Taiwan to allow mainland investment in auto sector

Taiwan plans to open up its auto sector and part of its flagship technology industry to investments from mainland China, an official said on Tuesday, as both sides forge closer trade ties to spur their economies.

Relations between Taiwan and China's mainland -- an auto-manufacturing giant -- have improved since the island's President Ma Ying-jeou took office, with the pace of cooperation accelerating over the past few weeks after both sides signed a financial deal and a corporate tie-up.

"The auto sector is on the list of sectors that we plan to open up to the mainland. This is our initial plan and it's not finalised yet," Emile Chang, deputy executive secretary of the investment bureau at the economics ministry, told Reuters.

Chang also said the Taiwan would also allow mainland China to invest in part of the wide-ranging information technology industry and Chinese medicine sector, but added details needed to be ironed out and the plans would still need to be approved by the cabinet.

News of potential mainland investments coming to Taiwan have pushed the island's stock market to 7-1/2-month highs and the Taiwan dollar to its highest level this year earlier in the week.

"Taiwanese businesses, many of which have long complained about the primarily one-way flow of funds, now see a strong need to attract capital from offshore in order to survive the global crisis," Moody's said in a report.

"Meanwhile, the removal of barriers in cross-border investment also benefits mainland investors as they now enjoy the added option of a relatively more familiar market."

Last week, mainland China said it was setting up rules to let its companies invest in Taiwan from May, while China Mobile, the world's largest mobile carrier by users, said it planned to buy a 12 percent stake in Taiwan's FarEasTone .

China has claimed sovereignty over self-ruled Taiwan since the end of the Chinese civil war in 1949. Beijing has vowed to bring the self-governed democracy of 23 million people back under mainland rule, by force if necessary.