Wang Yung-ching (王永慶), chairman of the Formosa Plastics Group (台塑), recently caused a major stir with his statement that Taiwan should "accept the one-China proposal and lift all curbs on investment across the strait." Analyzed in detail, his basic point is that with globalization imminent, Taiwan's industry should make a concerted effort to move to China and establish itself there in advance. As for the question of sovereignty, it should be de-emphasized, even as far as acceptance of the "one-China" principle.
Do those Taiwanese businessmen who enthusiastically advocate the one-China principle really wish in their hearts to place their own personal property at the disposal of "one China?" Of course they don't. They go into China with "foreign capital," that is, capital under the name of a third country, independent of both Taiwan and China. To understand this strategy, look at how the major Hong Kong consortiums faced the unification problem. Long before the 1997 deadline, many consortiums registered their companies in Bermuda or another third country, and then entered the Chinese market with their capital designated as foreign. In other words, they first sought independence for their capital and only then did they embrace one China.
If we look at economic and trade relations between Taiwan and China over the last 10 years, statistics show that up to the year 2000, our government had approved aggregate investments in China totalling approximately US$17.1 billion. But according to statistics from China's Ministry of Foreign Trade and Economic Cooperation, the actual aggregate investments totaled approximately US$25.6 billion. This figure is exceeded only by investments from Hong Kong, the US, the British Virgin Islands and Japan.
From the enormous difference between the two statistics, we can see that many Taiwanese businessmen are establishing new companies, subsidiaries and holding companies in third countries from which to invest in China. They particularly like to work through the British Virgin Islands, Hong Kong and Singapore. Thus, the Central Bank also estimates that actual investment in China by Taiwanese businessmen may amount to US$50 billion, far higher than the figure mentioned above.
Examining the issue in detail, in 1995 Taiwan's investments in British Central America, including the Virgin Islands and the Cayman Islands, amounted to only 15 percent of all Taiwanese investments abroad. By 2000, such investments had risen to over 30 percent and the region was the second-largest recipient of Taiwanese foreign investment, trailing only China. Moreover, in 1995, investment from the Virgin Islands amounted to only 0.8 percent of total foreign investments in China. By 2000, it had reached 9.7 percent, surpassing investments from the US and Japan.
In other words, it is already becoming increasingly common for Taiwanese businessmen to establish companies, subsidiaries or holding companies in third countries from which to invest in China. This model of transforming capital into third-country capital before entering China not only allows them to enjoy an undiminished level of incentives, but also allows them to benefit from agreements concluded between the third country and China to safeguard investments, especially the right to select arbitration agencies or an arbitration site in the third country.
There are no significant differences between China's legal standards and incentives for Taiwanese businessmen investing directly, for Taiwanese businessmen investing indirectly, and for other foreign capital. Once a critical dispute arises, however, in addition to being able to apply for arbitration from a Chinese arbitration agency, the other foreign investors can also apply for arbitration from other arbitration agencies (including third-country agencies). In contrast, Taiwanese businessmen who invest directly cannot freely select an arbitration agency or an arbitration site.
In contrast with Taiwanese businessmen who lack safeguards, the legal status of other foreign investors in China is protected by bilateral investment protection protocols. They enjoy legal protection on a par with that given to Chinese citizens, and in accordance with international arbitration standards. The content of the so-called Taiwanese Investment Protection Statutes (台商投資保護法), unilaterally established by China, however, can be amended at any time because these are domestic laws. No wonder then that according to a survey conducted by the Investment Commission of the Ministry of Economic Affairs, over 50 percent of Taiwanese businessmen feel that it is safer to invest in China as a company registered in the US or another country.
The relationship between any law and the subjects over whom it has effect should be two-fold. On the one hand, the subjects are the source that gives rise to and establishes the law. On the other hand, the subjects are regulated by the law. But in the above case, Taiwanese investors are just regulated by the law in a one-sided way without any status worth mentioning as so-called legal subjects. That is to say, China is not willing to conclude any mutual agreement with Taiwan to safeguard investment. Even if China was willing, without political equality, any agreement to safeguard investments would amount to an agreement with no security.
Originally, it was expected that after Taiwan and China entered the WTO, both sides would enjoy equal safeguards in a framework of multilateral negotiations by focusing primarily on economic activity and avoiding the dispute over political sovereignty. But China is unwilling to drop the issue of political sovereignty and the one-China principle, making Taiwan unable to obtain sovereignty over an independent and complete customs area. Thus investing in China through a third country is the way to enjoy safeguards.
These international Taiwanese businesses which invest in China with capital from a third country are even more "independent" than people who emphasize Taiwan's independent political sovereignty. Currently enjoying the incentives and safeguards on capital given to independent countries, however, they have forgotten that in the past they were only able to grow and become powerful by taking advantage of social and economic conditions in Taiwan and enjoying special or exceptional incentive policies. For the sake of their businesses, they first ensure that their own property is independently secured outside of Taiwan and China, and then push Taiwan over the precipice of unification by telling others to accept unification. Have they no scruples?
Lin Cho-shui (
Translated by Ethan Harkness
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