The Executive Yuan yesterday relaxed the cap on investment in China, one of several measures the Cabinet said would facilitate the return of capital from China.
Instead of revising the regulation itself, the loosening took the form of adopting a different approach to calculating the cap rate and of conditionally offering extra allowances on top of the cap.
"Although the 40 percent cap remains unchanged, the government will review applications for investment in China under the regulations in a flexible way," Mainland Affairs Council (MAC) Chairman Chen Ming-tong (陳明通) said at a press conference following the weekly Cabinet meeting.
RULES
The new proposal stipulates that the government would allow a company to calculate the percentage of its China investment out of the aggregate net assets of its group -- if doing so allows it to make a bigger investment in China -- rather than the net assets of the company alone, as is the case under existing rules.
Under existing regulations, China-bound investment may not exceed 20 percent of a company's net assets if those exceed NT$10 billion (US$323.5 million); 30 percent when net assets are between NT$5 billion and NT$10 billion; and 40 percent when net assets are below NT$5 billion.
Loosening the ceiling has long been the subject of debate.
Proponents of a relaxed policy argue that the removal of the cap would help Taiwanese businesses compete with multinationals investing in China, while opponents worry that easing the cap would accelerate the hollowing-out of local industries and increase the nation's overreliance on China.
Emphasizing that the government had neither done away with nor raised the 40 percent ceiling, Chen said: "Our policy goal is to attract Taiwanese capital back from China."
TRADEOFF
For companies whose investment in China already exceeds the 40 percent ceiling, or those on the verge of reaching that level, the government will allow them to invest a further 40 percent in China for every extra dollar they invest in Taiwan.
Chen said the measures "provide incentives" for Taiwanese businesspeople to return to and invest in Taiwan because one reason they chose to keep their capital overseas was the fear that they might encounter difficulties remitting more capital to China.
Also included in the proposal was a measure offering much lighter penalties for investors in China who had remitted capital out of Taiwan via underground or illegal channels and a promise that the government would not investigate tax evasion schemes that may have resulted from investments in China.
In accordance with the Statute Governing the Relations Between People of the Taiwan Area and the Mainland Area (兩岸人民關係條例), companies that do not obtain approval from the government prior to investing in China can be fined between NT$50,000 and NT$25 million.
The Cabinet also slashed the fine for illegal investment, but said that this would not apply to industries that are still listed under restricted categories.
Businesspeople will be absolved by paying a fine of NT$50,000 if their investment in China amounts to less than US$20 million, and NT$100,000 for investments totalling between US$20 million and US$100 million -- as long as they accept the amnesty offer and register their Chinese investments, Chen said.
The government would determine the fine for violators whose investments in China exceed US$100 million or those industries connected to Taiwan's core technologies on a case-by-case basis, he said.
"We also know that many businesspeople refuse to remit money back home in a bid to avoid paying taxes, but I promise that the [MAC] will not refer such cases to the tax inspection agencies," Chen said.
The amnesty marks the fourth time the government has offered to help businesspeople legalize their operations in China, following similar moves in 1993, 1997 and 2002.
"Despite the amnesty offers, the actual number of investment projects made by Taiwan individuals and companies in China is still much higher than the registered figure," Chen said.
In related developments, the Cabinet yesterday also approved a proposal that would allow Taiwan-based overseas enterprises to launch initial public offerings on capital markets.
Taiwan-based companies located in China and enterprises with a majority of Chinese shareholders, however, are not included in the proposal, Chen said, citing national security concerns.
"We welcome Taiwan-based companies in Southeast Asia and in Silicon Valley in the US to list in those countries' stock markets, but given Taiwan's already great dependence on the Chinese market, we don't want Taiwan-based companies operating in China to issue stocks in Taiwan as a way to earn paper money," Chen said.
In response, Democratic Progressive Party presidential candidate Frank Hsieh (謝長廷) said yesterday he was in favor of further opening up the local market on the condition that Taiwan-centered consciousness be upheld.
While he supports the policy of allowing Chinese investment in Taiwan, Hsieh said it is important that Chinese capital focus on manufacturing.
Regarding Chinese investment in real estate, Hsieh said he was against Chinese capital manipulating the housing prices as it could sabotage the normal chain of supply and demand. The local real estate market could collapse if China changed its policies, he said.
Taking property values in Taipei City as an example, Hsieh said prices were so high that young people and people with an average income could no longer afford a place of their own.
Hsieh said that his proposal had displeased many and affected political donations, but that he would not change his views because it was the right thing to do.
Chinese Nationalist Party (KMT) presidential candidate Ma Ying-jeou (馬英九) yesterday challenged the government's decision to relax investment regulations and grant an amnesty to Taiwanese businesses two weeks before the presidential election, saying he doubted it was determined to follow through on its promises.
"The government did not relax the regulations during the past eight years. Announcing the policy before the election is clearly for electoral purposes," Ma said yesterday in Taipei.
"Such a policy is good, but the timing of the announcement is interesting ... We don't know whether the government would carry it out after the election," he said.
Ma said he agreed that the investment regulations should be relaxed in order to revive the economy, but added that the nation's interests should still be the priority.
While promising to open up the nation's real estate market to Chinese investors in no more than six months if he was elected president, Ma said he would provide supplementary measures to restrain the excessive growth of housing prices, such as giving people under the age of 30 a two-year zero-interest rate on the first home they purchase.
Additional reporting by Ko Shu-ling and Mo Yan-chih
NO HUMAN ERROR: After the incident, the Coast Guard Administration said it would obtain uncrewed aerial vehicles and vessels to boost its detection capacity Authorities would improve border control to prevent unlawful entry into Taiwan’s waters and safeguard national security, the Mainland Affairs Council (MAC) said yesterday after a Chinese man reached the nation’s coast on an inflatable boat, saying he “defected to freedom.” The man was found on a rubber boat when he was about to set foot on Taiwan at the estuary of Houkeng River (後坑溪) near Taiping Borough (太平) in New Taipei City’s Linkou District (林口), authorities said. The Coast Guard Administration’s (CGA) northern branch said it received a report at 6:30am yesterday morning from the New Taipei City Fire Department about a
IN BEIJING’S FAVOR: A China Coast Guard spokesperson said that the Chinese maritime police would continue to carry out law enforcement activities in waters it claims The Philippines withdrew its coast guard vessel from a South China Sea shoal that has recently been at the center of tensions with Beijing. BRP Teresa Magbanua “was compelled to return to port” from Sabina Shoal (Xianbin Shoal, 仙濱暗沙) due to bad weather, depleted supplies and the need to evacuate personnel requiring medical care, the Philippine Coast Guard (PCG) spokesman Jay Tarriela said yesterday in a post on X. The Philippine vessel “will be in tiptop shape to resume her mission” after it has been resupplied and repaired, Philippine Executive Secretary Lucas Bersamin, who heads the nation’s maritime council, said
CHINA POLICY: At the seventh US-EU Dialogue on China, the two sides issued strong support for Taiwan and condemned China’s actions in the South China Sea The US and EU issued a joint statement on Wednesday supporting Taiwan’s international participation, notably omitting the “one China” policy in a departure from previous similar statements, following high-level talks on China and the Indo-Pacific region. The statement also urged China to show restraint in the Taiwan Strait. US Deputy Secretary of State Kurt Campbell and European External Action Service Secretary-General Stefano Sannino cochaired the seventh US-EU Dialogue on China and the sixth US-EU Indo-Pacific Consultations from Monday to Tuesday. Since the Indo-Pacific consultations were launched in 2021, references to the “one China” policy have appeared in every statement apart from the
More than 500 people on Saturday marched in New York in support of Taiwan’s entry to the UN, significantly more people than previous years. The march, coinciding with the ongoing 79th session of the UN General Assembly, comes close on the heels of growing international discourse regarding the meaning of UN Resolution 2758. Resolution 2758, adopted by the UN General Assembly in 1971, recognizes the People’s Republic of China (PRC) as the “only lawful representative of China.” It resulted in the Republic of China (ROC) losing its seat at the UN to the PRC. Taiwan has since been excluded from