Library of Congress

Law Library of Congress

The Library of Congress > Law Library > News & Events > Global Legal Monitor

Taiwan: Rules on Investment by China in Domestic Companies Eased

(Mar. 17, 2011) Taiwan's Ministry of Economic Affairs (MOEA) issued new rules on March 2, 2011, that ease restrictions on investment from mainland China in 42 additional sectors, including 25 manufacturing, 8 services, and 9 public construction sectors. The process began in June 2009, when Taiwan opened up 205 manufacturing, services, and finance sectors to Chinese investment. (Yu-Tzu Chiu, Taiwan Eases Barriers to Investments by China in Local Firms from 42 Sectors, 28 INTERNATIONAL TRADE REPORTER 398 (Mar. 10, 2011), Bureau of National Affairs online subscription database; Press Release, MOEA, Itemized List of Business Categories for the Second Phase of Opening Up of Mainland Capital Investment in Taiwan [in Chinese] (Mar. 2, 2011) [also has links to the lists for the three areas of manufacturing, services, and public construction].)

Sensitive high-technology industries, e.g., integrated circuits, liquid crystal displays, packaging and testing of semiconductors, and machine tools, are included among the newly opened sectors. The new rules prescribe that mainland Chinese businesses may have up to a 10% share of investment in Taiwan firms in the first three of these sectors, and up to 20% in machine tool firms. If investment is in the form of a technology joint venture, the mainland Chinese share must be under 50%, and industrial collaborative strategy proposals will have to be reviewed by the Taiwan government. For a number of sectors set forth under the new rules, moreover, the mainland investors are proscribed from having the capability of control over the investment project. Among the companies newly opened to mainland investors are Taiwan Semiconductor Manufacturing Co. and flat-panel maker AU Optronics Corp. (Chiu, supra; Itemized List of Business Categories for Mainlander Investment in Taiwan: Manufacturing Industries [in Chinese], MOEA website (last visited Mar. 14, 2011).)

Chinese investment in Taiwan firms thus far reportedly amounts to $139 million. Since the signing of the Economic Cooperation Framework Agreement (ECFA) between China and Taiwan on June 29, 2010, Taiwan has accelerated the process of facilitating that investment. (Chiu, supra; ECFA [texts available in Chinese & in English], ECFA website (last visited Mar. 14, 2011).) In this second round of easing restrictions on investment, according to Taiwan's Minister of Economic Affairs Yen-shiang Shih, “the government selected target industries in which Chinese investors are highly interested, based on Taiwan's economic strategies.” (Chiu, supra; see also Itemized List of Business Categories for Mainlander Investment in Taiwan: Service Industries & Itemized List of Business Categories for Mainlander Investment in Taiwan (Non-Contract) Public Construction Projects [both in Chinese], both on MOEA website, respectively (both last visited Mar. 14, 2011.)