The Ministry of Economic Affairs yesterday said that it has tightened control on Chinese investments in Taiwan due to national security concerns, following in the steps of countries such as the US and Japan.
Based on new regulations, Chinese military-owned companies and Chinese Communist Party-owned companies are banned from investing in Taiwan.
The regulations took effect yesterday, the ministry said.
Photo: Huang Pei-chun, Taipei Times
There is a worldwide trend of scrutinizing investments from China more closely due to concerns that China could gain access to key technologies and information, Investment Commission spokesman Su Chi-yen (蘇琪彥) said.
“The US, Germany, Japan and Australia have all been regulating Chinese investments more strictly, not just Taiwan,” Su said. “Protecting business intelligence is a matter of national security.”
Articles 3, 4 and 6 of the Measures Governing Investment Permits to the People of the Mainland Area (大陸地區人民來台投資許可辦法) have been changed to expand the definition of Chinese capital to close loopholes that could be used by companies seeking to skirt regulations.
Article 3 has been updated to consider funds from any company with more than 30 percent Chinese capital to be wholly Chinese owned as far as its subsidiaries are concerned, rather than 40 percent under the previous rules.
Another change in Article 3 targets “material control.” Under the old rules, a board of directors had to be made up of less than 50 percent Chinese nationals to be considered a non-Chinese company. Now the rule extends to any other organizations that might be in material control of the company.
“There have been examples of companies where the real decisionmakers are not on the board, but on an ‘executive committee’ that is technically under the board. Now those organizations are covered by the law,” Su said.
Article 4 has expanded the definition of “investment” to cover any purchase of Taiwanese companies or assets by a Chinese company, even in the absence of a stock deal.
“If the percentage of investment is very low, we would tell the company to keep us apprised of any changes in their ownership structure. If it is higher, then those companies would be barred from sensitive industries,” Su said.
“Chinese companies are restricted to investing in non-sensitive sectors such as retail and wholesale,” Su said.
Not only are technically advanced sectors such as IC design and telecoms off limits, but Chinese companies are also banned from investing in advertising and cultural industries due to “the unique dynamics of the cross-strait relationship,” Su said.
Any company found to be in contravention of the regulations would have to pay a maximum fine of NT$25 million and divest immediately, Su said.
The ministry also announced an amendment to the Regulations Governing Investment or Technical Cooperation in the Mainland Area (在大陸地區從事投資或技術合作許可辦法), tightening control of Taiwanese technology and intellectual property (IP) going to China.
“Selling or licensing Taiwanese technology or IP will now be considered ‘technical cooperation’ and must be approved in advance,” the ministry said in a release.
“This includes indirect technical cooperation through a third country,” it said, adding that the scope of the sectors targeted has also been widened from the IC sector to any “specialist technology.”
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