l Taiwan's Ministry of Economic Affairs (MOEA) announced last week the second wave of 42 business sectors to be made available to mainland capital that included those—LED, semiconductor, and LCD flat-panel display—once considered sensitive.
l The so-called second “positive list” brings to 247 the total number of industries that are open to Chinese investment since the first round of liberalization was announced on June 30, 2009. The new list, which became effective on March 7, includes 25 sectors in manufacturing, eleven in public infrastructure, and six in services.
l While some referred to the first “positive list” as a market barometer, the second round appears more likely to attract substantial Chinese investment because: (1) there are more high-tech sectors that are more appealing to prospective mainland investors, and (2) there is now an institutional framework in support of cross-Strait trade and investment following the implementation of the “Economic Cooperation Framework Agreement” (ECFA) early this year.
l According government regulations, Chinese investors will now be allowed to hold a maximum 10-percent share in Taiwanese companies in five sensitive manufacturing sectors including semiconductor production, semiconductor packaging, assembly and test, LCD flat-panel display, metal cutting machine tool making, and the semiconductor and electronics production equipment sectors.
l However, Chinese businesses are not allowed to hold more than 50 percent of shares in joint ventures between Chinese and Taiwanese investors in these sectors, and they are prohibited to have management control in the newly-formed companies. Chinese investors are also required to provide business plans including cooperation structure and operational strategy to the MOEA for approval.
l Chinese investment will be granted full access to the 10 sectors that are categorized as the least sensitive by the MOEA, including dyes and paints, cleaning products, metal molds, metal structures, metal architectural components, metal thermal processing, metal surface processing, wind power generators, battery sectors, as well as the repair and installation of industrial machinery industry. In services, mainland investors will enjoy full access in tourism cable cars, parking lots, and business and industrial parks, excluding forest recreational areas.
l There continues to be apprehension within Taiwan in opening some of the more sensitive business sectors to mainland investment. While the ratio of Chinese investment will be restricted, mainland investors will be able to appoint directors to the board. If a Chinese national with both knowledge and experience in the business is appointed director in a China-Taiwan joint venture, there could be real concerns over possible leaks of sensitive technologies and market intelligence.
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