2021-10-04

Mainland Affairs Council to Amend Law to Prevent Chinese Investment

In order to prevent Chinese investors from using “figureheads” to make illegal investments in Taiwan, the Mainland Affairs Council has announced amendments to the “Act Governing Relations between the People of the Taiwan Area and the Mainland Area” (“the Act”), adding “Figureheads Clauses” to heavily punish Taiwanese individuals and entities who cooperate with such Chinese investors.
 
Recently, there have been numerous cases of Chinese capital being infused into Taiwan’s semiconductor industry.  For example, a Chinese company named “Bitmain” concealed its Chinese-funded background and established two companies, “WiseCore Technology Co” and “IC Link Limited Co”, in Taiwan without first obtaining approval from the Ministry of Economic Affairs Investment Commission, and recruited 200 IC design professionals to cover the key technologies of TSMC and MediaTek.
 
According to current regulations and judgments, Chinese-funded enterprises that violate regulations on engaging in business activities in Taiwan can only be sentenced to fixed-term imprisonment of less than one year, or a fine of less than 150,000 New Taiwan Dollars, or a suspended sentence, none of which have much of a deterrent effect.
 
In order to effectively prevent illegal activities, the Mainland Affairs Council plans to draft amendments to Article 40-1, Article 93-1, and Article 93-2 of the Act, adding “Figureheads Clauses,” to impose substantial penalties.
 
According to the draft amendment, if people in Taiwan act as “figureheads” to allow Chinese capital or enterprises invested by a third party to circumvent the stipulations requiring permissions to engage in business activities in Taiwan, the maximum penalty will be increased to three-years imprisonment, criminal detention, or a fine of less than 15 million New Taiwan Dollars.
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