Wed, May 01, 2019 - Page 11 News List

Trade dispute is Taiwan’s chance to bring cash home

Bloomberg

Long Chen Paper Co (榮成紙業) has made and sold cardboard packaging in China for more than two decades, and had never made a loss there until US President Donald Trump and Chinese President Xi Jinping (習近平) began their face-off over trade.

Caught in the tariff crossfire, Long Chen and other Taiwanese companies have suddenly found much less appeal in doing business across the Taiwan Strait.

That adversity has been seized upon an opportunity by President Tsai Ing-wen (蔡英文), whose government last year started an “Invest Taiwan” campaign to lure companies away from China.

This year, her government has focused specifically on Taiwanese firms with operations in China, helping them overcome the nation’s shortages of land, electricity, water, labor and talent.

So far, it appears to be a hit. As of Friday last week, 40 companies, from a maker of network devices to a tap producer, have committed to investing a combined US$6.7 billion and creating 21,200 jobs — on track to exceed all the government’s targets.

The additional homecoming investment in combination with overseas flows could propel all investment from abroad to a new high this year, surpassing the previous record of US$15.4 billion made in 2007 under former president Chen Shui-bian (陳水扁).

“We have been affected by the trade war, and at the same time, Taiwan’s government launched this project, so it was an instant match,” said Danny Chou (鄒永芳), chief finance officer at Long Chen, the nation’s biggest industrial-use paper company.

China’s retaliatory tariffs on US recycled paper imports and business closures affected the company’s business on the cost and revenue sides, Chou said.

China accounted for 80 percent of the company’s sales last year, data compiled by Bloomberg showed.

Its cardboard boxes are widely used in China’s Jiangsu and Zhejiang provinces for shipping things such as refrigerators, TVs and bottled water.

Headquartered in Taipei, Long Chen is one of the first Taiwanese companies to take advantage of the government’s new program.

It plans to invest NT$7 billion (US$226.6 million) locally over the next three years, its biggest investment in 41 years.

The government has tried to lure Taiwanese companies to move back before, but with very little success, Minister of Economic Affairs Shen Jong-chin (沈榮津) said.

“The trade war is a wake-up call,” he said. “A 25 percent tariff eats up the entire benefit of moving production to China.”

In addition to Long Chen, Giant Manufacturing Co (巨大機械), Quanta Computer Inc (廣達電腦) and Yageo Corp (國巨) are among the companies to have taken advantage of the program.

Several firms have requested the government to not reveal their names for fear of angering China.

Investment by Taiwanese companies in China has fallen each year since Tsai took office in 2016, when she introduced a policy encouraging companies to invest in Southeast Asia rather than China.

Although the government did not previously routinely track the numbers of homecoming investments, Invest Taiwan chief operating officer Alex Chen (陳秀全) has no doubt that the latest campaign has sparked the biggest-ever wave of repatriations.

With signs that a detente between China and the US is emerging that could lead to the removal of some tariffs, there is ground to expect that the impetus for companies to move back to Taiwan is to fade.

This story has been viewed 1784 times.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top