Investors look to capitalise on cross-strait opportunities
Delegates to AsianInvestor’s Taiwan Institutional Investor Forum say they are taking a closer look at cross-strait investment opportunities on the back of Ma Ying-jeou’s re-election as president.
Ronald Edwards, an associate professor at Tamkang University, is among those who believe Ma’s reappointment in January will translate into four more years of pro-trade policies, with a number of industries in line to benefit.
Noting that Taiwanese investment in China has largely concentrated on manufacturing so far, Edwards points out: “The challenge is that low-skilled labour and cheap manufacturing in China has come to an end. The opportunity is to shift production to hi-tech goods and services where Taiwan has technological advantages.”
He cites Taiwan’s medical services industry as an example, pointing out that a number of people from Southeast Asia and mainland China travel to the island for medical procedures on the grounds that Taiwan has developed skilled use of advanced technology. He believes that the opportunities for such an industry to expand into mainland China are substantial.
On the equities front, Edwards names potential segments of interest as online communications, developers and sellers of environmentally friendly products, as well as health, education and entertainment services.
Jack Wang, head of global treasury sales at Chinatrust, adds agriculture, fishing, biotech, tourism and banking as other sectors worth noting.
But while financial sector liberalisation continues to evolve on both sides of the Taiwan Strait, Wang suggests it will take a long time for Taiwanese banks to become meaningful players in China, where the total market share of foreign banks is less than 2%.
“It will take much longer for us to get a foothold there and grow as the market develops. Likewise, it will not be easy for Chinese banks to establish themselves in Taiwan as the market has always been too competitive,” he adds.
Rex Wang, managing director at Daiwa Quantum Capital, sees key opportunities emerging on the back of the Economic Cooperation Framework Agreement -- a preferential trade accord designed to reduce tariffs and commercial barriers between the two sides -- with Taiwanese firms eager to capitalise on China's far more populous marketplace.
“For example, a pharmaceutical company may be able to sell its drugs in China after filing with the Chinese regulator and then treat both Taiwan and the mainland as homogenous markets,” he says. “Well-known Taiwanese consumer brands can also be sold at a premium in mainland China. And Taiwanese are very talented at integrating different parts to assemble precision machinery and put them into mass production.”
In terms of venture capital investment in China, Lucas Wang, partner at WIHarper Group and CEO of TMI Holding Group, observes that “emerging industries are developing at a much faster pace than anticipated in emerging markets”.
That means venture capital firms have to invest at an earlier stage in order to capture the sweet spot for exiting a deal. He offers the example of the LED industry in China.
"We made an investment back in 2006-2007," he notes. "However, as local demand for LED has grown so fast, by 2009-2010 LED companies no longer had any financing needs."