Mon, Mar 28, 2005 - Page 8 News List

Editorial: Time to curb investment in China

While there is still no clear answer as to whether United Microelectronics Corp (UMC) was "assisting," conducting a transfer of technology to, or investing in He Jian Technology (Suzhou), a separate case of a large-scale investment project in China has been uncovered, this time by a state-run company.

On Feb. 26, Taiwan Fertilizer Company signed an agreement with Yangzhou Economic Development Zone, pledging an investment of US$180 million to establish a production and sales base. Taiwan Fertilizer has made it clear that the project is still in the planning stage, and that the signing of the agreement was simply to facilitate visits by Chinese personnel. The agreement states that the project will not be implemented until the authorities concerned approve the application.

Taiwan Fertilizer's investment proposal would not be barred under the government's list of industries banned from investing in China. The amount of the investment would not exceed 40 percent of Taiwan Fertilizer's corporate assets. Therefore, the Investment Commission has no legal basis for banning the project. But that doesn't mean the company should get a green light to move ahead with it. Regulations governing investment in China appear to be so lax that they failed to regulate such an investment. The project should be rejected by the government.

Given the relatively high unemployment rate in this country and concerns about the hollowing out of the industrial base, Taiwan Fertilizer should give priority to building the new compound fertilizer processing plant in Taiwan. How can it choose to set up a plant in China and create employment for the Chinese government?

There are several similarities between the this case and the UMC case. UMC has benefitted from the government's incentives to develop the high-tech industry. It enjoys preferential treatment financed by the Cabinet's Development Fund and capital for state-run businesses. As for Taiwan Fertilizer, more than half of its board of directors are government officials. The two companies rely to a large extent on the government, and this means they also have a social responsibility.

Regrettably, UMC's sneaking into China by "assisting" He Jian, and Taiwan Fertilizer's plan to invest NT$6 billion in China shows a serious lack of social responsibility and a neglect of national interests.

The dream of China as factory to the world, built on a formula that combines Taiwan's manufacturing power with cheap Chinese labor, land and preferential treatment has long attracted Taiwanese companies. Sustainable corporate management means moving on from contract manufacturing to concentrate on research and development, innovation and developing brand marketing. That is the only way for Taiwanese companies to compete in the world market. Investment in China runs counter to that goal, since it gives paramount importance to cheap labor and land while ignoring R&D, innovation and brand marketing. Relying only on price will lead to cut-throat competition and disappearing profits.

Taiwanese investment in China is a slow form of suicide for our industrial base and the economy as a whole. China's "Anti-Secession" Law is a visible threat, while investment in that country is a less tangible one. Unrestrained investment in China simply prepares us for the slaughter. Taiwan's current dependence on China in terms of investment and as an export market is seriously over the safety limit. Any change in the Chinese market will have a serious impact on this country.

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