A New China-Taiwan Agreement Protects Investors

This is the VOA Special English Economics Report, from http://voaspecialenglish.com | http://facebook.com/voalearningenglish

China and Taiwan may disagree on political issues. But on Thursday they reached an agreement to protect investors. The agreement is important because China and Taiwan do not have diplomatic relations. China claims Taiwan as its territory. But Taiwan has been self-governing since 1949. The sides agreed to open new areas to investment and to inform the other within 24 hours if an investor is arrested. Talks on the deal have lasted two years. But they have been slowed because of the different legal systems in the two areas. The Chinese and Taiwanese negotiators signed the agreements in Taipei. They set up a way to negotiate, an arbitration mechanism. The deal also will open new areas of business and industry to investment. Chinese interests had held back investment because of fears of a change in Taiwan's government. Market experts expect Chinese investors to buy shares of Taiwanese companies listed on Taiwan's stock exchange. Experts think high-technology and travel industries will receive a lot of investment over the short term. Taiwanese share prices are considered undervalued although companies are doing well. Jack Huang is a lawyer in Taipei. He says China will buy stocks and seek partnerships with Taiwanese companies, especially in technology. Jack Huang says a lot of investment will come from Chinese companies or the Chinese government wealth fund. He says Taiwan's companies are mainly financially sound but stock prices are not too high. "Taiwan stocks," he says, "are undervalued."Taiwan's economy is over $430 billion. Taiwan permits Chinese investors to buy directly into Taiwanese companies in 247 industries. They can also buy up to a 10 percent share in most companies.Experts in Taiwan say China wants to invest in the island to support efforts at political reunification. The Nationalist Party, or KMT, of the former leader of China Chiang Kai-shek went to Taiwan at the end of the country's civil war in the 1940s. Today, Taiwan has several political parties. The main opposition party held power for eight years starting in 2000. President Ma Ying-jeou of the KMT has sought closer economic ties with the mainland. In 2010, China invested $1 billion in Taiwan after a deal that year reduced export taxes for both sides. Transcripts, MP3s and PDFs of our reports are online at voaspecialenglish.com. For VOA Special English, I'm Alex Villarreal.(Adapted from a radio program broadcast 10Aug2012)