Really Going WTO?  (c) Simon Xi Zhang, 2002

II-A. HIGH VOLUMES OF TRADING AND CAPITAL FLOWING ACROSS TAIWAN STRAIT

 

Chinese data shows that from 1989 to 1999, the sum of investment from Taiwan totaled $23.86 billion in real-utilized term and this constituted 7.76% of all foreign direct investment (FDI) in China during that period. Taiwan ranked the fourth largest investor after Hong Kong (50.32%), US (8.34%), and Japan (8.09%)[32]. According to Taiwanese data, since 1992, China has become its largest overseas investment destination.

In addition, many Taiwanese register shell companies at British Virgin Islands in recent years and channel the capital towards China[33]. Of all the outgoing Taiwanese overseas investment, Caribbean-destination counted 15% in 1995 and rose to 29% in 2000, second only to mainland-destination (34% in 2000)[34]. From China's perspective, British Virgin Islands contributed 0.8% of total incoming FDI in 1995; this percentage rose nearly ten-fold to 8.46% in 1999, surprisingly exceeding Taiwan-source contribution (8.19% in 1999)[35]. Neither side counts the British Virgin Islands capital-flow as "towards mainland" or "from Taiwan" in census. Based on Chinese data, and combining Taiwan and British Virgin Islands contributions together, Taiwan has become actually the second largest (10.81%) source of FDI in China during the time before 1999.

The data listed above shows the interdependence between Taiwan and China regarding their respective investment activities and economic development. The important role played by British Virgin Islands also indicates the burden created by Taiwan's "indirectness policy", and, speaking realistically, the ineffectiveness of such policy -- Taiwan's reliance on mainland is not avoided by those cumbersome indirect-clauses in the law. 


[32] Table: Largest Fifteen Foreign Investing Country/Area in China (as before 1999), September 22, 2000. Ministry of Foreign Trade and Economic Cooperation, PRC (hereinafter MOFTEC).

[33] According to President of Taiwanese Business Council in Shanghai, of all investment flowing from British Virgin Islands to China, at least 90% is Taiwanese capital. This warrants counting British Virgin Islands -- China capital transfer as Taiwan -- China investment. See, note 31, supra., footnote 7.

[34] See, note 31, supra., p.4.

[35] Table: Largest Fifteen Foreign Investing Country/Area in China (1999), September 22, 2000, MOFTEC, China.