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THE LIBERTY TIMES EDITORIAL: China is no heaven for businesses

Is China hell or heaven for Taiwanese businesspeople? Two recent news reports may help answer that question.

The first report was about Chinese panel manufacturer SVA Group (上海廣電), which owed Taiwanese businesspeople more than NT$2 billion (US$60.8 million) in payment for goods. The company was taken over and restructured by the Shanghai City Government, which totally ignored the debt it owes Taiwanese businesspeople, who did not have the courage to ask the SVA Group for the money. Instead, the businesspeople approached the Mainland Affairs Council (MAC, 陸委會) for help, but did not receive a response.

The biggest loser was the Taiwanese-listed company Himax Technologies Inc (奇景光電) — a member of the Chimei Group (奇美集團) — which reported NT$820 million in bad loans in the fourth quarter of last year.

Other affected Taiwanese companies were Coretronic Corp (中光電), K-Bridge Electronics Co (科橋電子), Sintek Photronic Corp (和鑫光電), Daxon Technology Inc (達信), Chi Lin Technology Co (奇菱科技) and Chimei Materials Technology Corp (奇美材料).

The other story was about a Taiwanese business in Dongguan in Guangdong Province, where two Taiwanese businesspeople were stabbed to death and another was seriously injured by a factory employee.

According to media reports, the employee had been working at the company for less than a month when he lost his right hand in a work-related accident. Although the Taiwanese company paid his medical fees and continued to pay his salary, he was not satisfied with the compensation. The angry worker went around the factory, stabbing people and yelling: “All Taiwanese should die.”

According to the victims’ families, the worker attacked others for almost 20 minutes, while almost 200 passersby, security guards and workers stood around watching and did not offer any help. Although a police station was less than 200m away, law enforcement officers did not arrive until the worker had been subdued.

After assuming power, the administration of President Ma Ying-jeou (馬英九) has adopted policies that lean heavily toward China, touting it as the world’s most important market and saying that if Taiwanese businesses did not enter this market, they will have no future. China’s strong economic growth in recent years, coupled with the size of its population and the massive scale of its economy, means that the potential business opportunities it offers cannot be ignored.

However, in terms of GDP per capita, China is still a developing nation with low levels of wealth. While developed Western and Asian nations have also suffered from the global financial crisis, their people still have strong spending power. As such, when Taiwanese companies lay out their global strategies, they should invest in these markets rather than place all their bets on China.

The government has overestimated the size of China’s economy and its purchasing power, while underestimating the risks in investing across the Strait. China’s economic and legal systems also do not comply with free market ideas and mechanisms. It is also plagued by a poor financial regulation: Companies fabricate financial reports, people rather than the law have the final say, and integrity is not a common practice in business management. In cases involving falsified accounts, fraud and conflict over debts, China’s judicial system is unable to resolve disputes and give relief to those who need it.

One of these reports was about debt issues between companies, while the other had to with the personal safety of investors. Both show the great risks in investing in China.

In the first case, bad business management was the reason why the SVA Group was unable to repay its debt to Taiwanese businesspeople. No creditors’ meeting was held during its restructuring to come up with a solution. Instead, valuable assets were sold off, leaving what was left in a mess. Normally, when there are disputes over debt, the creditor should request repayment of the debts owed to them. However, in this case, the China-based Taiwanese businesspeople had to bow out and seek assistance from the MAC — which was not much of assistance. This clearly shows the shortcomings of China’s business and judicial system.

In the second case, the death and injury of Taiwanese businesspeople was a result of China’s legal shortcomings. Beijing lacks a mechanism for dealing with disputes between employers and employees. There have been numerous reports of workers resorting to violence when their demands were not met, resulting in tragedy for many Taiwanese nationals doing business in China.

Straits Exchange Foundation statistics from 1991 to the present show that 102 Taiwanese businesspeople have been murdered and more than 300 have disappeared in China, highlighting major issues with public safety. Taiwanese businesspeople in China have had to deal with problems such as bad loans and having their things taken by force. Most of them do not dare let others know they have been cheated and chalk it up to bad luck. In reality, the Chinese market is a dark jungle where surviving involves the strong bullying the weak and officials suppressing citizens.

To get ahead in China, businesses often connive with government officials and pay protection money to get political backing. In this treacherous jungle, there are no guarantees for the personal safety of businesspeople or their business assets. However, the weak voices of complaining Taiwanese businesspeople have been drowned out by all the talk about Chinese purchasing delegations and Chinese investment in Taiwan.

While the government glorifies China as a paradise for Taiwanese businesspeople, these news reports show how businesses are committing suicide by investing in China. Taiwanese businesspeople have to wake up now before they fall further into the dark abyss that is China.

TRANSLATED BY DREW CAMERON
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