Taiwan stays cautious on Chinese tech investments

Taiwanese President Chen Shui-Bian reiterated on Tuesday his government's long-standing policy that governs investments by Taiwanese high-technology companies in China.

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Taiwan is committed to expanding business ties with China but will continue to restrict investments in key technology areas, Chen said. He spoke to journalists at the Foreign Correspondents' Club of Japan via teleconference from Taipei.

Taiwan and China separated amid civil war in 1949 and Beijing has threatened to attack the island if it moves towards independence. China has deployed between 650 and 730 missiles that target the island of 23 million people, Chen said, explaining that national security is a key priority for his administration.

"Economic security is an important element of our concept of comprehensive national security," Chen said. "Without economic security, we would not have national security."

Chen said that China and other countries offer investment opportunities for Taiwanese businesses as long as their roots and base remained on the island. Taiwanese investors in China "must have in their hearts their motherland," Chen said, referring to Taiwan.

In addition, businesses should keep in mind the potential risks of investing in China, which Chen said was "not a free market and not under the rule of law."

Increasingly, Taiwan's semiconductor and flat-panel display makers have eyed the possibility of establishing factories in China, where wages are lower and where many of their key customers already have manufacturing plants.

At present, one company, chip maker United Microelectronics Corp. (UMC), is under investigation for illegally investing in or transferring technology to Chinese foundry He Jian Technology (Suzhou) Co. Ltd.

"For Taiwan, some items in our trade are unrestricted but in other items we must be cautious and effectively manage the process," Chen said.

Taiwanese high-tech companies that want to invest in China face a long application process and numerous restrictions that define exactly what activities are and are not allowed. To date, only one Taiwanese chip maker, Taiwan Semiconductor Manufacturing Co. (TSMC), has won government approval to build a chip plant in China.

"In areas of highly sensitive technology, we are currently working on creating protects through the legislative process in Taiwan," Chen said. "In other words, we are not opening up to China unconditionally. We must do so with effective management."