The Wall Street Journal-20080128-Taiwan Firms Look Beyond China

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Taiwan Firms Look Beyond China

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TAIPEI, Taiwan -- A growing number of Taiwanese manufacturers operating in China are shifting new investment to Southeast Asia or elsewhere, as the cost of doing business in China rises.

Taiwan's companies are among the world's biggest investors in China. Taiwanese executives say the shift has been gaining momentum since the second half of last year, when the Chinese government announced changes aimed at improving the living standards of local workers. The Taiwanese are also reacting to efforts by China to cool its economy, and a new policy that eliminates most tax breaks for companies from outside mainland China.

Many companies have massive operations in China that would be difficult to replace. But according to a survey of 2,000 Taiwanese businesses in China by the Taiwan-based Chinese National Federation of Industries, just over 50% are considering increasing investments in the mainland within one year, down from more than 60% in previous years.