Will Taiwan Relax Rules on Mainland Investment?

Filed in archive Private Equity on January 28, 2008

The possibility of more relaxed trade between Mainland China and Taiwan has become a topic of conversation in the wake of an election in Taiwan that Kuomintang (KMT) party control of the legislature there.

The issue is two sided. On the one hand there's the question of how much Taiwanese businesses are allowed to invest in the Mainland. Currently, China-bound investment is capped at 40 per cent of a local company's net worth, according to . Regulatory authorities in Taiwan are looking at alternative ways to measure a company's net worth. The idea seems to be that if a company's net worth can be assessed upward, the amount that it can invest in the Mainland will increase without any changes in the current policy or law.






Changes in the law seem likely, though. The KMT beat the Democratic Progressive Party (DPP) in this election largely based on economic issue in Taiwan. Mainland China is Taiwan's largest trading partner. There is a presidential election scheduled for March in Taiwan and both parties are now interested in improving the trade and investment with the Mainland.

The other side of the issue, however, is not so flexible. That's Mainland Chinese investment in Taiwan - particularly in Taiwan's real estate market. Real estate prices in Taiwan are already high and Taiwan's Mainland Affairs Council, which governs mainland investment in Taiwan, said that there was "no progress to report on plans to relax restrictions on Chinese investment in the island's real estate," according to one blog on Taiwan.