07/11/2006, 00.00
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Mainland bank to lend to Taiwan to encourage investments in China

An agreement to finance Taiwanese businesses investing in the mainland was signed yesterday. Meanwhile Guangdong's economy remains highly dependent on foreign investments whilst growing rapidly. Local incomes have not kept pace with overall growth.

Beijing (AsiaNews/SCMP) – A mainland bank is set to offer financing to Taiwanese businesses to encourage investment in China. The heads of Huaxia Bank and the State Council's Taiwan Affairs Office signed a co-operation agreement yesterday in Beijing to assist Taiwan enterprises. The bank will provide the funds through loans and other financial services over five years.

Chen Yunlin, director of the Taiwan Affairs Office, said that the agreement would improve the financial environment for Taiwan businesses and help them develop their enterprises on the mainland.

For years Taiwan's President Chen Shui-bian has been urging Taiwanese businesses to reduce their investment in the mainland out of concern for the island's independence.

Under current legislation such investment requires authorisation but businessmen have found ways to overcome restrictions.

Between 1991 and 2005 Taiwan has approved investments totalling US$ 47.2 billion, but by Beijing's reckoning the amount stands at US$ 89.6 billions.

Tseng Hsin-chao, a vice-chairman of the Taiwanese Businessmen's Association of Xiamen, said that Huaxia Bank's move was not enough of a stimulus to attract more Taiwan business people to the mainland.

"They don't make the decision based on the availability of capital," Mr Tseng said. "Their main considerations are a stable political environment and low crime rate."

Huaxia Bank has become the first commercial shareholding bank to set aside funds for Taiwanese businesses. It has joined a small group of mainland banks, including the Agricultural Bank of China, to do so.

In the meantime, Guangdong's economy will expand at US$ 2 billion more than Taiwan on average every year, governor Huang Huahua says. By 2010 it will have overtaken that of the island.

"Every year, our economy expands by US$ 3 billion, whereas Taiwan grows by US$ 1 billion or so," he said. "By 2010, we aim to have an economy of more than 3.35 trillion yuan and a per capita income of 34,400 yuan, double that in 2000," this in fulfilment of the region's Five-year Programme. However, despite rosy forecasts, the governor admitted that Taiwan will remain ahead in terms of scientific and innovative capacity.

Guangdong 's gross domestic product (GDP) passed that of Hong Kong last year, Guangdong Academy of Social Sciences economist Cheng Jiansan noted, but its per capita GDP still lagged behind, around US$ 3,000 last year against Hong Kong's US$ 25,000. Similarly, he explained that the region remains dependent on foreign investments. Half of its trade volume was generated by foreign-invested businesses. (PB)

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