Mon, Jul 24, 2006 - Page 12 News List

China restrictions may be relaxed

AP , TAIPEI

The government may allow a number of companies to invest more in China but will not grant an overall relaxation of its investment restrictions, a senior government official said.

The policy relaxation may come at the government-sponsored Conference on Sustaining Taiwan's Economic Development on Thursday and Friday.

More than 100 government officials, scholars, lawmakers and business leaders are due to meet at the conference in an effort to plot a course for the nation's future economic development.

The business community wants the government to relax its limits on investment in China so their businesses can stay competitive there and in global markets. A few business leaders had threatened to walk out of the two-day conference if authorities refused to meet their demands.

But Hu Sheng-cheng (胡勝正), chairman of the Council for Economic Planning and Development which is organizing the forum, said authorities hope to prevent a big jump in China investments.

Any relaxation of the rules should come gradually to avoid a sharp impact on the economy and worsen the unemployment problem, he said.

The forum is aimed at "seeking solutions to the long-term structural problems facing the economy," Hu said in an interview with Dow Jones Newswires.

"The government will not announce a [big] opening of the investment rule for all companies," he said.

But "individual companies can seek special approval if their investment has hit the legal ceiling. We will give conditional approval to companies that meet certain criteria." He declined to give specifics.

Currently, Taiwanese companies with a net worth below NT$5 billion (US$150,000) can invest up to 40 percent of that amount in China.

The limit is 30 percent for companies with a net worth up to NT$10 billion, and 20 percent for that above NT$10 billion.

To date, Taiwanese have poured US$100 billion to US$150 billion into China to take advantage of the country's cheaper labor costs.

Last year Taiwanese investment in China accounted for 71 percent of the nation's overall investment abroad, and exports to China and Hong Kong together accounted for 38 percent of Taiwan's total exports, according to the Mainland Affairs Council.

The council proposed setting up a fund to help companies invest more in the oil-rich Middle East and other countries to reduce the nation's reliance on the Chinese market.

Early this month, President Chen Shui-bian (陳水扁) said that Taiwanese companies' growing investment in China has taken a toll on domestic investment.

"The government mustn't close its eyes to these warning signs, and should more actively come up with measures to respond," he said.

Hu said the economic conference this week will also tackle other issues such as financial reforms, environment protection, and fiscal reforms.

The conference's conclusions will serve as guidelines for government policy, he said.

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