A boom in the mainland's contracted Taiwanese investments illustrates the trend, said Liu Xueqin, a senior researcher with the Chinese Academy of International Trade and Economic Co-operation.

Taiwanese investors pledged an investment totalling US$2.73 billion to the mainland in the first nine months of this year, up nearly 21 percent on the same period last year, according to the statistics from the Ministry of Foreign Trade and Economic Cooperation (MOFTEC).

The rise contrasts with falls in 1997 and 1998 and the 13.2 percent growth rate of last year. Experts expected investment totals to jump again in October but official statistics were not available.

With low labor, land and materials costs and a shared language, the Chinese mainland has been a first choice investment location for Taiwan's business people, despite tensions across the Straits.

Experts said Taiwan's businesses are more interested in the mainland's huge market potential and steadily improving investment environment than any political differences.

"Although some Southeast Asian countries are able to offer lower costs than China now, they have a smaller market demand. And that has made Taiwan's investors choose the Chinese mainland instead," Liu told China Daily.

China's commitment to conform to WTO rules and international practices, including its recent revision of laws and rules concerning foreign-funded companies, helped boost Taiwanese investors' confidence in the mainland market, she added.

The National People's Congress, the country's top legislature, recently voted to delete several clauses requiring foreign-funded companies to maintain foreign exchange balances, export much of their products and give priority to domestic suppliers.

"Deteriorating internal conditions in the island are also helping to boost Taiwanese investment in the Chinese mainland," said Liu.

The decision not to construct a fourth nuclear power plant on the island recently triggered off political chaos. Fears of a local financial tumult have sent Taiwanese stock markets tumbling. On top of this, Taiwanese businesses battle with high production costs due to a lack of electrical power and strict environmental protection requirements.

"Many Taiwanese business people that I know have intentions of diverting their capital out of the island," Liu said, predicting that Taiwan's investment in the mainland will see a rapid rise in the next few years.

Trade officials are more conservative and don't expect a breakthrough in Taiwanese investment in the short term.

"Taiwanese authorities' interference will make a rapid increase impossible," an official with the MOFTEC said.

The mainland made use of US$1.49 billion from Taiwan in January-September, down 21.5 percent on the same period last year, he noted.

The official added that Taiwan's economy is not as bad as some people think, pointing to the island's rapid trade increase as an indicator of a healthy economy.

(China Daily 11/20/2000)