A few days ago, Vice Premier Tsai Ing-wen (
We do not object to the idea of the government's wanting to encourage investment flows back to Taiwan as a major cog in its economic development strategy. However, we would remind them that they should not seek to gain investment flows from Taiwanese businesses already investing in China at the expense of its basic policy for the effective management of investment in China and prioritizing investments in Taiwan.
In the past, pro-unification writers and media have maintained that it is better to encourage investment flows back into Taiwan than to waste resources on management measures that run counter to the market, and they have used this as a smoke screen for their efforts to undermine the "effective management" policy. This has forced the government's hand in how it implement its policy, effectively reducing the "Taiwan first" strategy to a mere slogan and thus bringing it to an early death.
Superficially, encouraging investment flows back into Taiwan sounds tempting because it doesn't suffer from the problems that afflict effective management of Taiwanese investments in China. But this is just a way of pulling the wool over the eyes of the Taiwanese people. It is also exactly what the blue camp wants, and why all the politicians are going in this direction. The idea of Taiwan as a regional operational hub and inducing Taiwanese businesses in China to list on the Taiwan stock exchange, are all products of this way of thinking.
The biggest flaw in the investment flows idea is that it obscures the significance of effective management of Taiwanese investment in China. Logically speaking, investment flowing out is a precondition to it being able to flow back in again: If the government wishes to encourage a flow of investment in Taiwan from Taiwanese investment in China, it has to set up favorable conditions for Taiwanese businesses to invest in China in the first place. Seen in this way, the policy can be equated with encouraging investment in China.
The actual amount of money flowing out is many times the amount flowing back, but although the government's attempts to encourage companies to set up operational headquarters in Taiwan is bearing fruit, and despite the considerable tax incentives offered, more and more enterprises are investing in China.
The idea of Taiwanese businesses getting listed on the Taiwan stocks and securities market is also based on this kind of thinking, although this is an even clearer incentive to move to China. Under the current system, Taiwanese businesses can be listed in Taiwan irrespective of whether they are located at home or abroad so long as they conform to certain standards. And if a company put Taiwan first, the 40 percent ceiling on investment abroad should not be too limiting, and there would be no need for any other incentives.