It is reported that China Mobile's bid for a 12 per cent stake in China's Taiwan's Far EasTone was dealt a blow. Taiwan would not immediately allow mainland investment into its telecommunications operators.

65 manufacturing sectors would be opened to mainland investors in the first phase of liberalisation.

These include the automobile, textiles and rubber industries, but not more sensitive sectors such as telecommunications, semiconductors or flat panels.

The announcement threatens to delay or even derail the first mainland investment in a listed Taiwan company.

State-owned China Mobile's announcement of its planned $533m investment in Far EasTone at the end of last month was seen as a strong signal that the often rocky relationship between Taiwan and mainland was fast improving.

There were hopes that the deal would be approved by both governments as it came shortly after the two sides issued a joint statement saying that Taiwan would, in principle, welcome mainland investment. The deal's announcement helped ignite a 15 per cent rally in the Taiwan stock exchange over the past two weeks.

The earlier joint statement did not detail which sectors would be liberalised.The detailed rules would likely be announced by the end of the month.

There will still be some reservations about opening mainland investment into Taiwan because of the special situation between the two sides. The first is that we have to consider the background of the incoming capital, and the second is that we have to establish some control over investments into sensitive or special areas.

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