After sending in a trade delegation from Guangxi Province that purchased US$200 million in Taiwanese goods last week, China said it would send more buying missions in the next two months.
Growing cross-strait business is a good sign, but recent allegations that the Dongguan City Government had offered to subsidize Taiwanese businesses operating there to list on the Taiwanese stock market have raised alarm bells in Taiwan.
Chinese Nationalist Party (KMT) Legislator Lo Shu-lei (羅淑蕾) said last week that the Chinese city government had offered some 20 Taiwanese businesses operating in Dongguan, Guangdong Province, a subsidy of 20 million yuan (US$2.9 million) each to apply for stock listing in Taiwan.
Lo warned that allowing China-based Taiwanese companies to list in Taiwan would allow them to raise funds here, adding that she suspected Dongguan’s cash reward to those companies might be part of the city government’s long-term plan to secure big returns from these firms in return.
Dongguan’s attempt to subsidize Taiwanese companies to trade their shares in Taipei — rather than in Shanghai or Shenzhen — is unusual, to say the least, especially in view of the economic downturn. Not surprisingly, it has raised suspicion that the proposed listings are aimed at gaining access to Taiwan’s stock market and its precious resources — Taiwanese capital.
This issue has raised concerns as to whether the administration of President Ma Ying-jeou (馬英九) — which has been aggressively pushing cross-strait rapprochement since taking office in May last year — is capable of keeping Taiwanese investors informed and protected.
The Ma government has encouraged overseas Taiwanese companies to list on Taiwan’s stock market. Its target is to boost the domestic capital market, bring in more capital from overseas and transform the domestic market into a regional financial hub.
However, allowing China-based Taiwanese companies to trade their shares and raise funds here continue to be a sensitive issue, as there is no guarantee that such a relaxation would contribute to the growth of Taiwan’s capital market.
If Lo’s fears that Dongguan only wants these companies to raise funds here to support their operations in China are founded, it would not only compromise the government’s plan to develop Taiwan’s financial market, but also undermine Taiwan’s economic growth because of fears of capital flight.
Also at stake is the credibility of these companies: Would they be able to take care of the interests of their Taiwanese investors or would they prioritize their financial supporters in China?
If the suspicion that a city like Dongguan is involved in this kind of under-the-table dealings proves true, it raises the specter of other, bigger Chinese cities doing the same and more easily, as they have more resources.
Such concerns would negatively affect local investors’ interests in the initial public offerings of China-based Taiwanese companies.
Despite public worries, the Financial Supervisory Commission has turned a deaf ear to these concerns. With the commission refusing to take the issue seriously, investors had better keep China-based Taiwanese companies seeking to list domestically at a distance.
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