Taiwan inches toward approving cracker projects in China

12 January 2005 09:51  [Source: ICIS news]

SINGAPORE (CNI)--The Taiwanese government could be showing signs that it might approve Taiwanese investments in Chinese cracker projects, but the actual investments are unlikely happen in the near term, an official from the Petrochemical Industry Association of Taiwan (PIAT) told CNI on Wednesday.

The Ministry of Economic Affairs has informally approved two Taiwanese investments in cracker projects in China recently, she said. But the final approval must come from the Mainland Affairs Committee, which has previously been opposed to heavy capital outflow to China and is unlikely to change that stand, she pointed out.

Taiwan's government prohibits capital-intensive investments in China, and the Chinese government requires foreign companies to form joint ventures with local companies for refinery and cracker projects. Both factors have prevented Taiwanese companies from investing in cracker projects in the past few years.

A consortium of downstream Taiwanese companies are interested in either building a cracker or buying a stake in a cracker project in China. Formosa Petrochemical Corp (FPCC) is also interested in building a cracker at Ningbo in Zhejiang province, China.

"Nothing is certain yet because the approval from the ministry was informal. We have to wait for the formal approval, and the Mainland Affairs Committee has not changed its stance against cracker investments in China," she said.

The ministry is now considering two investment proposals for China. One is for the cracker projects and the other is for liquid crystal display (LCD) projects, she revealed.

"The ministry will give priority to the LCD projects in China because they require less investments," she added.

In addition, recent developments regarding Chinese Petroleum Corp's (CPC) Taixi cracker and refinery project in Taiwan may prevent a quick approval from the government for Chinese cracker projects.

The 1.2m tonne/year Taixi project has recently gained support from the government and the local downstream companies, which are keen to buy a stake in the project to secure a stable feedstock supply.

By: Edgar Ang
+65 6780 4359

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