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Businessmen should not rely solely on one export market, says a senior official

A senior Taiwan official has warned against a worrying trend of 'blind investment'  in the mainland.

However, Deputy Minister of Economic Affairs Steve Chen Ruey-long admitted the effectiveness of government supervision over private investment was limited. The best they could do was to provide more information for businessmen to make rational  decisions,  he said.

Mr Chen said it was natural that the mainland had emerged as the largest market for overseas Taiwanese investment after it joined the World Trade Organisation.

The mainland had become the biggest importer of Taiwanese goods in the past 12 months, surpassing the United States, he said.

Twenty-five per cent of Taiwan's total exports in August were shipped to the mainland, which also attracted 57 per cent of the island's foreign investments.  The Taiwan business community had pumped US$100 billion in investment across the Taiwan Strait.

While further opening of the mainland allowed Taiwan firms to benefit from low production costs, Mr Chen warned that there were signs of excessive and blind cross-strait investment.

'We are a bit worried about the trend. Over-reliance on one export market is not a good thing. It will deal a severe blow to Taiwan if there are any changes in the mainland market. Furthermore, cross-strait relations are very unstable.'

Mr Chen said low production costs on the mainland had allowed Taiwanese companies to maintain their competitiveness by relocating part of their operations. 'But  ... some companies just rushed to the mainland before conducting a thorough market study.'

He said the influx of  investment would also lead to a drain of technological know-how. 'We must maintain our lead in science and technology. If we fail to do so, we will face fierce direct competition from the mainland.'

But Mr Chen admitted it would not be possible to control the flow of capital under a market economy.

The  government  hoped consultation with Beijing on matters such as investment protection would be stepped up. 'Given our important role in the mainland economy, there should have been regular consultative channels on trade and investment issues,' he said.

Mr Chen said strained cross-strait relations had had no major impact on foreign investment in the past year.

Given the strengths of the manufacturing sector and resilience of small and medium-sized companies, Mr Chen said the  economy had already recovered from the Asian financial crisis.

'Our greatest challenge is whether we are able to keep upgrading our industries and increasing their value-addedness in face of a growing competitive economy. We strive to build up an economy with firms rooted in Taiwan but with businesses and production bases spread across the world.'



Taiwanese warned over mainland investment