'Taiwan Plans Tighter Scrutiny Of HK Investments'

Taiwan plans to enhance scrutiny over investment from Hong Kong to prevent illicit money from the mainland China "infiltrating" its economy, a source with direct knowledge of the matter said.

Taiwan has traditionally treated investment from Hong Kong and Macau as foreign investment, without the same controls and limits it has on money coming from the mainland.

But the passing of a new security law in the SAR is forcing Taiwan to reassess how it does business with Hong Kong.

The new legislation targets crimes of secession, subversion, terrorism and collusion with foreign forces with up to life in prison and allows people to be sent to the mainland for trial.

"The line between Chinese money and Hong Kong and Macau money is less is less clear," the source told Reuters, speaking on condition of anonymity.

"We hope that money from Hong Kong and Macau comes over here, but we don't want Chinese money to benefit," the source added.

"Investment from Hong Kong and Macau was originally treated as foreign investment, allowing them a greater investment scope, but now we now have to pay attention to who is really pulling the strings," the source said.

"We will make national security part of our considerations for investment from Hong Kong and Macau at our discretion."

Official investment from Hong Kong into Taiwan was worth US$150 million in the first five months of this year, 4% of total overseas investment in Taiwan.

Hong Kong has long served as an important trade and investment conduit between Taiwan and and the mainland, as the two sides have no diplomatic relations.

The source said Taiwan will tweak legislation as needed to give it the legal right to review more closely investment from Hong Kong on national security grounds.

Mainland investment is already tightly controlled in Taiwan, though the source said they will be "taking stock" of how much there actually is in eight key sectors, including banking, energy, telecommunications and science parks.

"We must consider whether it has been infiltrated," the source added. "We want to establish a defence mechanism."

The source said they were aware of cases of technology security companies providing information services in those sectors being funded by illicit Chinese money.

"China is fighting an information war and a hacker war against us," the source said. "Information security is national security." (Reuters)