Taiwan's intelligence chief on Thursday warned that one in every three Taiwanese companies based in China are facing closure this year due to rapidly decreasing profits, a media reports said.
Another 30 percent of Taiwanese firms are also "struggling" in China, Tsai Der-sheng, head of the National Security Bureau, told a parliamentary session without giving details, the United Evening News reported.
"There is both risk and opportunity to invest in China. However, we can not deny the benefits of economic exchanges between Taiwan and China despite the growing risks," he was quoted by Taiwanese news radio BCC as saying.
The bureau's officials were not immediately available for comment.
Taiwanese firms are facing rising labour costs in China since 2008 under new rules requiring fewer working hours and higher pay, according to a report by the bureau cited by the media.
"This year is particularly grave for Taiwanese businesses amid rising wages and growing production costs in China due to new government rules.
"Also the general investment climate is worsening under global economic problems," said William Chao, secretary-general of Dongguan Taiwanese Businessmen Investment Association in southern China.
Taiwan and China split in 1949 at the end of a civil war, and Beijing has refused to renounce its use of force to take the self-ruled island if necessary.
Despite lingering tensions, Taiwan has been a major investor in China in recent years, providing more than $100 billion in financing, according to some estimates, as well as crucial technological know-how.
Last year, the island's authorities approved 575 China-bound investment cases totalling $13.1 billion, officials said.
Ties between the two sides have improved markedly since the Beijing-friendly Ma Ying-jeou took power in Taiwan in 2008, leading to the signing of 18 deals to boost trade and civil exchanges.
