Taiwan Firms in China to 2008... big numbers

Stats of the Day, from the abstract to The Estimation of Aggregate Statistics for Taiwan-Invested Enterprises in China: 1988-2008

"Between 1988 and 2008, Taiwan-Invested enterprises (TIEs) contributed enormously to the economic development of China. However, the official statistics do not reflect the actual status of TIEs in China. Through literature compilation, statistical analysis and use of appropriate formula for estimation, the aggregate statistics of TIEs in China at the end of 2008 were estimated at: USD166.5billion Taiwanese direct investment in China; USD116.6 billion fixed asset investment of TIEs in China; USD1,965.3 billion cumulative international trade of TIEs in China; and 14.34 million people employed by TIEs in China."

From this journal.
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Taiwan News: Don't lower standards for the Taishang

Taiwan News hit another high note today with its response to the suggestion that the economy be dumbed down for returning businessmen from China...

Even though it is questionable whether the "cost-down" mentality or even "sweatshop" management practices, which were fostered during four decades of KMT-imposed martial law rule, have truly left Taiwan, it is indeed critical to Taiwan's economic future to block a "return immigration" of the draconian factory management and low wages and "cost - down" strategies.

The key issues is what will such Taiwan companies and investors do now that they must confront the visible limit point of the viability of this exploitative model in, at least, the coastal zones of the PRC and what will be the policy of our government.

Unfortunately, successive Taiwan governments, whether under the KMT or the centrist Democratic Progressive Party, have been unwilling or unable to wean most Taiwan companies from their addiction to low wage and cost-down business strategies and adopt strategies aimed at boosting value added and total factor productivity, quality, environmental protection, creative designs and brand name marketing that could promote high wage and quality employment.

The latest wave of upward wage pressure in the PRC has again led to calls by many Taiwan conglomerates and "market fundamentalist" economists for the KMT government to attract Taiwan businesses (often known as "Taishang") to "return home" with "favorable conditions."

Revived 'social dumping'

Such incentives include lower corporate income taxes, lower inheritance and gift taxes, favorable rents in industrial zones, streamlined entry into "free trade port zones" and expanded quotas for the use of foreign labor and, by no means least, the publically voiced possibility of "delinking" the wages of foreign labor from Taiwan's basic wage of NT$18,400 a month as mandated by the Labor Standards Law.

Despite statements by MOEA officials urging Taiwan companies to invest in high technology or environmentally friendly "green" products and services, the structure of such perks too clearly presuppose assistance to Taiwan companies in maintaining "cost down" business strategies if they return home. Indeed, the "Cross-Strait Economic Cooperation Framework Agreement" pushed by President Ma Ying-jeou's KMT government also falls into this dilemma by focussing government attention on tariff cuts instead of industrial upgrading.

In our view, Taiwan companies which aim to bring back "cost-down" and "low wage" production methods should be politely encouraged to invest in Southeast Asia or Central and South America or South Asia and help diversify our export markets.

The fact of the matter is that the only and short-term "benefit" of allowing Taiwan companies to bring back this "successful model" will be statistical as positive "multipler" effects for our domestic economy will be minimized if wages are kept specially low in such special zones.

Even more worrisome is the likelihood of further delays to Taiwan's urgent project of industrial upgrading due to the "opportunity cost" imposed by the granting of official incentives to "cost-down" business operations and the resulting squeezing out effect on assistance to high-value added operations.

However, the gravest damage would come if the KMT government caves into pressure from pampered conglomerates and agrees, despite current denials, to directly or indirectly delink the wages for foreign workers in free port zones or elsewhere in Taiwan from the basic wage.

The government's mentality is that it must compete by slashing costs -- labor costs, specifically. It's a move toward the future, if the future is the 1980s, another of the many status quo policies of the KMT Administration. Yes, it is 2010 and we're exporting petroleum products to China, made out of government subsidized oil, with subsidized water and electricity, in factories with the most limited environmental oversight, owned by firms whose taxes just got slashed. Welcome to the free market: what we're really exporting to China is our tax dollars.

Several articles in recent years have pointed out the growing soft power of Korea (2007, 2008, 2010) -- with its TV shows and songbirds (like the Wonder Girls and Girls Generation about whom a local newspaper remarked "they could conquer North Korea with their legs"). Taiwan has nothing like this; its music culture at best is parochially focused on the Chinese speaking world and its talented film culture is tragically undersupported. Yet rising Korean soft power will help drive acceptance of Korean exports all over Asia. Branding and R&D and low labor costs just aren't enough for the 21st century -- the government needs to be taking a much bigger hand here....
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More Daily Links:

• Special Investigative Unit, which was mega-slapped by the Court, to appeal Chen Shui-bian ruling
• Volkswagon to set up assembly plant in Taiwan to take advantage of ECFA early harvest items BUT reports are confused on whether autos will be on the early harvest list.
  
• Taiwan What's Up latest issue
• WTF?: US passports' key tech is outsourced to Thai manufacturer.
• China. Water. Tibet. India.
• Explaining the world economic collapse in 3 minutes. Too painful not to laugh. (h/t to JE).
  

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

As wages rise in China, Taiwan firms to head elsewhere?

A flurry of stories about China and its Taiwan businesses this week. First, the Epoch Times detailed how the "Foxconn suicides" are neither, but look instead like a media construction to enable China to lever out firms that compete with its own national firms.

Foxconn responded to the negative publicity by raising wages, which inspired a number of articles. However, few of these articles noted that the raises were vapor. Why? Because, as Eastday chronicles, Foxconn wisely instituted a three month probation and review period for its Shenzhen workers. In other words, assuming anyone actually gets a raise, it will be months from now. "You didn't pass the review" is likely to be the new mantra over at Foxconn's HR unit for the next year or so.

In fact, while the local press has trumpeted Foxconn's announcement to move his factories back to Taiwan, this article at Taiwan Today claims Gou was working on that for the last months. All the Foxconn talk is just theatre. China attacks Foxconn with theatre, Foxconn replies with theatre. Not for nothing does "PRC" begin with "PR"....

That same article also says that wages for foreign workers in Taiwan are going to be lowered by adminstrative sleight of hand, which will help local firms return here and attract outside investment, which will mean greater demand for the taxis local workers are now all driving. Isn't that great?

Businessweek chronicled how rising wages, starting with the reforms of 2008 that note only pushed up wages but also ended certain export breaks, are putting pressure on Taiwan firms in China:

Recent wage hikes in China could force Taiwanese electronics firms operating there to relocate to other Asian countries, a Taiwanese industry leader has said.

Chairman Arthur Chiao of the Taiwan Electronics and Electrical Appliances Association said his group is assisting China-based Taiwanese companies to seek out new manufacturing sites in India, Indonesia and Vietnam in the wake of steadily rising labor costs on the mainland.

Another article noted that the Minister of Economics in Taiwan promised to put in place a set of policies to help Taiwan firms move south. The southward call was highly ironic, since diversification of investment to Vietnam and elsewhere was a staple of DPP policy (please, will somebody start looking at India?). Arthur Chao further said:

However, companies whose main markets are in the United States and Europe should consider relocating as soon as possible to places with better potential for development and profit making, Chiao said.

Meanwhile exports hit the largest percentage rise ever to reach the fifth highest monthly total ever. Looks like Taiwan's economy is on the rebound.

And back in China? The strikes at several foreign owned firms have apparently triggered other strikes, many at foreign owned factories, at least according to Epoch Times. Spreading strikes.... Looks like China has attempted to call up the demon of mass action and may now have great trouble getting it stuffed back into the bottle again.
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Daily Links

• Taiwan mountain biking video at Taiwan in Cycles.
• Police officer uses geomancy in police work.
• In response to the gangster killed in front of policeman in Taichung, Ma calls for stepped up police work and stuff. Because this approach worked so many times before. The government even plans to crack down on gangsters for a whole three months.
• MUST READ: John Pomfret's excellent piece in WaPo on the outburst of a PRC Admiral at the US for frustrating China's aggression and imperialism threatening its core interests. It really strikes to the heart of the kind of self-deception the panda huggers are engaging in.
  

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!