Newsletter
RESTRICTIONS ON MAINLAND-INVESTED COMPA-NIES MAY BE RELAXED
Article 73 of the Statute Governing Relations Between the People of the Taiwan Area and the Mainland Area, as currently in force, provides that a foreign company in which mainland Chi-nese individuals, juristic persons, civic groups or other organizations hold more than 20% of shares, may be refused recognition in Taiwan, and recognition already granted may be revoked. Therefore, at present, any foreign company in which mainland Chinese investors hold more than a 20% share may find it impossible to obtain recognition and to set up a branch office in Taiwan.
The Home and Nations Committee of the Leg-islative Yuan recently approved a draft of a ma-jor amendment to the statute that would raise the above threshold for mainland capital to 33%, and empower the Mainland Affairs Council (MAC) to make regulations governing approval for mainland investors to invest in Taiwan. In other words, foreign companies with a mainland holding of less than 33% would be able to apply for recognition and establish a branch office in Taiwan under the same rules as apply to foreign companies generally, while applications from companies with a mainland holding of over 33% would be handled under regulations to be drawn up by the MAC.
It is understood that the MAC, the Ministry of Economic Affairs and other relevant agencies have already drafted the above investment ap-proval regulations, and intend initially to open the door to indirect investments.
As for the degree of future liberalization that is planned, mainland-invested businesses will at first mainly be allowed entry into service sectors, in line with WTO demands for the opening of service industry markets. Of the 58 types of business for which liberalization is currently planned, none is in manufacturing.