VZCZCXYZ0019
RR RUEHWEB

DE RUEHIN #3968/01 3310710
ZNR UUUUU ZZH
R 270710Z NOV 06
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 3194
INFO RUEHBJ/AMEMBASSY BEIJING 5993
RUEHHK/AMCONSUL HONG KONG 7213

UNCLAS AIT TAIPEI 003968 
 
SIPDIS 
 
DEPARTMENT FOR INR/R/MR, EAP/TC, EAP/PA, EAP/PD - DAVID FIRESTEIN 
DEPARTMENT PASS AIT/WASHINGTON 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: OPRC KMDR KPAO TW
SUBJECT: MEDIA REACTION: PRESIDENT CHEN SHUI-BIAN'S FUTURE AND 
CROSS-STRAIT RELATIONS 
 
 
Summary:  Taiwan's major Chinese-language dailies November 25-27 
focused on [Taiwan's] Advanced Semiconductor Engineering's 
announcement that it will sell 100 percent of the company's stock to 
the U.S.-based Carlyle Group for NT$39 [US$1.20] per common share, 
or a total of NT$179 billion [US$5.5 billion], to get around the 
government's restriction limiting Taiwan companies' investments in 
China to 40 percent of their net worth.  The other major focus of 
all Taiwan dailies is the allegedly luxurious life of President Chen 
Shui-bian's son, Chen Chih-chung, and daughter-in-law, Huang 
Rui-jing, in New York; and whether they will return to Taiwan to 
give birth to their baby to prevent President Chen from "being the 
grandfather of an American." 
 
In terms of editorials and commentaries, pro-status quo "China 
Times" said in its editorial that the year-end mayoral elections in 
Taipei and Kaohsiung will determine the future of President Chen 
Shui-bian and KMT Chairman Ma Ying-jeou.  Another "China Times" 
editorial said that the Purchase of [Taiwan's] Advanced 
Semiconductor Engineering by [the U.S.-based Carlyle Group] is an 
ominous sign for Taiwan's economy, and urged the government to 
adjust its cross-Strait economic policy.  The English-language, 
pro-independence "Taipei Times" editorialized that the government 
should be wary of companies that may attempt to delist their stock 
in Taiwan's stock market in order to circumvent China-bound 
investment regulations.  End summary. 
 
A) "Citizens in the Taipei City and Kaohsiung City are Determining 
the Nation's Future" 
 
The pro-status quo "China Times" [circulation: 400,000] 
editorialized (11/26): 
 
"... The political climate in general, haunted by the shadow of 
scandals involving high-ranking officials, in spite of the 
Presidential Office Allowance for State Affairs that involves 
President Chen Shui-bian and the First Family, or the special 
allowance case that involves KMT Chairman Ma Ying-jeou, has made the 
[mayoral] elections a decisive battle between 'rectitude and 
corruption.'  Regardless of whether it was [the] Blue [camp] or 
Green [camp], they all praised 'rectitude.'  This means that 
political practitioners have become more aware of the importance of 
not getting tainted in their careers.  It is certainly advantageous 
for the political culture as a whole. 
 
"However, it is also because of the shadow of scandals that involve 
high-ranking officials that the elections have tacitly become a 
confidence vote of Chen Shui-bian vs. Ma Ying-jeou. ... 
 
"... In other words, the moment that constituencies cast their votes 
on December 9 is a critical one that determines the DPP's next move. 
 Obviously, not only the party chairman might face having to 
consider resigning, but the Premier and Chen Shui-bian as well.  The 
maneuvers of the four DPP bigwigs, their relations with President 
Chen, and even the DPP's choice to completely distance itself from 
corruption might face a showdown. ..." 
 
B) "Taiwan's Ominous Economy Forecasted by the Purchase of Advanced 
Semiconductor Engineering" 
 
The pro-status quo "China Times" [circulation: 400,000] 
editorialized (11/27): 
 
"... From the development of industries across the Strait, 
industries [in Taiwan] have reached a critical decision point.  More 
than ten years ago, when the policy of 'no haste, be steady' started 
to restrict investments in China, China's development in industry 
was still falling behind relative [to Taiwan's].  Other than 
labor-intensive industries, China has been developing 
capital-intensive traditional industries, such as petrochemicals and 
automobiles.  Hence, Taiwan's high-tech industry, which is vital 
overall to Taiwan's industries, did not face any imminent crisis. 
But China has made speedy development in its high-tech industry 
through policy guidance, the influx of global capital and 
technology, and the establishment of factories in China by 
multinational companies. ... Taiwan's industries, however, were 
chained on the small island by the government and did not have any 
space to maneuver. ... 
 
"Whether the foreign company [i.e. the U.S.-based Carlyle Group] 
will complete the purchase of the Advanced Semiconductor Engineering 
remains to be seen, the matter is a serious warning to the 
government's cross-Strait relations and Taiwan's capital market.  If 
the government is not able to look squarely into its implications 
and make major adjustments to its policy, this might be a watershed 
mark in a downhill trend for Taiwan's industrial and capital 
markets." 
 
C) "Companies, like life, will find a way" 
CROSS-STRAIT RELATIONS 
 
 
The pro-ndependence, English-language, "Taipei Times" [circulation: 
30,000] editorialized (11/27): 
 
"The film [Jurassic Park] reminded many in the industry just what 
happened last Friday when ASE, the world's largest semiconductor 
packaging and testing company, confirmed it had received an 
indication of interest from a private equity consortium led by the 
Carlyle Group, paving the way for the Taiwanese firm to openly 
invest in China. 
 
"The reason why the analogy is a pertinent one is that if ASE agrees 
to the all-cash buyout by the Carlyle-led consortium -- and provided 
the government does not oppose it -- ASE will be transformed into a 
foreign company. At that point, Carlyle will likely apply to delist 
ASE from the Taiwan Stock Exchange, as long as it secures 75 percent 
of the outstanding common shares of the local firm. This will in 
turn allow ASE to circumvent the government's China-bound investment 
restrictions, especially the present 40 percent investment ceiling 
of a listed company's net value. ... 
 
"In the past, buyouts of local firms were usually an isolated 
phenomenon. Nowadays, the appetite of foreign investors is higher 
and businesses are keener on delisting. Several investment banks, 
including Goldman Sachs, have predicted more foreign investors will 
follow suit in shopping for other potential acquisition targets in 
Taiwan, especially those which are undervalued, such as United 
Microelectronics Corp, MediaTek, Quanta Computer and Lite-On 
Technology Corp. 
 
"Coupled with recent cases of companies that have announced capital 
reduction plans, the government should be wary of companies that may 
attempt to delist their stock in order to circumvent China-bound 
investment regulations. Life will find a way and so do companies. 
The publicized cases are just the tip of the iceberg." 
 
YOUNG