TAIPEI (REUTERS) - Taiwan plans to enhance scrutiny over investment from Hong Kong to prevent illicit money from mainland China "infiltrating" its economy, after Beijing imposed a new security law on the Asian financial hub, a source with direct knowledge of the matter said.
Taiwan, claimed by China as its own, has traditionally treated investment from Chinese-run and supposedly autonomous Hong Kong and Macau as foreign investment, without the same controls and limits it has on money coming from mainland China.
But Beijing's contentious new security legislation for Hong Kong has been criticised by many Western nations and rights groups as undermining the city's autonomy, forcing democratic Taiwan to reassess how it does business with Hong Kong.
The new legislation targets crimes of secession, subversion, terrorism and collusion with foreign forces with up to life in prison and allows people to be sent to mainland China for trial.
Taiwan opened an office this month to help people fleeing Hong Kong after the new law was imposed.
Beijing denies stifling the city's freedoms or autonomy and has condemned Taiwan's plans to help people there.
Taiwan is on alert to ensure any influx of Hong Kong money is not secretly coming from mainland China.
"The line between Chinese money and Hong Kong and Macau money is less is less clear," the source, speaking on condition of anonymity, told Reuters.
"We hope that money from Hong Kong and Macau comes over here, but we don't want Chinese money to benefit," the source added.
"Investment from Hong Kong and Macau was originally treated as foreign investment, allowing them a greater investment scope, but now we now have to pay attention to who is really pulling the strings," the source said.
"We will make national security part of our considerations for investment from Hong Kong and Macau at our discretion."
Official investment from Hong Kong into Taiwan was worth US$150 million (S$208 million) in the first five months of this year, 4 per cent of total overseas investment in Taiwan.
Hong Kong has long served as an important trade and investment conduit between Taiwan and China, which have no diplomatic relations.
The source said Taiwan will tweak legislation as needed to give it the legal right to review more closely investment from Hong Kong on national security grounds.
Mainland Chinese investment is already tightly controlled in Taiwan, though the source said they will be "taking stock" of how much there actually is in eight key sectors, including banking, energy, telecommunications and science parks.
"We must consider whether it has been infiltrated" by China, the source added.
"We want to establish a defence mechanism."
The source said they were aware of cases of technology security companies providing information services in those sectors being funded by illicit Chinese money.
"China is fighting an information war and a hacker war against us," the source said.
"Information security is national security."