Fri, Sep 01, 2017 - Page 11 News List

China investment slackens

SHIFT CONTINUES:Although stricter regulations in China have reduced Taiwanese companies’ investment appetite, there are signs of continued capital flight and brain drain

By Crystal Hsu  /  Staff reporter

Investment interest in China among Taiwanese firms is slackening this year as Chinese taxation rules grow increasingly unfavorable and production costs climb, an annual report by the Taiwan Electrical and Electronic Manufacturers’ Association (TEEMA, 電電公會) showed yesterday.

Citing a survey of 2,312 firms that operate in China, the association said the investment environment scored 3.172 this year, the lowest since the technology bubble burst in 2001, while investment risks soared to 2.587, the highest since the global financial crisis in 2008.

There was little surprise in the findings, as nearly 70 percent of the polled firms said they are looking at an unprofitable year, it said.

Only 32.46 percent of firms voiced plans to expand operations in the Chinese market, 3.82 percent lower from last year and down for the fourth consecutive year, Chung Yuan Christian University business management professor Leu Horng-der (呂鴻德) said, presenting the results on behalf of the association.

“Investment risks are heightened in China, where authorities have tightened accounting rules and introduced measures against tax evasion and loose capital flows,” Leu said.

The series of changes has driven up operating overhead, making it more difficult to turn a profit, he added.

Many Taiwanese firms have long moved manufacturing facilities to China to take advantage of cheap land and labor costs there.

In recent years, non-manufacturing firms have followed suit, attracted by the fast-emerging and vast domestic market, Leu said.

Only 23.15 percent of respondents expect to stay in the black this year, while 69.75 percent were looking at losses of up to 50 percent, he said.

To grow into a major economic player, China has been developing its own supply chains in various sectors and courted skilled workers from Taiwan with high salaries, Leu said.

“The problem of brain drain may prove the most serious for Taiwan in the next five years,” Leu said, citing international studies.

Only about 44.72 percent of respondents intended to keep their headquarters and operations in Taiwan, down from 45.32 percent last year, he said.

Slightly more than 10 percent were planning to shut factories in Taiwan and keep only marketing staff, Leu said, which suggests continued capital flight.

Nearly 13 percent of respondents said they wanted to team up with Chinese firms and 7.45 percent hoped to attract funds through a listing in Taiwan, he said.

Another 7 percent expect to return to Taiwan and urge the government to lend a helping hand by creating favorable terms, Leu said, adding that a minor 4.32 percent said they expected to close their business in Taiwan.

Chengdu in Sichuan Province, Kunshan in Jiangsu Province and Suzhou Industrial Park top the survey for most favored investment destinations, Leu said, adding that Shenzhen in Guangdong Province could becomethe region’s “Silicon Valley,” derailing Taiwan’s effort to win the status.

Shenzhen is home to the Shenzhen Stock Exchange and the headquarters of several homegrown multinational high-tech companies such as Tencent Holdings Ltd (騰訊), ZTE Corp (中興), BYD Co (比亞迪), and Huawei Technologies Co (華為).

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