Tue, May 09, 2006 - Page 12 News List

FSC proposed lifting China investment cap

SENSITIVE ISSUE An FSC official said the financial watchdog proposed to the Cabinet an easing of the limit on investments in China for some firms

By Amber Chung  /  STAFF REPORTER

A Financial Supervisory Commis-sion (FSC) official said yesterday that the regulator has proposed a conditional raising of the cap on Taiwanese companies' investments in China, indicating that cross-strait economic policy could be further relaxed in the near future.

The commission has proposed to the Cabinet exempting some Taiwanese companies from the regulatory ceiling, which limits their investment in China to a maximum of 40 percent of their net value, the commission's Vice Chairman Lu Daung-yen (呂東英) said in a question and answer session at the Legislative Yuan's Finance Committee yesterday.

To qualify for the exemption, companies would be required to have a certain level of shareholding by overseas investors, run "global operations" and maintain their headquarters, research and development and marketing centers in Taiwan, Lu said. He did not give further details on those criteria.

The relaxation proposals were made in a bid to enhance the internationalization of Taiwanese companies, Lu said.

Details are subject to further inter-department discussion within the Cabinet, the official added.

Final results may not be available until the cross-party and industry conference for sustainable economic development scheduled to take place next month, he said.

However, in a bid to downplay the sensitive issue of further cross-strait economic liberalization, the commission said later yesterday in a statement that it had not reached any final conclusions on the matter. The commission, which does not have the final say on cross-strait economic policy, has had several rounds of internal debate on the raising the China investment cap at the urging of the nation's business sector, the statement said.

There have been no policy discussions on the issue within the Cabinet so far, the statement said. The Mainland Affairs Council is the authority governing all cross-strait issues.

Despite the political conflict between Taiwan and China, business activities have been robust for more than a decade.

China is the nation's largest investment destination with about US$49 billion flowing into the country since 1991, according to figures from the Investment Commission -- though many believe that number to be far higher due to indirect investment through tax havens and other third countries.

Analysts appeared positive about the proposed relaxation.

Jesse Wang (王嘉樞), research head of BNP Paribas Securities (Taiwan) Co, said that BNP welcomes any opening-up of the nation's China policy.

Wang urged full-scale liberalization to allow the free flow of capital in conformity with free market principles, and said that any relaxation of cross-strait tensions would result in a "peace dividend" that would boost markets.

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