The Ministry of Economic Affairs (MOEA) yesterday said it was considering lifting a ban on Taiwanese companies investing in the naphtha-cracking sector in China.
However, investment would come with a slew of conditions it aims to negotiate with the Chinese government during the next Economic Cooperation Committee meeting, possibly to take place by the end of the month, Minister of Economic Affairs Shih Yen-shiang (施顏祥) said on Thursday.
The minister’s remark came two weeks after four Taiwanese petrochemical companies signed agreements with Chinese partners on a proposed US$4.5 billion petrochemical project in Fujian Province, China, in a bid to build oil refineries and produce petrochemicals there.
Because China has still not opened up its oil refinery sector to overseas investors and the Chinese government limits foreign companies to holding less than than a 50 percent stake in -naphtha-cracking joint ventures, Shih said Taiwanese companies must be able to obtain a majority stake in naphtha cracking ventures before they would be allowed to invest across the Taiwan Strait.
Also, if these investment projects are approved by Taiwan, the companies must guarantee they would export a certain quota of raw petrochemical materials back to Taiwan to sustain the operations of the nation’s supply chain, and their investment in Taiwan must match that in China, he added.
Local petrochemical firms welcomed the ministry’s proposal.
“The relaxation would help local companies get more opportunities,” a Formosa Plastics Group (台塑集團) official told the Taipei Times by telephone.
However, the official said the three additional conditions for the investment would not be easy to meet, especially the requirement that Taiwanese investors own more than a 50 percent stake in the invested company.
“But the government’s proposal is a good start,” the official said.
He refused to give updates about the group’s plan to build a naphtha cracking plant in Ningpo, Zhejiang Province.
CPC Corp, Taiwan (台灣中油) spokesman Chen Ming-hui (陳明輝) also said the ministry’s proposal would benefit the local petrochemical sector.
“The requirement that local investors ship part of the ethylene and propylene back to Taiwan would offer another supply channel for local downstream companies,” Chen said by telephone.
In addition, there was no need to worry about possible technology outflows from such investments in China because the necessary techniques for running naphtha crackers are all under international common patents, Chen said.
Even if Taiwan lifts the investment ban, only the private sector would enjoy the privilege, with state-run CPC excluded because of national security concerns.
On Aug. 16, China Petrochemical Development Corp (中國石油化學工業開發), Ho Tung Chemical Corp (和桐化學), LCY Chemical Corp (李長榮化學) and USI Corp (台灣聚合化學品) signed agreements with China Petrochemical Corp (中國石油化工集團) and the Fujian Provincial Government to develop a planned petrochemical complex in the Gulei Peninsula in Zhangzhou.