Mainland companies are allowed to invest in Taiwan

Chinese mainland companies can soon invest in Taiwan for the first time in six decades.

The mainland and Taiwan Sunday agreed on the long-awaited move at the third cross-Straits talks between the Association for Relations Across the Taiwan Straits (ARATS) and the Straits Exchange Foundation (SEF).

ARATS, representing the mainland, and the Taiwan-based SEF signed three agreements to replace chartered flights with regular ones, jointly combat crime and boost cooperation in finance.

Taiwan "sincerely welcomes" mainland companies and will expand the field for them gradually, SEF said in a statement. The details of the investment regulations will be "announced in one to two months", SEF Vice-Chairman Kao Koong-lian told a press conference.

Zhang Guanhua, deputy director of the Chinese Academy of Social Sciences' institute of Taiwan studies, said the move is "vital to the realization of direct trade across the Straits".

The central government has been calling for direct cross-Straits links in transport, postal services and trade since 1979, and allowed Taiwan companies to invest on the mainland in the 1980s.

But mainland companies were not allowed to invest in Taiwan. Only the mainland's real estate companies can enter the island's market at present, and that too under strict conditions.

"Since the top negotiators of ARATS and SEF have agreed on the investment issue and Taiwan has promised to take specific measures within two months, mainland companies should be able to invest in the island soon. This will turn the one-way investment process into a two-way affair," Zhang said.

The Taiwan authorities have been trying to boost cross-Straits relations since the end of last year and hope to seek the mainland's cooperation in industrial sectors, including in solar energy, herbal medicine, automobiles and aviation, Zhang said. It's these areas that are likely to be the first to be opened to mainland companies.

"Companies in these areas may have a greater chance of investing in Taiwan since the island authorities are eager to seek cooperation in these fields," Zhang said.

The Taiwan authorities, however, may not allow mainland investment in the island's pillar industries such as semiconductors for the time being, Zhang said.

"Nevertheless, as the cooperation progresses, I believe the scope for mainland companies will widen," he said.

ARATS and SEF signed an agreement yesterday to set up a regulatory framework for financial services firms to invest and do business in each other's markets. They agreed to gradually set up a clearing system for the Taiwan dollar and the yuan.

"This will drive new investment in the domestic market and bring strong interest from foreigners as well," Reuters quoted Standard Chartered economist Tony Phoo as having said.

"Even though there's nothing really (unexpected) that came out, it's something positive - something that's been holding back for too long," he said.

High hopes over the deals have supercharged Taiwan's stock market this year, making it the world's best performer after Shanghai.