Wed, Sep 05, 2007 - Page 8 News List

Editorial: We walk on thin ice in China

Amid a management dispute between Shin Kong Mitsukoshi Department Store and its venture department store Shin Kong Place in Beijing, Shin Kong Mitsukoshi department store general manager Steven Wu (吳昕達) was reportedly placed in confinement by the Beijing authorities. After Taiwan attempted to intervene, Wu managed to return safely last Saturday. Nevertheless, Shin Kong Mitsukoshi may be on the verge of falling out with its Chinese partner over the ownership and operational rights of the stores in China.

According to statistics published by the Mainland Affairs Council and the Straits Exchange Foundation, as of the end of last month, 1,952 complaints over the safety and property of China-based Taiwanese businesspeople have been reported. Of these, 341 cases involved businesspeople barred from leaving China.

The figure is likely an underestimate since the number of unreported cases, resolved privately by paying compensation, may be several times higher.

The public usually sees the positive side of investing in China while ignoring the potential economic and human risks. There are also many other potential risks derived from non-economic factors, such as political systems, the wobbly rule of law, social customs and cultural differences.

In other words, even a slight mistake can lead to a serious financial loss as well as endangering the personal safety of China-based Taiwanese businesspeople. In the wake of this incident, more victims of Chinese investments gone wrong will be willing to stand up to condemn Beijing's political blackmail.

Taiwanese investors in China usually choose to establish joint ventures with local companies to take advantage of Chinese connections and power combined with Taiwan's advanced technology. However, even as disputes over joint ventures between Chinese and foreign parties have become more common, China has not clearly defined the legal position of Taiwanese businesspeople working there. Other laws are also lacking in transparency.

The fact is that Taiwanese companies in China are neither fish nor foul: neither local nor foreign. That makes these disputes even harder to settle. In addition, the sharp competition between Taiwan and China as well as increasingly tense cross-strait relations have had an impact on the safety of Taiwanese investments.

Being outside the rule of law is the first trap for Taiwanese businesspeople investing in China. Moreover, Beijing does not honor the law and respect human rights and property rights, so many problems are solved by connections which foreign investors don't have. When a business dispute flares, Chinese firms tend to resort to violence or call in public security officers at the expense of the safety of Taiwanese businesspeople instead of allowing the problem to be addressed by the courts.

Solving issues outside the law is the second trap Taiwanese businesspeople can fall into. As they are used to solving problems outside the law, Taiwanese also become more vulnerable to exploitation.

There are few examples in the world of two countries that are enemies politically but maintain a thriving economic relationship. The difficult cross-strait relationship therefore makes it difficult for Taiwanese businesspeople to decide what course to take in China. Yet this unstable situation is the best-case scenario.

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