Sun, May 23, 2004 - Page 4 News List

China's `cooling down' to benefit Taiwan: researcher

CNA , TAIPEI

China's efforts to cool off its overheating economy will benefit Taiwan investors based there despite a limited negative impact in the short term, an analyst said yesterday.

Hung Yen-hsing, a senior researcher at the Industrial Technology Information Service (ITIS), a program funded by the Ministry of Economic Affairs, said that China's move to stem its fast-growing economy will benefit Taiwanese companies in the long term on the grounds that the measures are expected to bring down commodity and raw material prices.

To achieve this goal, the Chinese authorities have targeted a wide range of sectors, mainly small and medium-sized businesses that consume large amounts of energy and are environmentally unfriendly, including steel, cement, petrochemical, textile and printing companies, as well as industries suffering from over-expansion, including the construction materials, real estate and automobile manufacturing industries, Hung said.

Beijing's moves to cool the economy, including the gradual phasing out of uncompetitive companies in these sectors by the end of 2005, will benefit Taiwanese investors in China because surging commodity prices caused by voracious demand will fall, thus helping businesses to operate normally, Hung said.

He added that it will also be a good opportunity for Taiwanese companies to adjust their market deployment strategies in the face of the new situation.

Although it seems that many industries, such as steel producers, will be dealt a blow, Hung said he is certain that basic demand in China's market will hold up due to China's efforts to become a world manufacturing powerhouse as soon as possible.

"Large construction projects in China will continue, and long-term demand will persist," he noted, adding that Taiwanese enterprises have not pulled back their mainland-bound investment following China's moves to cool off its economy.

The Investment Commission under the Ministry of Economic Affairs approved in early May projects in China by 10 large Taiwanese companies, including Taiwan Semiconductor Manufacturing Corp, Hong Hai Precision and the Formosa Group, worth more than US$650 million in total, including US$51 million in capital increment for a Taiwan-funded steel plant in Guangzhou.

Generally speaking, China's economic cooling-off plan will only have a limited and short-term negative impact on China-based Taiwanese companies, particularly export-oriented businesses, as long as the upward trend in business conditions in the US and Europe prevails, Hung said.

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