No easy for Chinese mainland investors in Taiwan

• Source: The Global Times
• [10:04 May 21 2009]
• Comments

By Shi Jierui

According to Forbes, Taiwan's family-controlled auto parts suppliers will not be easy for automakers from the Chinese mainland to takeover or invest directly.

"I don't see a lot of Taiwanese families selling their stakes," said an analyst from a Taipei brokerage, who asked to remain unidentified due to company policy. "I think there is some sort of barrier."

In Taiwan, family-controlled means a family controls more than 20 percent of a company and the original shareholders of a listed company are from the founding family.

On May 6 the deputy secretary of the "investment bureau at the economics ministry" announced companies from the Chinese mainland could invest in part of the wide-ranging information technology industry which included the car sector.

After the announcement, Taiwan's big three family-controlled auto parts suppliers – Tong Yang Industry, TYC Brother Industrial and Depo Auto Parts Industrial – became very attractive to the Chinese mainland automakers. The Taiwanese companies have the technologies for engines, steering systems, braking systems, transmission, and suspension systems that the Chinese mainland automakers want.

But the statement about potential mainland investment in Taiwan auto parts suppliers is "only based on the idea or logic that the government is encouraging a closer relationship between the mainland and Taiwan," said Hong Kong-based analyst Ricon Xia, who tracks mainland automakers for Daiwa. It "doesn't mean that we have to buy from Taiwan."

Mainland automakers have to consider an array of commercial factors, such as profitability, and components for different and new product lines.

However, analysts still agree that building ties with the Chinese mainland would be good for Taiwan auto parts suppliers.