Tue, May 14, 2019 - Page 14 News List

Government must do more to counter illegal Chinese investment
中資無孔不入 政府須提高戒備

A model of a concept design for the Taipei Twin Towers development project.

Photo: George Tsorng, Taipei Times

Chinese investment occurs in many countries throughout the globe, but it has long been subjected to restrictions and controls in Taiwan. Despite this, in recent years, there have been a number of controversial cases over which a cloud of suspicion continues to hang, in which these restrictions are being circumvented in increasingly subtle ways. Whatever the actual motive behind Chinese investment, government departments, including the Ministry of Finance, the Financial Supervisory Commission and the Mainland Affairs Council, should be on a heightened state of alert and doing everything within their power to monitor this all-pervasive Chinese investment. In addition to employing strict verification and vetting procedures, the government should also ensure stiff penalties are in place to deal with any contravention of the rules and regulations.

Nan Hai Corp, one of several members of a consortium that was awarded the “Taipei Twin Towers” development project, is suspected of having links to Chinese investment entities. The Investment Commission has suspended the company’s continued participation in the project and requested clarification. The thorny issue of Chinese investment is once again in the spotlight.

The government has not comprehensively prohibited Chinese investment into the domestic economy, but has instead opted for a regulatory approach. Fund managers and investment institutions must go through the Chinese qualified domestic institutional investor program, while individual Chinese investors or Chinese investment institutions are forbidden from directly investing in Taiwan’s stock market. There are also restrictions on the amount that can be invested, and any direct investment into Taiwan must by vetted by the Investment Commission. Furthermore, a Chinese investor cannot invest in a Taiwanese company that operates within a restricted industry.


1. controversial adj.

爭議性的 (zheng1 yi4 xing4 de5)

2. be on a heightened state of alert phr.

拉高戒備 (la1 gao1 jie4 bei4)

3. all-pervasive; widespread adj.

無孔不入 (wu2 kong3 bu2 ru4)

4. in the spotlight phr.

引起各界關注 (yin2 qi3 ge4 jie4 guan1 zhu4)

5. enter through the back door phr.

走偏門 (zou3 pian1 men2)

6. use every means at one’s disposal phr.

千方百計 (qian1 fang1 bai3 ji4)

7. ulterior motive phr.

特殊目的 (te4 shu1 mu4 di4)

8. go to the trouble of phr.

大費周章 (da4 fei4 zhou1 zhang1)

That is, Chinese investment into Taiwan is subject to restrictions and controls. A problem arises when Chinese investment enters Taiwan through the back door, is routed through other companies or enters Taiwan in the guise of non-Chinese foreign investment. Whether the motivation is to pass off mainland Chinese investors as Hong Kong investment institutions or whether the goal is to conceal a Chinese investor that is a majority (controlling) shareholder, it goes without saying that this kind of activity is illegal under Taiwanese law.

Some people argue that Chinese investment is no different from foreign investment by other countries. Nevertheless, the government treats Chinese investors as extremely high-risk and uses every means at its disposal to obstruct them. In practice, though, this means blocking only illegal Chinese investors. From the government’s perspective, if there is no ulterior motive at play, why would Chinese investors feel the need to go to the trouble of — and assume the risk of — circumventing Taiwan’s regulations?

In order to deal with Chinese investors undeterred by the threat of fines and the widespread nature of Chinese investments, legislators last month passed the third reading of an amendment to the Act Governing Relations Between the People of the Taiwan Area and the Mainland Area. Chinese investors that breach the rules can now be fined up to a maximum of NT$25 million (approx. US$800,000). The authorities should step up inspections to ensure that illegal Chinese investors are left with no place to hide and ensure that they catch any transgressors that have fallen through the net. The government must also employ new laws where necessary to create stronger penalties that are essential for an effective deterrent.

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