The government should quickly amend the Statute for Investment by Foreign Nationals (外國人投資條例) and Statute for Investment by Overseas Chinese (華僑回國投資條例) to protect Taiwan’s key technology and infrastructure from being controlled by Chinese firms, the New Power Party (NPP) legislative caucus said yesterday.
The party called for amendments to both statutes after hosting a public hearing on the issue on Friday, at which experts highlighted the importance of using the law to block investments from China, or “red capital.”
The government strictly reviews the investments from China, but is more lenient toward investments by foreign nationals, NPP Chairwoman and deputy caucus whip Chen Jiau-hua (陳椒華) said.
The current system allows Chinese investors to disguise their funding as belonging to foreign nationals to enter the Taiwanese market, she said.
“From Kerry TJ Logistics winning the logistics service contract for Hsinchu Science Park (新竹科學園區) and Shopee failing the review for an electronic payment license to China Ocean Shipping Group having control over two piers in the Port of Kaohsiung, we have seen that the current system is far from perfect,” Chen said.
By categorizing investments from Hong Kong and Macau as those made by foreign investors, to whom more lenient standards apply, Chinese-funded Nan Hai Corp was given permission to bid for the Taipei Twin Tower project before its most favored bidder status was revoked by the Investment Commission, Chen said.
Chinese delivery service provider SF Express, by funneling capital through Hong Kong, is able to offer logistics services in Taiwan, and Shanghai Longfeng Group illegally invested in Tatung Co by channeling capital via Hong Kong and Singapore, she said.
Since Beijing in 2015 announced its “Made in China 2025” policy, which encourages Chinese corporations to obtain key technologies and sensitive information by investing in or acquiring firms in other countries, the US in 2018 passed the Foreign Investment Risk Review Modernization Act to review foreign investors, Chen said, adding that Ministry of Economic Affairs officials should study the act.
“The US government is aware that Beijing tries to achieve its political aims through culture, trade and other means. The Taiwanese government should scrutinize these tactics ... and address them by amending current regulations. This would be key to closer Taiwan-US relations,” she added.
NPP caucus whip Chiu Hsien-chih (邱顯智) said the government should seek to address at least six issues by amending the law.
First, the Investment Commission lacks a comprehensive mechanism to investigate whether investors have used many subsidiaries to divert or siphon off funds, as well as to inform investors of their obligations, Chiu said.
“Second, investors do not need to secure approval from the Investment Commission in advance as long as they can keep the shares they hold in a single investment below 10 percent,” he said.
“Third, only direct investors are obligated to report changes in shares in cases involving a transfer of ownership, but such a requirement does not apply to indirect investors,” Chiu said.
“Fourth, investors would not be fined even if they refuse, evade or obstruct an investigation by the Investment Commission,” he said.
Fifth, the lack of penalties for investors who contravene the statutes not only makes it difficult to curb offenses, but also makes it impossible to seek judicial assistance from other countries, and sixth, the government should review the background information of investors and examine the shareholding structure in each case, Chiu said.
NPP Legislator Claire Wang (王婉諭) said that the economics ministry needs to upgrade the status of the Investment Commission and give it more personnel and resources, so that it can review and investigate mounting investment cases from overseas.
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