China allowing state enterprise to invest in Taiwan

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Cheaper to buy Taiwan than to invade?

China Makes First Taiwan Investment as Relations Thaw

by Tim Culpan and Janet Ong

Apr 30 (Bloomberg) — China Mobile Ltd. agreed to buy 12 percent of Far EasTone Telecommunications Co., the first investment by a Chinese state-owned company in Taiwan since a civil war ended six decades ago.

Taiwan’s benchmark Taiex index surged 5.7 percent, the biggest gain since Oct. 30, today on speculation more Chinese companies will invest on the island. The NT$17.8 billion ($529 million) purchase, announced by China Mobile yesterday, underscores how warming political relations between the two sides are leading to closer economic ties.

“This is a landmark deal. China Mobile will lead the way for other Chinese companies that have been waiting to invest in Taiwan but were hesitating,” said C.Y. Huang, vice chairman of Polaris Securities in Taipei. “This will open the floodgates for more Chinese investments into Taiwan.”

The Chinese government said this week it would end a ban on investments in the island on May 1 following an agreement to open cross-border operations for financial-services companies, expand direct flights and cooperate in fighting crime.

China Mobile agreed to pay NT$40 a share, or 14 percent higher than Far EasTone’s closing price yesterday, for the stake in Taiwan’s third-largest phone company. China Mobile will get a seat on the Taipei-based company’s board and become its second- largest shareholder, Far EasTone spokeswoman Alison Kao said. The deal is subject to approval from regulators and shareholders.