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China Watch: Slowed China-Taiwan Trade Talks Have Investors on Hold

Stocks in this article: GOOG QCOM IHG

They also benefited major hotel operators such as a Taipei branch of the U.S.-based Holiday Inn (IHG), which said it had earned money on the takeoff in tourism.

But Chinese firms can normally buy no more than 10% of a company listed on the bourse in Taipei. Taiwanese authorities still have the power to spike foreign-direct-investment bids case by case even if the rules give Chinese investors a conceptual all-clear.

The scant access to Taiwan's lucrative private equity and fast-appreciating real estate markets remains little changed since 2008.

If investment caps fall further, mainland Chinese are expected to buy shares of Taiwanese smartphone developer HTC Corp. (2498.TW) and flat-panel maker Chimei Innolux (3481.TW) because the share prices are cheap.

HTC has lost 66% over the past year and Chimei 64%, largely because of economic problems in their overseas markets.

As China is distracted with its leadership transition, the two sides have evidently not yet begun to talk about dropping import tariffs on up to 11,000 items. They got a promising start in 2008 by slashing tariffs on an initial 800 items, but obvious benefits are limited mainly to a few specialized petrochemical firms.

Finally, Taiwan believed that China had felt enough goodwill toward it since 2008 to not protest its pursuit of a landmark free-trade deal with Singapore. That country would become Taiwan's first major trading partner to ink a deal letting in exports, such as consumer electronics, at low tariffs.

Two years later there's no word on why the Singapore deal is taking so long or when it will be signed. Maybe Beijing is too busy to sign someone's dotted line -- or having second thoughts.

"We need more progress and more concrete items," says William Dong, head of Taipei equity and research with UBS, summing up the status of China-Taiwan tie-ups. "My view is it's going to have to wait a bit."

Among those waiting for progress is Volkswagen (VOW.F). The German carmaker has been scoping out Taiwan since 2010 as a would-be megafactory site, with one of its criteria being how liberal China-Taiwan trade rules become, the government and analysts say. VW's share prices have held around the same level over the past year.

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