Formosa Plastics to build four PVC plants in China

Formosa Plastics Group (台塑集團) plans to invest about US$300 million in building four petrochemical plants producing polyvinyl chloride (PVC) and other plastic materials in China, local news reports said yesterday.

Wang Yung-tsai (王永在), the group's vice chairman, signed a contract with Chinese officials to acquire land needed for the plants -- part of a larger project to construct a petrochemical complex on Meishan island (梅山島) off China's eastern Ningpo port -- before wrapping up a low-profile China visit Saturday, the reports said.

Meanwhile, the leading Taiwan manufacturing group also plans to open a branch office in Shanghai to manage the investment projects of its three flagship enterprises -- Formosa Plastics Corp (台塑), Nan Ya Plastics Corp (南亞) and Formosa Chemicals & Fiber Corp (台灣化纖), the reports added. Nan Ya Plastics already operates nine petrochemical plants in China.

The Shanghai office -- which also aims to manage the group's finance and personnel in China -- is an indication of the group's determination to repeat its Taiwan business model in China, according to local reports.

The investment plans in China are expected to be discussed at Formosa Plastics' board of directors meeting in March and shareholders' meeting in May. Moreover, the plans need special approval from the Taiwan government, which has banned any investments in China of more than US$50 million and imposes other restrictions on high-tech and infrastructure sectors under the "no haste, be patient" (戒急用忍) policy.

Formosa Plastics was forced to cancel a US$7 billion investment in 1991 to build a chemical complex in China's Fujian Province that would have included an oil refinery and two naphtha-cracking plants. Ever since then, company executives have repeatedly complained that the government's restrictions have barred the group from competing with its rivals in the West.

In addition, the group's chairman, Wang Yung-ching's (王永慶), praise of China's improved infrastructure -- following a fact-finding trip there late last year -- invited backlash here with some critics warning his remarks could speed up Taiwan investment in China.

But, as the cross-strait trade relationship grows and with China-bound investment by Taiwanese companies having reached US$45 billion to date, the government is being forced to consider easing restrictions that limit such projects to US$50 million.

Nonetheless, in accordance with the limitations currently imposed by the Taiwan authorities on China-bound investment, Taiwan firms cannot pump more than 20 percent of their total assets into their mainland projects.