Taipei, Aug. 12 (CNA) The signing of an investment protection pact between Taiwan and China may not be beneficial to Taiwan's economy if the current investment flow cannot be balanced, officials at Bank of America Merrill Lynch said recently.
In a research note dated Aug. 10, Merrill Lynch officials said that the bilateral investment flow remains unbalanced and one-sided because investment from China to Taiwan continued to be treated more prohibitively than outbound investment to China.
In 2011, Chinese investment to Taiwan totaled US$43.7 million, compared with the US$13.1 billion of Taiwanese investment to China, according to Merrill Lynch's data.
For the first six months of 2012, Chinese investment to Taiwan increased to US$122.2 million, but the amounts were still less than the US$5.2 billion of Taiwanese investment to China, the U.S. bank said.
If the investment pact encourages the Taiwanese to keep investing in China but not in Taiwan, this signing may not be beneficial for Taiwan's economy, said Marcella Chow, a Hong Kong-based economist at Merrill Lynch.
"It may defeat the government's potential stimulus plans to encourage local Taiwanese businessmen based overseas to invest in Taiwan," he wrote in the note.
"As a result, further deregulation of foreign direct investment is required to substantially promote and attract investment from China in order to narrow the current imbalances," Chow said.
However, Chow added that a closer cross-strait relationship will probably revive consumer sentiment and consumption, albeit slightly, as he expects the overall sentiment to be overshadowed by the disappointing macroeconomic data.
During the eighth round of talks in Taipei on Aug. 9, the heads of Taiwan's semi-official Straits Exchange Foundation and its Chinese counterpart, the Association for Relations Across the Taiwan Straits, signed an investment protection pact and a customs cooperation agreement.
These are the results of follow-up negotiations since the 2010 landmark Economic Cooperation Framework Agreement (ECFA), and the signing serves as a foundation for further discussions.
With the latest two agreements signed, Taiwan and China have inked 18 agreements since the two sides resumed dialogue in 2008.
(By Jeffrey Wu)