The Financial Supervisory Commission’s rejection last week of a bid by a Hong Kong consortium to acquire Nan Shan Life Insurance Co was a welcome development because it demonstrated the government can, when it wants, protect the interests of Taiwanese.
Commendable though the decision was, however, the outcome was far from certain. The commission’s examination of the bid, spearheaded by China Strategic Holdings and Primus Financial Holdings, took several months and a final decision was delayed a number of times.
Admittedly, the case was a major one, as it affected about 4 million policyholders, 4,000 employees and more than 34,000 insurance agents. Questions surrounding the bidder’s ability to ensure operational continuity at Nan Shan, coupled with uncertainties about the nationality and political connections of the ever-shifting shareholders and board members in the consortium, made the bid an altogether problematic one. Over the months, the many reports prepared by Democratic Progressive Party Legislator Pan Men-an’s (潘孟安) office on the matter were helpful in highlighting the scope of the problem.
Celebrations among those who opposed the deal could be short-lived, however, as the Economic Cooperation Framework Agreement (ECFA), which is set to come into force imminently, will usher in a new era of cross-strait investment. The combination of China’s substantial investment power, Beijing’s long-term political objectives via investment in Taiwan, and President Ma Ying-jeou (馬英九) administration’s hankering for foreign investment, could present the commission with an insurmountable challenge simply by virtue of the workload it may face.
In other words, even with the best intentions in the world, the commission’s finite resources could be overwhelmed by a sudden bombardment of Chinese investment bids, some of which could be equally, if not more, problematic than the one involving Nan Shan, especially after Taiwan opens more, and increasingly sensitive, sectors to Chinese investment.
It is no secret that under Chinese President Hu Jintao (胡錦濤) many “private” Chinese companies have either been renationalized, become dependent on loans by state-owned banks or have their board of directors controlled by former or current Chinese Communist Party officials loyal to the party. It is also well known that tracing a Chinese firm’s money to its source or determining who the real decision-makers are, is a daunting task requiring tremendous amounts of effort and time.
The combination of these two phenomena — an upsurge in Chinese investment bids in a number of sectors and the lack of transparency in the Chinese corporate system — could make it impossible for the commission or other regulatory bodies to handle future cases with the same level of professionalism it did throughout the Nan Shan case.
Added to the political pressure from an administration that gets high on good relations with Beijing, the commission could in certain cases be forced to cut corners or, for political considerations, look the other way. Intelligence agencies preparing threat assessment face this dilemma on a daily basis, where finite resources must tell signal from noise and consciously de-prioritize some information. In many instances, mere fatigue amid a constant barrage of threat information makes it possible for important information to slip through the cracks, sometimes with catastrophic outcomes.
There is a very high likelihood, therefore, that some Chinese investments that endanger national security, just as the one for Nan Shan did, will nevertheless be allowed — not because nothing untoward was found or because the threats were not apparent, but because regulatory authorities were overwhelmed.
Taiwan may have won this battle, but this war by other means is far from over.
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