urge end to investment limits

Rechi Precision Co (瑞智精密), the world's third-largest compressor maker, yesterday took out a half-page newspaper ad to call on the government to lift the ban on investment in China.

"The regulation that investment in China is not allowed to exceed 40 percent of one company's book value ... has been a pain in the neck to most China-based Taiwanese companies," Rechi's former chairman Felix Chen (陳盛沺) said in the ad.

The ban should be relaxed to sharpen Taiwanese firms' competitiveness against foreign rivals, said Chen, who is also the former chairman of Sampo Corp (聲寶), a home-appliance maker.

The ad appeared five days after Rechi resumed trading shares on the Taiwan Stock Exchange. Last month, Rechi restated its financial book for last year, as required by regulators, cutting its earnings to NT$666 million (US$19.8 million) from NT$696 million.

The company's shares were suspended from trading in May after Rechi's management was suspected of embezzlement and accounting fraud. Chen resigned as chairman over the allegations. But Rechi denied the accusations.

EVADING RESTRICTIONS

Rechi said that in order to circumvent restrictions on China-bound investment, it put US$4.5 million into a private fund through Rechi Holdings, registered in the Viking Islands, while in actuality the money went to Rewan Hong Kong Co Ltd (瑞萬), a paper company registered in Hong Kong, which owns a Chinese manufacturer of compressor components.

The company will fully comply with the ongoing judicial investigation, Rechi said in a filing to the Taiwan Stock Exchange yesterday.

In the filing, Rechi said the ad was an individual act by Chen and he had paid for it on his own.

Rechi and Sampo shares fell 1.51 percent and 0.24 percent yesterday, respectively, to close at NT$22.8 and NT$4.21.

Rechi is expected to ship 9 million compressors this year, with 8 million of those made in China, which accounts for 80 percent of it's profits, the statement read, after Matsushita Electric Industrial Co of Japan's 15 million units and LG Electronics Inc of South Korea's 12 million units.

EXPANSION INEVITABLE

Since 60 million out of estimated 70 million compressor shipments worldwide are made from China, expansion across the Taiwan Strait is inevitable if companies are to survive, Chen said.

Taiwanese companies are allowed to invest up to 40 percent of their net worth in China.

The Financial Supervisory Commission has suggested to the Council for Mainland Affairs and the Ministry of Economic Affairs that this restriction be lifted -- under certain conditions -- commission spokesman Lin Chung-cheng (林忠正) said in a telephone interview yesterday.

The conditions include repatriating to Taiwan the profits made in China to contribute to cash dividends and strengthening corporate governance, Lin said, adding that the proposal is under preliminary inter-party discussion.
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