It's also narrowing Taiwan's tax base. Part of the solution is for China to make it easier for Taiwanese companies to raise money there. Besides making more loans available to Taiwanese companies that want to invest there, China should make it easier for them to list their mainland operations on Chinese stock markets, he argues. And Taiwan needs to allow banks to go to the mainland to monitor investments by their customers. Banks need to have a presence there, because Taiwanese companies in China face a higher degree of political risk than foreign ones.
China is an authoritarian state where a legal framework is lacking.
The political risk born by Taiwanese investors is far greater than their U.S. or European counterparts. It is no easy task for Taiwan's banks to monitor the activities of their customers operating on the mainland. The government here is already moving in that direction. A few weeks ago it said for the first time that it planned to allow the ten biggest institutions, including some large state-owned banks, to open representative offices in China. Perng says that Taiwan should do whatever it takes to keep its own businesses including manufacturers at home.