During the 1990s, a wave of Taiwanese businesspeople relocated to China to build factories there, with many prospering in their cross-strait ventures. However, over the past few years, these businesspeople have been increasingly subjected to forced land expropriations carried out by local governments, the Ministry of Economic Affairs said, attributing the problem to a misunderstanding of Chinese property laws.
According to the ministry, the land secured by Taiwanese manufacturers in China, especially small and medium enterprises whose factories are not within the industrial zones, is often expropriated by local governments. Some of these enterprises have received monetary compensation, while many others are still negotiating the issue with Chinese authorities with the ministry’s assistance.
“That is because in China, all land is either state-owned or is owned collectively,” Vivian Lien (連玉蘋), an official at the ministry’s Department of Investment Services, said on the sidelines of an investment seminar in Taipei last week.
Under China’s laws, individuals do not have the right to own land, they can only obtain land-use rights.
“Collectively-owned land cannot be rented because it is owned by all the surrounding villagers. As such, it cannot be leased to individuals,” Lien said.
Since the Cross-Strait Bilateral Investment Protection and Promotion Agreement (海峽兩岸投資保障和促進協議) took effect in February last year, the department has handled a total of 177 complaints filed by Taiwanese businesspeople in China and about 40 percent of these cases involve disputes with local governments regarding the use of land.
Not only Taiwanese, but also many Chinese do not fully understand the regulations governing the use of land in China, especially in the 1990s, some local businesspeople said at the seminar.
“I went to China in 1996 and established a factory in Beijing in 1998. There were no land-use problems before Beijing held the Summer Olympics in 2008,” said Taiwanese businessman Chang Hsi-kuei (張錫圭), who manufactures machine tools for agricultural use.
He said that since 2008, there have been many cases in which Taiwanese businesses, especially small and medium-sized enterprises, became embroiled in disputes with local governments regarding land expropriation.
“China is a society ruled by man. When I first went to Beijing, I only had to get along with the leader of the district I wanted to operate in and he would lease a plot of land to me for decades. However, these leaders end up being promoted, transferred to another district, or retired... That is when the problems began,” Chang said.
Chang said that in 2009, the district government he was leasing land from informed him that it was planning to expropriate and demolish his factory, adding that it would not compensate him for the demolition because he did not have ownership rights over the land his plant is built on.
“I do not own the land, but I have been paying taxes for housing and land use for several decades,” he said.
Recognizing that his case straddles a fine line between legality and illegality, Chang said he decided to seek help from Taiwanese authorities and the ministry department forwarded the matter to the Chinese government’s Department of Complaints to negotiate for compensation.
After years of deliberation, the case was finally resolved in April.
“They demolished my property, but I got full compensation. To me, that is the best solution I could have hoped for,” Chang said.
Yao Hai-hung (姚海宏), chairman of the Taiwanese Businessmen Association in Shunyi District in north Beijing, said that many Taiwanese entrepreneurs in China are facing or have faced similar problems.
The problem is that they cannot seek judicial assistance via the Chinese court system as they do not own the land they are using, they have to reach out to the government in Taipei for help to resolve the matter, Yao said.
“We [Taiwanese businesspeople in China] can only seek to resolve such issues through negotiations,” Yao said.
Lien and other experts say that Taiwanese manufacturers are experiencing other challenges to their businesses across the Taiwan Strait, with the Chinese economy slowing and Beijing adjusting the country’s economic structure.
A study released last week by the Taiwan Electrical and Electronic Manufacturers’ Association (電電公會) showed that Taiwanese businesses are operating in an increasingly tough environment in China, with the proportion of loss-making enterprises operated by Taiwanese growing from 18 percent in 2008 to 25.6 percent this year, while the amount of those posting profits dropped from 11.6 percent to just 5.3 percent over the same period.
“Beijing now does not welcome industries that consume a lot of resources, generate substantial pollution and have low added value,” Lien said. “Taiwanese businesspeople in China are facing negative impacts brought on by the changing investment environment there.”
Peter Chen (陳志強), a senior researcher at the Industrial Economics and Knowledge Center of the Industrial Technology Research Institute (台灣經濟研究院), last week said that the nation is highly reliant on China, which has been slowing down economically, despite a recovery in the global economy this year.
While the slowdown in China has impacted Taiwan’s exports, the biggest concern for Taiwanese companies is that when China establishes a comprehensive domestic supply chain, it will reduce its reliance on imports.
Taiwan’s petrochemical industry will be the first to be affected, but the nation’s semiconductor sector will also face a growing threat from China, as Beijing aims to establish a domestic industrial chain within five years, Chen said.
Information technology, electronics and semiconductors are significant drivers for the nation’s economic growth and if Taiwan loses that competitiveness, the results will be of such gravity as to constitute a matter of national security, Chen said.
Additional reporting by CNA
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