Mainland Affairs Council (MAC) Vice Chairman Fu Don-cheng (傅棟成) yesterday said that he estimated China-bound investment by domestic companies was likely to drop to below 50 percent of total foreign investments this year from the earlier 60 percent to 70 percent level.
The reason will mainly be a stronger yuan and surging costs of doing businesses in China, he said.
Statistics from the Ministry of Economic Affairs show that China-bound investment made by domestic companies in 2005 peaked at 71.7 percent of their outbound investments, which dropped to 63.9 percent in 2006 and further to 60.7 percent last year. Fu attributed the 2005 peak to the approval of two massive applications filed by Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Mocroelectronics Corp (UMC, 聯電) that year.
Rising labor costs and deteriorating incentives for doing business in China since late last year will bring about a significant impact on decisions by Taiwanese companies on their investments in China this year, he said.
He said that the local economy would greatly benefit once businesses cool their China fever and put more effort into tapping other markets.
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