Public works industry
Cross-strait trade relations have steadily improved since the signing of the Economic Cooperation Framework Agreement. Taking the next step in Taiwan's continuing efforts to promote cross-strait industry partnerships and to attract more mainland investors, the Ministry of Economic Affairs recently announced that several new industry categories will be opened to Chinese investment. The announcement included 25 categories in the manufacturing industry, eight categories in the service industry and nine in the public works industry.
Chinese companies will be allowed to invest in these categories by forming joint ventures with Taiwanese companies or by investing directly in existing Taiwanese companies. In the case of joint ventures, the share of Chinese ownership will be capped at 50%. The rules related to direct investments will vary according to the nature of the industry and the target company. Taiwanese authorities will generally treat Chinese investments in regular industries as they do other foreign investments and will not attach any restrictions. On the other hand, the share of Chinese ownership will be capped at 20% for slightly sensitive industries and 10% for sensitive industries.
Investment in battery manufacturing, metal manufacturing, power equipment manufacturing and chemical manufacturing will not be restricted.
For investments in chemical engineering and machinery and equipment manufacture, Chinese ownership may not exceed 20% in an existing company or 50% in a joint venture. In addition, the Chinese company may not have control of the target company.
Chinese investments in integrated circuit manufacturing – including wafer foundry services, semiconductor packaging and testing and the manufacturing of circuit boards and metal-cutting machines – may not exceed 10% in an existing company and 50% in a joint venture. Again, the Chinese company may not have control. In addition, the Chinese company must provide a strategic partnership plan for review and approval.
Investment in tourist cable car services, parking lots, amusement parks and theme parks (except forest parks) will not be restricted.
Chinese ownership of target companies in the port industry (eg, wharf management) and the storage industry may not exceed 50% of an existing company. The Chinese company may not have overall control.
Public works industry
Chinese companies will be allowed to invest in civil airports and maintenance hangars, parking lots at public transport facilities, pollution control facilities, sewage facilities and international conference centres. Chinese companies may not own more than 50% of maintenance hangars and may not be the largest shareholder in such investments. Aside from this, investments in these categories will not be restricted.
The Ministry of Economic Affairs has promulgated various regulatory mechanisms for these investment categories. Investments that implicate sensitive technologies – such as integrated circuit manufacturing, semiconductor packaging and testing, as well as the manufacturing of liquid crystal display (LCD) panels, LCD panel components, metal-cutting machines and machines used in electronic and semiconductor manufacture, will be subject to ownership limits. Chinese companies must be upstream or downstream manufacturers or be in a position to help expand the marketing channels. They must also provide strategic partnership plans for review and approval, and are prohibited from assuming the position of or appointing key managers, controlling more board seats than all other shareholders and soliciting proxies prior to shareholder meetings.
The Ministry of Economic Affairs will soon impose similar regulations on investments in port and storage industries (ie, ownership capped at 50%, no assumption or appointment of key managers by Chinese investors, no more board seats than all other investors and no solicitation of proxies before shareholder meetings).
The Ministry of Economic Affairs will continue to evaluate its policies regarding mainland investments in Taiwan to suit the practical needs of the market.
For further information on this topic please contact Jason Chou at Lee and Li Attorneys at Law by telephone (+886 2 2715 3300), fax (+886 2 2713 3966) or email ([email protected]).