Taiwan opens door for mainland investment

(Agencies)
Updated: 2009-06-30 19:34

TAIPEI, Taiwan: Taiwan has opened up key parts of its manufacturing and service sectors to mainland investment as another barrier falls across the Straits.

The new rules announced Tuesday are part of Taiwan leader Ma Ying-jeou's ambitious effort to move the island's economy closer to Chinese mainland, and foster a dialogue aimed at ending six decades of estrangement.

Under the new rules, Chinese mainland companies will be able to invest in 100 categories of local business, including computer components, cell phones, car making and building of resort hotels and commercial ports.

But Taiwan is keeping the semiconductor, flat panel display, solar panel making and communications sectors to itself, to maintain its technological advantages. Real estate development will not be open to mainland companies, though their mainland employees will be permitted to buy property for private use.

No specific investment caps have been imposed but officials said the percentage of mainland ownership in a Taiwanese firm will be subject to approval on a case-by-case basis.

Under the new rules, mainland institutional investors will also be allowed to buy Taiwanese shares as long as the accumulated stock does not exceed 10 percent of a listed firm's total share value.

The new rules take effect immediately.

"We will start on a smaller scale and expand the scope when we see results of the (initial) investments," said Deng Cheng-chung, Taiwan's deputy economics chief.

Despite the limitations, a substantial influx of mainland capital is expected into the island. Chinese mainland has encouraged its businesses to invest in Taiwan, as a chance to establish closer ties across the Taiwan Straits.

Until now, the trade and investment flows have been largely one way. Cumulative Taiwanese investment on the mainland since the late 1980s stands at more than $100 billion and trade now exceeds $110 billion annually.

Since Ma took office 13 months ago, the island leader has pushed aggressively to cement closer economic ties and liberalized conditions for Taiwanese investment on the mainland. The two sides launched regular direct air and maritime links last December.

Fresh mainland funds are expected to help stimulate Taiwan's economy, which shrank by a record 10.2 percent in the first quarter of 2009 from a year earlier.

Property developers say they expect upscale office rentals in Taipei, currently lagging way behind those of Hong Kong or Singapore because of the sluggish local economy, to shoot up as more mainland enterprises set up operations on the island.