Tue, Apr 03, 2012 - Page 11 News List

Beijing relaxes rules on small business investments

EASIER ACCESS:Taiwanese investors can now open businesses with less than 10 employees without having to apply for foreign investment approval from Beijing

By Lisa Wang and Amy Su  /  Staff Reporters

A relaxation by Beijing on restrictions for small and medium-sized enterprises from Taiwan, Hong Kong and Macau in selected sectors will not trigger a new wave of large-scale capital investments in China from Taiwanese firms, a government official said yesterday.

The move represents the latest effort by Beijing to solicit investments from outside China.

As of Sunday, Taiwanese investors were allowed to establish in China individually owned businesses consisting of no more than 10 employees and an operating area of no greater than 500m2, the English-language People’s Daily reported on Thursday.

“In the past, we have seen only a very small number of such tiny investments from local small and medium-sized firms,” Emile Chang (張銘斌), deputy executive secretary of the Investment Commission, said by telephone. “We do not expect the new rule [from China] to change the situation. The impact will be limited.”

Last year, the commission approved US$13.1 billion in China-bound investment projects, up 7.12 percent from 2010, with the largest investments targeting the electronic components sector.

Excluding restrictions on certain sectors, Taiwanese companies are only required to seek government approval for China-bound investments valued at more than US$1 million, the commission said.

LESS RED TAPE

Based on Beijing’s new rules, Taiwanese who plan to establish individually owned businesses in nine provinces and municipalities would not have to apply for foreign investment approval, the People’s Daily reported. Prospective investors can now directly register with local industry and commerce administrations, it said.

According to the People’s Daily, China is easing restrictions on three sectors: packaging services under leasing and commercial services; office services under leasing and commercial services, including the design and production of signs, bronze plaques, trophies, plaques, medals and silk banners; and craft activities, indoor leisure and entertainment, including pottery, sewing and painting.

The easing of restrictions could hurt the Taiwanese labor market by taking away job opportunities in the retail and restaurant sectors, National Taiwan University economics professor Kenneth Lin (林向愷) said.

‘SYMBOLIC’

“Although the relaxations are more symbolic than substantive, it might still siphon some funds for domestic investments and take away job opportunities,” Lin said by telephone yesterday.

Lin said he could not imagine any reason for local individually owned businesses to invest in China, especially in the current climate, because Taipei is substantially relaxing restrictions on Chinese investment.

Chinese investors could eat into the profitability of the local service sector and steal some advanced technology from the electronics sector, Lin said.

“The government has to carefully watch the impact of increased Chinese investment on Taiwan’s economy and labor market,” Lin said.

DRAWING POWER

However, compared with Beijing’s latest easing, Lin said the Economic Cooperation Framework Agreement (ECFA) between Taiwan and China remained the most obvious factor drawing Taiwanese investors to China.

Democratic Progressive Party spokesperson Lo Chih-cheng (羅致政) said the party noticed that the document relating to Taiwan was released on a different date than the one for Hong Kong and Macau. The party declined to comment about Beijing’s possible political intentions with the relaxation.

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