Fewer Taiwanese firms plan to expand operations in China as its investment environment is worsening due to rising production costs and slowing economic growth, an annual report by the Taiwan Electrical and Electronic Manufacturers’ Association (TEEMA, 電電公會) said yesterday.
A total of 40.28 percent of Taiwanese firms expressed plans to increase investment in China this year, down from 46.12 percent last year, as the massive market is losing appeal in terms of labor, raw material and land costs, said Leu Horng-der (呂鴻德), a business management professor at Chung Yuan Christian University, presenting the findings on behalf of the association.
China is itself at crossroads as it is seeking to rein in risks over shadow banking, local debts, excessive foreign reserves and corporate default, Leu said.
Except for environmental protection requirements, all risk indexes point upward this year, reflecting greater difficulty for Taiwanese firms to operate and make a profit in China, the report said.
Taiwanese firms with operations in China have to cope with a volatile yuan and softening demographic bonus, while labor shortages and disputes, intellectual property violations and a credit crunch continue to weigh, the report said.
As in Taiwan, firms that wish to stay competitive in China have to evolve and upgrade as Chinese peers in different sectors have showed less dependence and pose an increasing threat as rivals, Leu said.
“Taiwanese firms have a better chance of success fighting as a team and building their own niche market,” Leu said, adding that few can become leading players like Taiwan Semiconductor Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s top contract chipmaker.
Rather, local firms can aim to be “a hidden champion” like Greater Taichung-based Hiwin Technologies Corp (上銀), a producer of linear guideways, ball screws and industrial robots.
Among Taiwanese firms, Kunshan in Jiangsu Province has topped the survey for six consecutive years in the overall investment rankings, followed by the industrial zone in Suzhou, Jiangsu Province, and the offshore zone in Xiamen, Fujian Province, the report said.
The results suggest Taiwanese firms are seeking to bolster their presence in free-trade zones, lured by more favorable investment terms, Leu said.
Others plan to expand into emerging territory are linked to the Internet, the report said, after questioning 2,498 firms.
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