Tue, Sep 30, 2003 - Page 1 News List

Tsai warns service sector to be wary of moving to China

By Joyce Huang  /  STAFF REPORTER

The nation's service industries should be wary of using a recently signed trade pact between Hong Kong and China to rush into Chinese markets, Mainland Affairs Council Chairwoman Tsai Ing-wen (蔡英文) said yesterday.

"Risks remain high for the service sector in branching out into China, especially for the financial service sector companies, some of which may attempt to enter Chinese markets via Hong Kong," Tsai said at a luncheon with members of the Chinese National Federation of Industries (全國工總).

There is a lot China must do to improve its judicial, legal and financial transparency before it can develop a sound investment environment for the service sector, Tsai said.

"Currently, there is only the arbitration system in place to handle cross-strait business disputes in China, which is not good enough," she said.

Tsai also questioned the benefits of the Closer Economic Partnership Arrangement, saying it was not clear whether the free-trade pact would actually help boost Hong Kong's economy.

She said that the agreement may end up damaging Hong Kong's economy if outdated Chinese business practices and standards, which will be incorporated into Hong Kong's advanced economy, further undermine its established international competitiveness.

Regardless of the deal's impact on Hong Kong, its effects on Taiwan's economy will be indirect and limited, Tsai said.

Following China's accession to the WTO, many Taiwanese service-sector companies have prepared to take advantage of Chinese commitments to open up its service sector.

More than 500,000 Taiwanese in China run 50,000 businesses there, mostly manufacturing operations that use China's cheap labor and land, according to the council.

Chen Lee-in (陳麗瑛), a research fellow at the Chunghua Institution for Economic Research, agreed that the risks of entering the service sector were great and the level of corruption in local governments was stifling development.

While many Taiwanese manufacturers expressed satisfaction with China's improving dispute-resolution mechanisms for the manufacturing sector, "The regulations in China for the service sector remain unclear, presenting high risks," Chen said.

In her speech to industry representatives yesterday, Tsai responded positively to some of the points in the business group's seven-point petition to further relax cross-strait trade restrictions.

Tsai said that the council was amenable to allowing earnings generated in China to reinvested there "within a certain amount, say NT$10 million."

She also said that the council is working on legal revisions to allow Chinese businesspeople to travel to Taiwan freely in the near future.

Tsai, however, yesterday rejected the business group's suggestion to allow the entry of Chinese labor and open up the Taichung Harbor and Kinmen Harbor for cross-strait direct sea links.

She said that amendments to cross-strait bills would allow white-collar professionals from China to work here, but the immigration of low-end Chinese labor contravened the government's goal of adding value to the local economy.

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