XIAMEN, CHINA -- While Western investors hesitate or even pull back, business people from Taiwan are pouring money into mainland China despite decades of bitter political acrimony between the mainland government and the island state.

Although China's official newspapers have not said a word, the next move is expected to come from Wang Yung-Ching, a plastics billionaire who proposes to build a multibillion-dollar petrochemical complex near Xiamen.

Wang, like other Taiwan investors, appears to be undeterred by the Chinese army's gunning down of protesters near Tiananmen Square last year. He appears to be inspired by a simple vision: big profits to be derived from China's offer of special concessions to Taiwan businessmen and, most important, from the use of cheap Chinese labor.

Wang, founder of the Formosa Plastics Group and perhaps the wealthiest man in Taiwan, has faced strong opposition to his proposed investment from Taiwan officials. So his visits to Xiamen were kept secret until early this year, when a Taiwan magazine disclosed the details.

The stakes are extremely high. According to reports from Taiwan, Wang is considering an investment of more than $7 billion in a naphtha cracking plant and other facilities near Xiamen. That would be more than seven times the estimated total of Taiwanese investment here for all of 1989.

The confrontation between Wang and the Taiwan authorities reached a new stage recently when Taiwan went public at a high level with its objections. Taiwan Premier Hau Pei-tsun told parliament the government is "doing its best to dissuade Mr. Wang from investing in the mainland."

The Economic Daily News in Taiwan said that Taiwan's central bank had instructed all Taiwanese commercial lenders not to join in financial arrangements for the Xiamen project.

The Taiwan government apparently fears that many petrochemical-related industries will follow Wang to the mainland.

Businessmen and officials in Xiamen say that Wang's project would be only the crest of a new wave of investment from across the Taiwan Strait. They said that if Wang comes into Xiamen, other investors who once feared the censure of the Taiwan government will overcome any doubts and hesitation that they harbored.

Some Chinese officials are convinced that even without a commitment from Wang, Taiwan investment will exceed American and Japanese investments in China within the coming year.

At the moment, Hong Kong is the leading investor in China, holding some 60 percent of the estimated total of foreign investments of about $16 billion. The United States and Japan are second and third.

Taiwan still bans direct investment and trade with mainland China, so many investors work through companies that they set up in Hong Kong or firms they incorporate in the United States.

Most of the investors already in Xiamen were driven here by two considerations: First, they can no longer afford the high costs of labor on Taiwan. Second, they feel at home in Xiamen, because they have ancestral ties with the people here, who speak the same dialect and share many customs with the Taiwanese living just across the strait from them.

Taiwan investment in Fujian Province, where Xiamen is located, amounts to more than $1 billion, or more than half of estimated Taiwanese investment on the mainland.

Most of the investors have made relatively small commitments so far. The Prince Chemical Industrial Co. is typical. Incorporated in the United States, the company, which exports cosmetics to the United States, has working funds of about $2.5 million. But company officials say they plan to more than triple their commitment by opening another branch in Xiamen with an investment of some $5 million.

Several Taiwan managers supervise a Chinese staff of some 300 workers at the cosmetics factory, where workers earn an average of about 350 yuan ($75) a month, which is good pay for China, but four times lower than wages in Taiwan.

One of the factory's Taiwanese managers, who asked not to be named, said he feels at home in Xiamen because the language and way of life are similar to what he is accustomed to in Taiwan.

The manager said that after the Tiananmen massacre in June of last year, Taiwan investment dropped off sharply for several months. But he said that in the fall, investors began to return to Xiamen and now arrive in a steady stream.

Chen Jiande, Xiamen's deputy director for Taiwan affairs, said that Taiwan investors are now signing a new investment contract every three days and that they are moving from short-term to longer term investments.

"In the beginning, they tended to lease workshops," he said. "Then they wanted to buy them. Now they want to lease the land so that they can build their factories. We now allow land to be leased here for 50 to 70 years."

Taiwan businessmen were not as shocked as Western investors by the brutality of the Chinese government crackdown on student-led protesters last summer. As a veteran Western diplomat said, the Taiwanese never expected China's Communist Party leaders to be anything but brutal.

The diplomat said that the motives of Taiwan investors were simple. As they see it, he said, "there's a profit to be made ... and there's a sense of dealing with fellow Chinese."

Despite bonds of language and culture, however, many Taiwan investors find that they encounter the same problems that bedevil other outside investors in China.

A representative of a small Taiwan firm dealing with agricultural technology said he has failed to make a profit in Xiamen because of bureaucratic obstructions and a low level of education among mainland workers.

"Things we take for granted on Taiwan, they can't do," said the investor, who asked not to be identified by name. "The attitude toward work here is entirely different from that {in} Taiwan. Everything moves very slowly here."