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.
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