Taiwan may see more investment from China and other countries after today’s expected inking of an investment protection agreement with China that will add another layer of legal protection for business ventures on both sides, foreign analysts said yesterday.
Straits Exchange Foundation chairman Chiang Pin-kung (江丙坤) is scheduled to meet with his Chinese counterpart, Chen Yunlin (陳雲林) of the Association for Relations Across the Taiwan Straits, in Taipei today for the eighth round of cross-strait trade talks that will culminate in the signing of the pact.
“The pact marks another step forward in cross-strait trade ties, but is not a big deal in itself,” Leong Wai Ho (梁偉豪), a Barclays Bank PLC Singapore-based senior regional economist, told a media briefing in Taipei.
The real value of the agreement is that it will encourage foreign investors to express interest in joint ventures with Taiwanese companies to penetrate the Chinese market, Leong said.
“It will make more sense for foreign investors, especially from Japan, to use Taiwan as a base to expand in China, as Taiwanese firms will [probably] receive more legal protection than foreign firms there,” he said.
The pact will also build up momentum for the two sides to deepen the Economic Cooperation Framework Agreement (ECFA) in the next round of meetings between Chiang and Chen, so that more sectors and export items may benefit from favorable taxation treatments, Leong added.
Currently, more than 500 export items bound for China enjoy lower or zero tariffs, the economist said, adding that the list may increase and extend to the service sector as a result of warming cross-strait trade ties.
Cosmas Lu (陸怡豪), managing director of Barclays Bank’s Taipei branch, shared the view that the investment protection pact would give foreign investors additional incentives to team up with Taiwanese firms in exploring China.
“No foreign investors can afford to ignore China now that it has become the world’s second-largest economy,” Lu said. “They would consider partnerships with Taiwan as it secures more protection and favorable treatments with China.”
Taipei-based Standard Chartered Bank economist Tony Phoo (符銘財) said the pact may facilitate Chinese capital entering Taiwan and help ease the longstanding investment imbalance across the Strait.
“With the guarantee of legal protection, more Chinese funds would be willing to invest here,” Phoo said by telephone. “The pact helps address concerns over political risks linked to the change of ruling parties in Taiwan.”
China has become Taiwan’s second-largest Asian foreign investor after Japan, with total investments hitting US$122 million in the first half of the year, higher than the US$43 million invested in the whole of last year and the US$94 million in 2010, Phoo said.
The inflow of Chinese capital will not happen overnight and requires more regulatory easing, the economist said.
“It is up to the government to set the pace,” Phoo said.