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Talk of the Day -- Rising risk of investment in China

2012/08/27 23:04:39

China has become less attractive to Taiwanese investors as investment risks are rising there, according to the results of a survey released Monday by the Taiwan Electrical and Electronic Manufacturers' Association (TEEMA).

The survey results show that China is gradually losing its role as the world's factory, said a TEEMA analyst.

The latest TEEMA survey found that China's investment climate has been deteriorating for four consecutive years, with wages surging rapidly and the labor force, especially of migrant workers, starting to shrink.

Taiwan Cement Co. Chairman Leslie Koo said in a speech at the European Chamber of Commerce Taipei that tapping into the vast Chinese market requires special strategies due to its special characteristics.

The following are excerpts from a special report in the Monday edition of the United Evening News on the findings of the TEEMA survey on China's general investment climate:

Besides rising wages and shrinking labor force, many Chinese manufacturing hubs have also been plagued by power shortage, financial crunch, increasing material costs and appreciation of the Chinese currency, said the latest TEEMA report.

Taiwanese businessmen operating in China, commonly known as "Taishang," have consequently become more reluctant to recommend TEEMA members to launch new investment projects in China, the survey found.

Major reasons behind such a trend include that China is no longer a paradise for labor-intensive industries and that investment has become less profitable there due to stricter Chinese restrictions on investment terms.

The latest survey also found a decline in approval rating of trade dispute settlements. While 69.38 percent of TEEMA members responding to the 2011 survey said they were satisfied with solution to their trade disputes in China, the ratio dropped to 62.93 percent in the 2012 poll.

"Taishang's" interest in expanding their operations in China has also been on a downward streak, declining from 53.03 percent in the 2010 survey to 50.95 percent in 2011 and 49.39 percent in 2012.

Changing business climate in China, coupled with bleak export prospects amid the lingering eurozone debt crisis, has deterred "Taishang's" interest in channeling more funds into the Chinese market.

The TEEMA survey also found that booming towns and cities in central and northern Jiangsu Province as well as Chongqing and Chengdu in western China and cities in the Bohai economic rim have emerged as the most attractive investment destinations in China.

In his speech at an European Chamber of Commerce lunch meeting, Leslie Koo said in his capacity as vice president of the Taipei-based Chinese Federation of Industries that 75 percent of Taiwan's outbound investment projects are located in Asian countries, with China topping the destination list.

Noting that many Taiwanese business groups have established comprehensive distribution networks in China, Koo said European luxury goods conglomerates can cooperate with them to facilitate their bid to tap into the Chinese market.

On the other hand, he said, European companies tend to have advanced green technology. He suggested that Taiwan's government help mediate partnerships between Taiwanese and European businesses in exploring the growing Chinese green market. (Aug. 27, 2012).

(By Sofia Wu)