(Bloomberg) -- China removed or relaxed wide-ranging restrictions on Taiwanese companies in a sweeping move to boost investment from an island that Beijing views as a breakaway province.
A total of 29 government agencies unveiled a plan outlining 31 measures to welcome Taiwanese investment in some of the nation’s most restricted industries, including energy, infrastructure, finance and entertainment, according to a statement on the website of China’s Taiwan Affairs Office. The moves, effective Wednesday, enable Taiwan’s companies to enjoy the same investment policies and tax benefits as counterparts on the mainland, it said.
The measure is “aimed at sharing the opportunities of the mainland’s development with Taiwan compatriots,” China’s state-run Xinhua News Agency reported.
The policy shift comes amid heightened tensions between Beijing, which has vowed to reclaim the island by force if necessary, and Taiwanese President Tsai Ing-wen, who helms the pro-independence Democratic Progressive Party. The changes could also give a boost to acquisitions on the mainland involving Taiwan-based companies, whose announced deal values fell to $962 million last year from a record $1.7 billion in 2016, according to data compiled by Bloomberg.
“This is Beijing’s most comprehensive resolution on equal treatment for the Taiwan people,” said Zhu Songling, a professor on Taiwan studies at Beijing Union University. “The integration of economy and society across the Taiwan Strait is a process of reunification, and economic unification is a way to lead to the the reunification of politics and regimes.”
Since Tsai took office almost two years ago, Beijing has worked to suppress Taiwan’s presence on the global arena. China has cut Taiwan’s participation in international organizations and lured away some of its diplomatic allies: In June, Beijing won over Panama, one of fewer than two dozen nations that recognize the government in Taiwan, prompting concerns that others like Vatican or Paraguay would follow suit.
Taiwanese technology companies stand to be among the biggest beneficiaries of the policy changes. Taiwan Semiconductor Manufacturing Co., the major producer of microprocessors for tech giants including Apple Inc. and Qualcomm Inc., is building up capacity in Nanjing to feed Chinese customers’ growing appetite for electronics.
Hon Hai Precision Industry Co., the world’s largest contract electronics manufacturer and maker of the iPhone X, operates massive plants in Chinese cities such as Zhengzhou, Chengdu and Shenzhen. Chairman Terry Gou plans to list unit Foxconn Industrial Internet Co. in Shanghai and use the proceeds to fund new-technology projects in areas including artificial intelligence manufacturing, Internet of Things and cloud service.
Companies from Taiwan will also gain unparalleled access to China’s growing entertainment industry. The new rules exempt the island from quotas set by China on all non-mainland content and production, including restrictions on imported content, and casting and financing of co-produced films and television dramas.
A summary of some of the measures to lure Taiwanese companies:
- Entitled to 15 percent corporate income tax for high-tech companies and full value-added tax refund for research and development procurement
- Permission to participate in urban infrastructure projects and government procurement
- Permission to invest in partial privatization of state-owned enterprises or mixed-ownership reform through joint ventures as well as mergers and acquisitions
- Priority in industrial land supply at preferential costs
- Entitled to same tax rebates for agricultural machinery and other preferential agricultural policies as mainland firms
- Permission to cooperate on mobile payments with China UnionPay and other non-bank payment companies
- Permission to offer syndicated loans supporting the real economy
©2018 Bloomberg L.P.
With assistance from Keith Zhai, Jing Yang de Morel, Gao Yuan