Attracting Taiwan

We learn today from the China Daily that China is increasing their expenditure on infrastructure to 31 cities in order to attract Taiwanese businesses.

Thirty-one central and western mainland cities have been selected to strengthen cooperation with Taiwan companies, the spokeswoman for Taiwan Affairs Office of the State Council said on Wednesday.

The 31 selected cities, which will be developed as centers for labour-intensive processing trade industries, will benefit from preferential policies and financial support from the government to help them build necessary facilities, Fan Liqing said at a regular press conference in Beijing.

Between now and 2010, the government will spend 30 billion yuan ($4.37 billion) on infrastructure developments to help attract Taiwan firms to set up or expand existing operations on the mainland, she said.

Also by 2010, 19 more cities will be added to the program, taking the total to 50, the spokeswoman said.

"The government understands the importance of Taiwan companies based on the mainland and is keen to improve their investment and operating conditions", Fan said.

"We will also collect feedback from Taiwan companies before deciding on the final industrial structure," she added.

Taiwan companies are well aware of the major changes to the mainland's industrial policies, she said.

This blog is not a political blog. I have my own views on the cross-straits relationships. However, this article does highlight the dependence of Chinese economic growth on Taiwanese investors and other foreign direct investments. The economies of Taiwan and China are interlinked. Any discussions by any parties of the future of Taiwan and China relationships should always remember how highly-integrated the two economies are. Many people are excited by what they perceived as the potential economic benefits from improved cross-straits relations. However, the certainty of such benefits are not clear.

According to China Economic News (CENS):

Taiwan's China-bound investments witnessed a whopping annual growth of 145.12% to US$1.157 billion in May of this year, according to the statistics released by Investment Commission under the Ministry of Economic Affairs (MOEA).

CENS continues

In the first five months of the year Investment Commission approved China-bound investment totaling US$4.104 billion and outbound investment of US$2.136 billion, both showed rises. However, in the same period Taiwan-bound investment experienced an annual decline of 12.82% to US$3.037 billion.

How does this benefit the Taiwan economy? I am not sure. It certainly seems some investments are fading in Taiwan (here I assume they are referring to foreign direct investments or FDI). That may not be good for the economy. More money invested in China by Taiwanese companies means less money available for on-island job creation. This may even heighten the disparity between the rich and the poor in Taiwan (and this disparity is growing).

Anyway, it seems for the industrious, entrepreneurial minded Taiwanese person, with money, there are even more opportunities in China. However, as many failed Taiwanese investors in China would attest, here be dragons!

Article 1: 31 cities selected to attract Taiwan firms
Article 2: Taiwan`s China-bound Investment Shoots Up 145% in May