Monday, December 13, 2010

No cross-Stait agreement on investment protection

l  It is now official: the long-anticipated investment protection agreement will not be signed at the next cross-Strait summit between China’s Association for Relations Across the Taiwan Strait (ARATS) and Taiwan’s Straits Exchange Foundation (SEF), now scheduled to take place in Taipei toward the end of December.

l  Since the investment protection agreement was seen as a natural follow-up to the historic "Economic Cooperation Framework Agreement" (ECFA) signed between China and Taiwan in late June, the news has been most disappointing to the business community on both sides, which has been aggressively pushing for the agreemnet to be signed at this month's ARATS-SEF summit.

l  According to government statistics, Taiwanese businesses have invested some US$150 billion in China over the past 20 years, while Chinese enterprises have invested US$127 million in Taiwan since the island opened the door to mainland investment in June 2009. The signing of the ECFA, in turn, will most likely expand and accelerate the flow of both capital and personnel between China and Taiwan, making the investment protection agreement a necessity.

l  Since one of the primary goals of the investment protection agreement was to give investors from both sides a legal framework to seek redress, it is definitely a priority issue for both China and Taiwan in cross-Strait negotiations. Without such a signed agreement in place, the flow of capital—particularly those from China to Taiwan—will likely remain limited, at least for the first half of 2011.

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