Wednesday was an historical day. It was the day the Taiwanese government started processing applications for Chinese investment in Taiwan and, coincidentally, the 12th anniversary of Hong Kong’s official return to China and the beginning of “one country, two systems.”
Only time will tell whether Chinese investment in Taiwan represents an opportunity or a risk. From a business perspective, I welcome sincere foreign direct investment that is in accordance with market principles and mechanisms, and that is not backed by political motives.
It will also be interesting to see whether Taiwan’s industries will be able to move ahead and make themselves stronger, and whether cross-strait industrial cooperation will take off.
However, I am firmly against Chinese investment that is politically motivated, aimed at “unification” and speculative in nature. A look at Hong Kong shows that China employed three methods to implement the “one country, two systems” formula.
First, China actively saved Hong Kong’s stock market on several occasions, for example during the 1997 Asian Financial Crisis and the 2003 SARS epidemic. Second, China took control of and injected capital into Hong Kong’s public utilities and infrastructure. Third, Beijing actively supported capitalists of ethnic Chinese background.
Twelve years after its return to China, not only are Hong Kong’s industries being undermined, it also faces serious problems with economic transformation. In addition, Hong Kong’s social diversity, which once represented a mix of eastern and western cultures, is now becoming more uniform with the “interior.” Hong Kong is no longer the cosmopolitan “pearl of the east” it once was.
Taiwan does not suffer from a lack of funds, and according to data compiled by the Directorate-General of Budget, Accounting and Statistics, it is expected that the excess savings rate this year will reach a six-year high of 9.24 percent, at an all-time high of NT$1.1544 trillion (US$35 billion).
The ruling party has been unable to build public confidence, which has resulted in an unwillingness to invest among the private sector. This in turn has caused a decline in private investment much larger than the overall economic drop off, creating an excess of idle funds. Therefore, the government should try to reinstill confidence into private investors.
The decision to allow Chinese investment into Taiwan was not part of the nine agreements reached between China’s Association for Relations Across the Taiwan Strait Chairman Chen Yunlin (陳雲林) and Straits Exchange Foundation Chairman Chiang Pin-kung (江丙坤) during their three meetings. The decision is in fact a “consensus” reached at their third meeting only two months ago.
I seriously doubt whether the agreements implemented over the past year have passed policy impact assessments. How can the government recklessly implement a “consensus” on allowing Chinese investments in Taiwan, something that will have a huge impact on Taiwan’s industries and economy, simply by referring to “legal authority.”
The ruling party has opened Taiwan to Chinese investment without any form of oversight by non-governmental organizations or broader social debate. Economically, it was a rushed and mistaken decision that will only have short-term benefits with no real long-term gain.
Furthermore, the way the government has allowed manipulation and the formation of bubble markets in the capital and real estate sectors will only see the gap between rich and poor widen further.
Taiwan has always lacked a comprehensive set of economic development strategies and now the government is relying on a Chinese injection of funds without considering ways to really strengthen Taiwan, falling back on the Chinese Nationalist Party’s (KMT) old ways of deceiving people into thinking that a bright economic future is waiting just around the corner.
Since July 2004, China’s Ministry of Commerce has released three versions of the Catalogue for the Guidance of Foreign Investment Industries (對外投資國別產業導向目錄). This publication shows clearly how China hopes that Chinese businesses will invest in natural resources like petroleum, mineral resources and raw materials overseas. Does Taiwan possess these resources? Just what is the attraction for Chinese businesses investing in Taiwan?
Given Taiwan’s excess idle funds and savings, attracting a lot of Chinese funds without industrial transformation means that once Chinese investment enters the stock market and the real estate market in a big way, those investments will turn into speculative, short-term hot money that will widen the gap between what is happening on the capital markets and the real economic fundamentals.
In addition, the very first line of a set of guidelines released in May by China’s State Council — information from the Ministry of Commerce and the Taiwan Affairs Office for Chinese businesses doing business in Taiwan (兩部門就大陸企業赴台灣地區投資有關事項發通知) — says these businesses must not harm China’s national security or the goal of unification with Taiwan. The only thing the document doesn’t mention is “one country, two systems.”
The way in which the government follows the political rhetoric of China, gives into its nationalist policies and acts in conjunction with it in a stage show aimed at stealing Taiwan’s sovereignty is extremely worrying.
Wednesday marked the official opening to Chinese investment and will go down as a key day and an important dividing line in the development of cross-strait relations and Taiwanese history. The attitudes and abilities of our leaders will be the main factors that decide whether Chinese investment in Taiwan will be an opportunity or a risk.
Hong Chi-chang is a former chairman of the Straits Exchange Foundation and a former Democratic Progressive Party legislator.
TRANSLATED BY DREW CAMERON
Congratulations to China’s working class — they have officially entered the “Livestock Feed 2.0” era. While others are still researching how to achieve healthy and balanced diets, China has already evolved to the point where it does not matter whether you are actually eating food, as long as you can swallow it. There is no need for cooking, chewing or making decisions — just tear open a package, add some hot water and in a short three minutes you have something that can keep you alive for at least another six hours. This is not science fiction — it is reality.
A foreign colleague of mine asked me recently, “What is a safe distance from potential People’s Liberation Army (PLA) Rocket Force’s (PLARF) Taiwan targets?” This article will answer this question and help people living in Taiwan have a deeper understanding of the threat. Why is it important to understand PLA/PLARF targeting strategy? According to RAND analysis, the PLA’s “systems destruction warfare” focuses on crippling an adversary’s operational system by targeting its networks, especially leadership, command and control (C2) nodes, sensors, and information hubs. Admiral Samuel Paparo, commander of US Indo-Pacific Command, noted in his 15 May 2025 Sedona Forum keynote speech that, as
In a world increasingly defined by unpredictability, two actors stand out as islands of stability: Europe and Taiwan. One, a sprawling union of democracies, but under immense pressure, grappling with a geopolitical reality it was not originally designed for. The other, a vibrant, resilient democracy thriving as a technological global leader, but living under a growing existential threat. In response to rising uncertainties, they are both seeking resilience and learning to better position themselves. It is now time they recognize each other not just as partners of convenience, but as strategic and indispensable lifelines. The US, long seen as the anchor
Kinmen County’s political geography is provocative in and of itself. A pair of islets running up abreast the Chinese mainland, just 20 minutes by ferry from the Chinese city of Xiamen, Kinmen remains under the Taiwanese government’s control, after China’s failed invasion attempt in 1949. The provocative nature of Kinmen’s existence, along with the Matsu Islands off the coast of China’s Fuzhou City, has led to no shortage of outrageous takes and analyses in foreign media either fearmongering of a Chinese invasion or using these accidents of history to somehow understand Taiwan. Every few months a foreign reporter goes to
RSS