The Executive Yuan is planning to come down hard on Taiwanese businesses that have invested illegally in China. The Ministry of Economic Affairs has compiled a list of venture-capital companies who have made such investments and plans to push them to withdraw their money. The Mainland Affairs Council is also demanding that businesses promise not to sneak away -- under threat of being punished if they do. Violators are likely to have a hard time getting approval for applications for future investments in China.
One of the companies on the ministry's list is Prudence Capital Co (
This is an important step in the government's efforts to impose economic and trade discipline across the Taiwan Strait. Even though the government's policy is "active openness, effective management," the easing of business and trade restrictions is not something Taiwan can decide unilaterally. It is contingent on good interaction between the two sides of the Strait. Illegal investments by Taiwanese businesses have caused a serious hemorrhaging of capital and technology from Taiwan to China and caused Taipei to lose the initiative in cross-strait trade policy. The government has been ridiculed for "passive openness, inefficient management." Following repeated pledges from President Chen Shui-bian (
For a long time, the economics ministry and the council have been discussing lifting restrictions on investments in Chinese chip foundries. The decision to allow investment in eight-inch wafer foundries was reached only after careful consideration of national security, industrial competition and economic freedom. However, some businesses have already invested in such foundries before winning government approval. The government's credibility is on the line -- it must take action, especially since KMT bigshots and business heavyweights such as Hsu, Wang and Chen Lu-an (
It's not that the government has lacked the means to tackle illegal investment -- it is just that enforcement has been lax. The Statute Governing Relations between the People of the Taiwan and Mainland Areas (
Many countries require government approval for the export of sensitive technologies and products, including the US. Taiwan is a country that attaches great importance to economic freedom. However, in the rush to exercise their freedom, some individuals and businesses have forgotten that China is still hostile toward Taiwan. Investment controls may limit some business freedom, but they are a necessary evil for maintaining the public interest.
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