Taiwanese firms had, in terms of book value, invested approximately NT$8.5 trillion (US$262.73 billion) in China and Hong Kong as of June 30, while 68 out of 700 Taiwanese companies that had explored business opportunities in China had 100 percent risk exposure, government reports showed.
China last month announced that it was auditing the taxes of Hon Hai Precision Industry Co (鴻海精密), known internationally as Foxconn Technology Group (富士康科技集團), sparking concern over the risks faced by Taiwanese firms with investments in China and Hong Kong.
Risk exposure is calculated based on the amount invested elsewhere compared with the net worth of the parent company, which represents the rights of the shareholders.
Photo: Reuters
Listed Taiwanese companies are expected to submit a quarterly report showing all funds wired from Taiwan, all funds wired and the dividends made, as well as the net quarterly profit or loss and total book value at the end of the quarter.
If the amount of investment in China exceeds the net worth of the parent company, it is considered overt risk exposure.
Of the 68 Taiwanese companies that exceeded 100 percent risk, 26 were listed as registered in the Cayman Islands or were foreign companies that were not listed abroad but were listed in Taiwan.
Disregarding companies registered in the Cayman Islands and companies whose parent companies had a net worth under NT$10 billion, there were 16 firms whose risk exposure in China exceeded 100 percent, with paper manufacturing company Longchen Paper & Packaging Co (榮成) topping the list with an overexposure rate of 165.98 percent.
Longchen Paper is China’s fourth largest paper manufacturer, with more than 20 subsidiaries. As of June 30, it had invested NT$11.8 billion in China, or more than 50 percent of the net worth of its parent company.
In second place was computer firm Clevo Co (藍天電腦), with an overexposure rate of 156.11 percent and investments of NT$63 billion.
Hon Hai had a net worth of NT$1.39 trillion, an overexposure rate of 117.12 percent and an end-of-quarter book value of NT$1.6 trillion. It had invested NT$203.8 billion in China.
Taiwan Semiconductor Manufacturing Co (台積電) with a total net worth of NT$3.18 trillion, had only invested NT$49.4 billion, and its exposure rate was 5.6 percent.
Ninety percent of Taiwanese firms invested via third-party intermediaries, with only 10 percent making a direct investment. Hon Hai, for example, made all of its investments via third-party intermediaries.
Statistics showed that funds wired to China from Taiwan exceeded NT$2.2 trillion, but if the investment capital was multiplied by the stakes held by Taiwanese businesspeople, the total value of Taiwanese funds wired to China exceeded NT$3.3 trillion.
From 1991 through the end of September, Taiwan approved 45,444 applications to invest in China, with total funds valued at NT$6.4 trillion, data from the Ministry of Economic Affairs showed.
However, the Chinese Ministry of Commerce said that up until the end of last year, it had only approved 120,000 investment applications from Taiwan, with total funds valued at NT$2.3 trillion.
Additional reporting by Fang Wei-chieh
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