Booming trade between Taiwan and mainland China is the main factor driving vigorous investment in Hong Kong. For years, the colony has served as a vital in termediary in cross-Straits business deal ings because the ROC government requires that Taiwan-mainland trade be conducted indirectly. The colony is the primary import-export link across the Taiwan Straits. Last year, US$4.7 billion worth in Taiwan-made exports reached mainland markets through Hong Kong, while US$1.2 billion in mainland exports reached Taiwan through the same route.
In addition, many local companies have set up subsidiaries in the colony to serve as communications intermediaries and mother companies for mainland in vestments. These Hong Kong subsidiaries also arrange cross-Straits shipping and exportation of Taiwan-invested mainland products. John C.I. Ni, the ROC's trade representative in Hong Kong, estimates there are now more than 2,500 Taiwan invested companies in Hong Kong, 90 percent of which are connected with mainland businesses. Big-name Taiwan companies with such subsidiaries include the Formosa Plastics Group, Far Eastern Textile, Teco Electric & Machinery, Kunnan Enterprise, San Yang Industry, UB Office Systems Inc., Pacific Electric Wire and Cable, Cheng Shin Rubber, and Evergreen Marine Corporation.
To help smaller Taiwan investors get in on the action despite soaring office rents in Hong Kong, the China External Trade Development Council (CETRA), Taiwan's semi-official trade promotion organization, set up a Taipei Trade Center in Hong Kong last year. The center provides offices and joint secretarial services to local companies. Even before its formal opening in April 1991, the center's twenty offices had been rented out entirely by Taiwan companies. To meet the huge demand, at least four Taiwan com panies have also set up similar in stitutions in Hong Kong.
Taiwan's vigorous cross-Straits investments, as well as booming Taiwan-mainland China economic relations, have fostered substantial business opportu nities for Hong Kong financial in stitutions. These provide Taiwan investors with such services as letters of credit and loan extensions. In order to take advantage of these services, most Taiwan investors now collect foreign exchange earnings from their mainland operations in Hong Kong and use the colony as point of origin for letters of credit. The three com mercial banks run by the Taiwan Provincial Government-First Commercial, Hua Nan, and Chang Hwa-have obtained the approval of the Ministry of Finance to set up Hong Kong liaison offices. And the at tractive opportunities for financial institu tions have recently prompted several local companies, including China Development Corp. and San Yang Industry, to acquire Hong Kong banks.
Companies here are moving into the colony's real estate market as well, be lieving that the uncertain future of the colony has created many opportunities for profits. Evergreen Marine Corp. estab lished Evergreen International Hotel in 1991. Meanwhile Pacific Construction Corp., a subsidiary of Pacific Electric Wire & Cable, spent US$20.5 million to acquire 35 percent of a large real estate company in Hong Kong and will also participate in the construction of the colony's new airport, now in the planning stages. Last year, Tsai Chen-nan, former chairman of Cathay Investment and Trust, invested more than US$12.8 million in Hong Kong office buildings, and UB Office Systems Inc. purchased a US$50 million office building. Some Taiwan businessmen are also using their invest ment in Hong Kong real estate firms as a stepping stone to mainland China's real estate market.
The strong presence of Taiwan in vestors in Hong Kong in part reflects their confidence in the colony's ability to retain its status as a major trade and financial center in Asia after 1997. Many local professionals believe that due to the backward financial, telecommunications, and transportation facilities in mainland China, Hong Kong will still serve as the intermediary for Taiwan-mainland China economic links even after its transfer to the communist regime. John Ni expects Taiwan businesses to keep investing in Hong Kong because the prosperity of the colony benefits all parties.
If so, Hong Kong will continue to serve as the catalyst for the further devel opment of the economic links across the Taiwan Straits. The difference is that when sovereignty of the colony is trans ferred to the communist regime, Hong Kong will cease to be used as a buffer in cross-Straits trade.