The Scramble to Court Taiwan Investors : Commerce: Taipei has $70 billion in foreign reserves. Some of its firms are looking overseas because of rising wages and land prices at home.

Chinese from Taiwan are finding themselves among the most courted potential foreign investors anywhere.

“Every other week, we see newspaper advertisements by foreign governments organizing investment-promotion seminars (in Taiwan) to explain the advantages of investing in their countries,” said K. H. Wu, deputy chairman of the China Trade Development Council.

The attractiveness of Taiwan’s investors is not hard to explain. The nation’s central bank holds about $70 billion in foreign exchange reserves.

“That’s why you see a lot of investment bankers hanging around hotel lobbies in Taipei,” said Steven R. Champion, president of International Investment Trust Co. in Taipei.

Other factors behind the investment push are Taiwan’s rising currency, soaring land prices and rising wages. Those factors are pushing the nation’s businessmen abroad to establish low-wage factories in a “self-defense” attempt to regain international competitiveness.

But some Taiwan businessmen are also looking at foreign investment as an offensive strategy--to expand business that is unthreatened at home.

Much of the new Taiwan investment is focused on tiny “transitory” factories that can be shut down overnight. Yet, with its huge foreign exchange reserves, Taiwan is still considered a major player in the worldwide investment game.

Although statistics are unreliable, Taiwan investors appear to be pulling ahead of Americans in their volume of new investment in Asia, said David L. Hendrix, Citibank’s vice president and country corporate officer for Thailand.

Taiwan businessmen not only have the capital but, along with their counterparts from Hong Kong, the advantage of cultural bonds with transplanted Chinese who control much of Southeast Asia’s economy.

“Throughout Southeast Asia, Chinese or people of Chinese origin play a big role, and they have some political influence. That’s why the investment climate is either not bad, or good, for Chinese businessmen,” Wu said. “Chinese businessmen can easily find a joint venture partner with whom it is easy to cooperate,” more so than any other foreign investors in Asia, he said.

One Japanese businessman in Taipei agreed, saying that Taiwan investment has exceeded Japan’s in the Philippines and Indonesia because “Japanese businessmen fear a ‘country risk,’ whereas Chinese businessmen from Taiwan have overseas Chinese to work with” in both countries.

How much the Taiwan Chinese are investing overseas is anybody’s guess.

There are no reliable statistics on incoming or outgoing investments, Champion said. Government regulations allow Taiwan Chinese to take up to $5 million out of the country without reporting, and family networks spanning the globe provide other loopholes through which even large investments often go unreported.

Taiwan’s Ministry of Economic Affairs put outbound investment for 1989 at $931 million, but even its own staff scoffs at that figure as too low.

“We can’t get any figures,” admitted Wang Yuchang of the ministry’s Industrial Development and Investment Center.

Mikio Hoshino, deputy manager of the Taipei branch of Japan’s Dai-Ichi Kangyo Bank, said he estimates the outflow at “between three and four times” the official statistics. The American Chamber of Commerce in Taipei estimated it at 10 times.

Indeed, Taiwan’s balance-of-payments statistics showed an outflow of $8 billion in 1989 in long-term capital and a trend toward $15 billion in 1990.

Although that sum includes investment in foreign stocks, bonds and real estate, a huge chunk is going into direct investment in manufacturing. Many of the new plants are being set up in mainland China--despite a Taiwan government ban on direct investment. Indirect investment, through Hong Kong or Japan, is legal.

Kim Woo Choong, chairman and founder of the giant Daewoo Group of South Korea, predicted that Taiwan Chinese will invest $50 billion in China in the next 10 years.

Hoshino of Dai-Ichi Kangyo Bank estimated that cumulative Taiwan investment in the mainland has reached at least $6 billion and is running “at more than $1 billion a year now.”

Wu of the semi-governmental Trade Development Council said about 700 small factories making products such as shoes, textiles, umbrellas, toys and bicycles have been set up in the coastal areas of the mainland, where wages are only one-tenth those on Taiwan.

Xiamen, a Chinese coastal city across from Taiwan, “is a ‘Little Taipei.’ Taiwan dollars are almost used in the streets,” said Winchell Craig, executive director of the American Chamber of Commerce in Taipei.

Even the Taiwan government-run Chinese Petroleum Corp. is openly discussing joint oil exploration with the mainland.

A nouveau riche form of Taiwan investment in foreign real estate has apparently calmed down. A three-year, 12-fold spiral of Taipei Stock Exchange prices ended with a bang last year, and “no longer do you find the ‘I’ll-take-three-of-those’ Taiwan home buyers in the California market,” Champion said. For a while, “California became the blue chip place to buy homes,” he said.

Taiwan, however, is grooming itself for a bigger splash.

For example, Yuen Foong Yu Paper Manufacturing Co., with more than 10 years of investment experience in Indonesia and five years with another joint venture project in Thailand, is preparing to invest “several hundred million dollars” in a forestry, pulp and paper project in Canada, said Scott Liu, executive manager for overseas investments.

The firm has raised $100 million to finance part of the deal, he said. Negotiations with local and national governments remain to be completed.

“A lot of Taiwan companies are studying the strategy of Japan--both its successes and failures,” Liu said. “I cannot predict how large Taiwan’s overseas investment will grow, but, yes, Taiwan will follow the pace of Japan.”