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Invading Taiwan through investment
Tuesday, Sep 07, 2010, Page 8
The Financial Supervisory Commission¡¦s rejection last week of
a bid by a Hong Kong consortium to acquire Nan Shan Life Insurance Co was a
welcome development because it demonstrated the government can, when it wants,
protect the interests of Taiwanese.
Commendable though the decision was, however, the outcome was far from certain.
The commission¡¦s examination of the bid, spearheaded by China Strategic Holdings
and Primus Financial Holdings, took several months and a final decision was
delayed a number of times.
Admittedly, the case was a major one, as it affected about 4 million
policyholders, 4,000 employees and more than 34,000 insurance agents. Questions
surrounding the bidder¡¦s ability to ensure operational continuity at Nan Shan,
coupled with uncertainties about the nationality and political connections of
the ever-shifting shareholders and board members in the consortium, made the bid
an altogether problematic one. Over the months, the many reports prepared by
Democratic Progressive Party Legislator Pan Men-an¡¦s (¼ï©s¦w) office on the matter
were helpful in highlighting the scope of the problem.
Celebrations among those who opposed the deal could be short-lived, however, as
the Economic Cooperation Framework Agreement (ECFA), which is set to come into
force imminently, will usher in a new era of cross-strait investment. The
combination of China¡¦s substantial investment power, Beijing¡¦s long-term
political objectives via investment in Taiwan, and President Ma Ying-jeou (°¨^¤E)
administration¡¦s hankering for foreign investment, could present the commission
with an insurmountable challenge simply by virtue of the workload it may face.
In other words, even with the best intentions in the world, the commission¡¦s
finite resources could be overwhelmed by a sudden bombardment of Chinese
investment bids, some of which could be equally, if not more, problematic than
the one involving Nan Shan, especially after Taiwan opens more, and increasingly
sensitive, sectors to Chinese investment.
It is no secret that under Chinese President Hu Jintao (JÀAÀÜ) many ¡§private¡¨
Chinese companies have either been renationalized, become dependent on loans by
state-owned banks or have their board of directors controlled by former or
current Chinese Communist Party officials loyal to the party. It is also well
known that tracing a Chinese firm¡¦s money to its source or determining who the
real decision-makers are, is a daunting task requiring tremendous amounts of
effort and time.
The combination of these two phenomena ¡X an upsurge in Chinese investment bids
in a number of sectors and the lack of transparency in the Chinese corporate
system ¡X could make it impossible for the commission or other regulatory bodies
to handle future cases with the same level of professionalism it did throughout
the Nan Shan case.
Added to the political pressure from an administration that gets high on good
relations with Beijing, the commission could in certain cases be forced to cut
corners or, for political considerations, look the other way. Intelligence
agencies preparing threat assessment face this dilemma on a daily basis, where
finite resources must tell signal from noise and consciously de-prioritize some
information. In many instances, mere fatigue amid a constant barrage of threat
information makes it possible for important information to slip through the
cracks, sometimes with catastrophic outcomes.
There is a very high likelihood, therefore, that some Chinese investments that
endanger national security, just as the one for Nan Shan did, will nevertheless
be allowed ¡X not because nothing untoward was found or because the threats were
not apparent, but because regulatory authorities were overwhelmed.
Taiwan may have won this battle, but this war by other means is far from over.
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