MNEs? foreign direct investments are being done daily. China has become an important place to produce IT and 3C products. Taiwan?s investments in China exceed 2/3 of all oversea, especial electronic apparatus manufacturing industry. Therefore, how can the government help Taiwan MNEs to carry on the global overall arrangement, to get a ticket into China, and prevent spillover effect? This paper adopts the game theory to research MNEs? strategy under government policy. And use a design program software ?Mathematica 5.1? to deal with the model (ie. Cournot quantity competition). According to the function & figures to analyze government policy and MNEs? strategy. This research discovered: The government of home country, Taiwan, makes one powerful ?control policy? toward MNEs?, but not a reward policy. When the government adopts ?semi-control policy of FDI or export?, MNEs? investment causes technology spillover effect. Giving those firms of host country, China, a chance to enter the market and share the profit. In addition, when MNEs fall into the prisoner dilemma between FDI and spillover. The government could implement a ?control export policy? to force firms choose the FDI strategy, then reach Pareto optimality.
