I-B. FROM 1991 TO 2001: INDIRECT TRANSACTION PERIOD
4. Restrictions of Mainland Capital Investment and Indirect Requirements
Taiwan also restricted mainland capital investment. Relations Statute provides that Chinese person, legal person, organization or entity may not perform any act with legal effect in Taiwan without permission (from Taiwanese Government). Investment is of course an act causing legal effect. Since its promulgation in 1991, there has been no permission (legislatively or through specific approval) granted to Chinese to invest in Taiwan.
If a non-Chinese entity wished to invest in Taiwan, it must ensure that Chinese ownership was no more than 20%, or such entity itself was also barred from performing any act with legal effect in Taiwan. Therefore, indirect Chinese investment was subject to a twenty-percent ownership cap. This percentage restriction also applied if "the shareholder with substantial influencing power" of the investing entity was from mainland area, which made the fate of the subject investment project become only more unpredictable.