Local venture capitalists yesterday expressed concern over the government's plan to put a ban on their China-bound investments.
That plan -- discussed at a meeting on Tuesday between the Cabinet and the Mainland Affair Council -- requested the government's Development Fund (
"The Chinese market has gradually become too important to ignore, therefore, the to-be-determined ban will surely trigger difficulties in our investment decisions in the near future," said an employee at De Yang Biotech VC Corp (
"The policy will greatly limit venture capitalists' investment targets and opportunities," said another venture capitalist, who also requested anonymity.
Currently, none of these venture capitalists have invested in Chinese firms except for Prudence Capital Co (誠宇創投), which, in May, agreed to withdraw its US$2 million investment in Shanghai-based Semiconductor Manufacturing International Corp (SMIC, 中芯國際集成電路).
Since the policy is not finalized, the Taiwan Venture Capital Association (TVCA, 創投公會) yesterday said that it will stay in close communication with related government agencies to clarify the policy.
An official at the association, who requested anonymity, yesterday said that difficulties will arise since venture capitalists, which usually make financial investments by acquiring less than 20 or 30 percent of shares, have no say in management of their re-invested companies.
Therefore, if local venture capitalists invest in multinational companies, which then decide to branch out in China, they have no say in the multinational's decision-making process, the official said.
"If the government then asks us to dump our shares, who's going to make up our losses at low stock prices?" the official asked.
The official, nevertheless, yesterday said that most local venture capitalists are still hesitant about injecting capital into China's markets since its capital market has not fully matured and isn't transparent enough while capital flow is not free enough, either.
Hsu Chin-chou (許欽洲), deputy executive secretary of the fund's committee, yesterday further confirmed that the Cabinet requested the Ministry of Economic Affairs to come up with a plan to prevent Chinese capital from being invested in Taiwan's high-tech industries via venture capitalists in order to gain access to the nation's advanced technological knowledge.
"Currently, all venture capitalists have already had to require an approval from the economics ministry before they can put down money in China-based companies," Hsu said yesterday.
Though failing to call the government's plan into question, Hsu, however, yesterday added that there will be difficulties in facilitating the government's policy since he said that there's no way of differentiating the source of incoming capital.
The TVCA's official, moreover, yesterday called the government's policy orientation "strange."
He said that foreign capitalists can only buy company shares and become small-time shareholders, adding "no shareholders are capable of stealing companies' state-of-the-art technologies or meddling in company management."
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