The Executive Yuan yesterday relaxed the cap on investment in China, one of several measures the Cabinet said would facilitate the return of capital from China.
Instead of revising the regulation itself, the loosening took the form of adopting a different approach to calculating the cap rate and of conditionally offering extra allowances on top of the cap.
"Although the 40 percent cap remains unchanged, the government will review applications for investment in China under the regulations in a flexible way," Mainland Affairs Council (MAC) Chairman Chen Ming-tong (陳明通) said at a press conference following the weekly Cabinet meeting.
RULES
The new proposal stipulates that the government would allow a company to calculate the percentage of its China investment out of the aggregate net assets of its group -- if doing so allows it to make a bigger investment in China -- rather than the net assets of the company alone, as is the case under existing rules.
Under existing regulations, China-bound investment may not exceed 20 percent of a company's net assets if those exceed NT$10 billion (US$323.5 million); 30 percent when net assets are between NT$5 billion and NT$10 billion; and 40 percent when net assets are below NT$5 billion.
Loosening the ceiling has long been the subject of debate.
Proponents of a relaxed policy argue that the removal of the cap would help Taiwanese businesses compete with multinationals investing in China, while opponents worry that easing the cap would accelerate the hollowing-out of local industries and increase the nation's overreliance on China.
Emphasizing that the government had neither done away with nor raised the 40 percent ceiling, Chen said: "Our policy goal is to attract Taiwanese capital back from China."
TRADEOFF
For companies whose investment in China already exceeds the 40 percent ceiling, or those on the verge of reaching that level, the government will allow them to invest a further 40 percent in China for every extra dollar they invest in Taiwan.
Chen said the measures "provide incentives" for Taiwanese businesspeople to return to and invest in Taiwan because one reason they chose to keep their capital overseas was the fear that they might encounter difficulties remitting more capital to China.
Also included in the proposal was a measure offering much lighter penalties for investors in China who had remitted capital out of Taiwan via underground or illegal channels and a promise that the government would not investigate tax evasion schemes that may have resulted from investments in China.
In accordance with the Statute Governing the Relations Between People of the Taiwan Area and the Mainland Area (兩岸人民關係條例), companies that do not obtain approval from the government prior to investing in China can be fined between NT$50,000 and NT$25 million.
The Cabinet also slashed the fine for illegal investment, but said that this would not apply to industries that are still listed under restricted categories.
Businesspeople will be absolved by paying a fine of NT$50,000 if their investment in China amounts to less than US$20 million, and NT$100,000 for investments totalling between US$20 million and US$100 million -- as long as they accept the amnesty offer and register their Chinese investments, Chen said.
The government would determine the fine for violators whose investments in China exceed US$100 million or those industries connected to Taiwan's core technologies on a case-by-case basis, he said.
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