Liberty Times: The cross-strait service trade agreement and the free economic pilot zones have been forwarded to the legislature for review. How would you examine issues of the current business and trade development across the Strait ?
Wu Jieh-min (吳介民): On the current situation, we must go in more depth to analyze the flow of financial capital and the modes of business operation across the Taiwan Strait.
Quite a few big business conglomerates have their operational bases in both Taiwan and China, so are these Taiwanese capital-funded companies or Chinese capital-funded companies?
Let’s take a look at Want Want Group, Ting Hsin Group and ASE Group, for example. To categorize them in the traditional way as either Taiwanese companies or Chinese companies would not be precise enough, because they are both. This double identity would be better described as “companies of cross-strait capital.” This type of capital was originally born in Taiwan, but the operations reached across the Strait and their revenues in China have far exceeded those in Taiwan. For the Chinese market, the companies promote their own “Chinese brands,” but when they encounter problems, they appeal to their “Taiwanese company” status and emphasize their “Taiwanese bloodline.”
For example, when HTC had difficulties making inroads into the Chinese market, HTC chairwoman Cher Wang (王雪紅) came back here to seek support from Taiwanese consumers. When ASE was embroiled in a pollution scandal, ASE chairman Jason Chang (張虔生) stressed the company’s goal to “put down roots in Taiwan.” As they appealed to their “Taiwanese company” status, it implied an intimate relationship for people “to put their faith in,” trying to identify identify as “one of us.”
LT: With their mode of operation and financial capital, what kind of impact have these companies made in Taiwan?
Wu: These cross-strait companies have great influence in Taiwan’s political and business circles, as well as influence on society. They trade and operate on both sides of the Strait and have already become a powerful force to lead political and business development trends in Taiwan.
For the food industry, Want Want Group makes large profits in China and in the past also received massive subsidies from the Chinese government.
In 2008, it returned to Taiwan and purchased the three media organizations from the Chinese Nationalist Party (KMT): China Television Co, Broadcasting Corp of China and Central Pictures Corp. By owning these media outlets, the group was able to influence public opinion. It advocates Chinese nationalism for all Chinese people. Thereafter, these media’s reporting and viewpoints almost toe the same line as China’s People’s Daily newspaper and Xinhua news agency. This later led to the “Anti-Media Monster” movement in Taiwan.
Ting Hsin Group got its business started in China, then it returned to Taiwan and bought up Wei Chuan Corp. When the deal ran into cash-flow trouble, China’s Taiwan Affairs Office helped out to arrange for its financial assistance. In recent years, Ting Hsin Group purchased stakes to become the majority shareholder of Taipei 101.
In the manufacturing sector, we need to take a closer look at ASE Group’s transgression in polluting Greater Kaohsiung’s Houjin River (後勁溪). ASE Group has a total of 69 subsidiary companies, with the parent company established in what was then Kaohsiung City in 1984.
In 1999, it became involved in the management of Universal Scientific Industrial Co with an initial purchase of 21 percent of that company’s shares. The company later became Universal Global Scientific Industries (USI). Starting in 2000, this company started to set up manufacturing plants in China’s Shanghai, Suzhou and Shandong Province, as well as Weihai and Kunshan in Guangdong Province.
In 2003, it established Universal Scientific Industrial (Shanghai) Co in Shanghai. ASE Group’s global operations generated an overall revenue of US$6.4 billion in 2012, while its annual revenue in Taiwan was US$2.4 billion.
Although ASE Group looks like a typical transnational conglomerate, it is not.
A number of years ago, ASE Group manipulated the delisting of Universal Scientific Industrial Co from the Taiwan Stock Exchange and then it made the listing of Universal Scientific Industrial (Shanghai) Co, USI (SH) on the Shanghai Stock Exchange. Subsequently, it used USI (SH) company to set up USI in Taiwan to buy up the production lines of Universal Scientific Industrial Co. Utilizing the company’s reorganization to make big profits in stock market’s equity financing. Through years of such market manipulation tactics, the production capacities of its plants in Taiwan were gradually relocated abroad. This resulted in sacrificing the rights of Taiwanese workers, as many of them were let go.
Another issue worth closer examination is that USI (SH) stocks in China are traded in the “A Share” market. For foreign companies to get approved for listing in the “A Share” market, most of them need to become joint ventures between Chinese and foreign capitals. In reality, USI (SH) is almost a company with “pure foreign” capital, but it is able to package itself as a joint venture of Chinese and foreign capital. Thus the question should be asked: Does ASE Group enjoy special political and business privileges in China?
LT: These companies have their own management styles. Can you categorize some of their common characteristics?
Wu: These cross-strait conglomerates have certain general patterns of behavior and attributes. First, they are active in the political and business networking circles of China and Taiwan. Thus, essentially they are closely connected to political power structures, in transactions of political power and capital.
Second, they have set up operations and institutions in both China and Taiwan, for their convenient maneuvering of capital, goods, and labor, while side-stepping any government regulations that are disadvantageous to their business operations.
Third, they exploit the loopholes in the special provisions for normalizing the systems integration in the developing cross-strait relations, as they engage in “rent-seeking” activities.
Article 10 in the Act Governing the Relations Between the People of the Taiwan Area and the People of the Mainland Area (兩岸人民關係條例) has opened a backdoor, to allow a large number of Chinese workers to enter Taiwan to engage in “activities.” Thereafter, numerous provisions and complementary measures were put down, which gave government administrators tremendous decisionmaking power. Recently, President Ma Ying-jeou’s (馬英九) administration integrated these provisions and measures together into the Act on Permission for Entrance of People of the Mainland Area into the Taiwan Area (大陸地區人民進入臺灣地區許可辦法), which loosened up the regulations even more. What problems has it created? It is leading to a double-track system for foreign workers.
Foreigners in general would use the Employment Services Act (就業服務法), which has more stringent regulations and higher requirements. For Chinese workers, they would be regulated under the Act Governing the Relations Between the People of the Taiwan Area and the People of the Mainland Area, and the provisions and measures derived from this act. Professor Lee Chien-hung (李建鴻) put it aptly: He said the system governing regulations in Taiwan is designed for “one country, two systems.” On the surface it looks like setting up protection, but in reality, it is to open the backdoor to Chinese companies.
LT: Some people say that capital is capital. Do we have to put up extra safeguards on Chinese capital and cross-strait capital?
Wu: Yes, it can seem that way, but in reality it is not.
The cross-strait dealings and flow of capital is part of the overall free movement of capital in the global economy. The trend toward trade liberalization across the Taiwan Strait is also one of the links in the globalization process.
However, carefully monitoring these “transnational corporations” reveals that they basically only cover two countries. Take the ASE Group as an example: Its manufacturing bases are mainly in China and Taiwan, but at the same time, it set up a number of financial holdings companies to enable the manipulation of its accounting. They were all set up in tax haven countries, such as in Bermuda, the British Virgin Islands and the Cayman Islands.
Therefore this kind of “globalization” is actually only locked into the commercial activities across the Taiwan Strait. So-called globalization for the “Greater China Region” is actually resulting in becoming “locked up in China.”
Capitalism as practiced in China has the very strong characteristic of being transactions between political power and money. This attracts and absorbs the cross-strait capitals and entrepreneurs to entice them to participate in the Boao Forum and the Zijin Mountain Cross-Strait Entrepreneur Summit. Thus, they are able to enter the privileged clubs for the ruling elites and wealthy capitalist class. Issues such as human rights and working conditions will not be on the agenda among these political and business elites.
In addition, China has designs on the territorial and sovereignty claims by Taiwan. This makes cross-strait business interactions more complicated. Thus, for criticisms leveled at the cross-strait service trade agreement, besides coming from the perspectives of fighting against neo-liberal globalization doctrine, safeguarding the rights and benefits of the underprivileged and preserving social stability, it should also take into account Taiwan’s national security, the national policies for industry development and other perspectives.
Taiwan is facing the two trends of neo-liberal globalization and economic growth, which are the twin strands of the same double-helix structure, and both of which are increasingly reliant on China.
LT: How do you think Taiwan should strengthen its policies to deal with this?
Wu: Currently, regarding cross-strait capital, our policies on Chinese companies come under “specialized” provisions. This results in opening up opportunities for rent-seeking, that is the extension of business transactions for the elites with special privileges. Because the provisions are “specialized,” it allows the transactions between political powers and capital to become more convenient. Due to this, the people who manipulate their access to political power and wealthy business classes are increasingly displaying an “it’s a natural course for us” attitude, and speaking words to the effect of: “If you don’t like it, what can you do about it?”
Getting to the root of the matter, we should apply the same standards to all “foreign source capital.”
There should not be any “specialized” provisions for Chinese companies, but rather all flows of capital in and out of the country should be sensibly regulated and controlled. We should heed the advice of Lai Chung-chiang (賴中強) of the Democratic Front Against Cross-Strait Trade in Services Agreement, who has advocated for strict regulation of “any major investment which originates from other foreign governments into Taiwan to conduct business with strong influence and political controlling power.”
Also, our government must apply stringent measures and scrutiny for highly sensitive industries, job opportunities for the underprivileged groups, safeguarding of social stability, protective mechanism for our democratic system, autonomy of cultural development and so on. The government must not ruin our society because of “trade liberalization.”
For the free economic pilot zone initiative, the government should also apply the same standards.
I must say that these cross-strait political and commercial alliances are now in control of our country. Under the current system, why not just change the name of the Act Governing the Relations between the People of the Taiwan Area and the People of the Mainland Area to the “act governing the cross-strait political power and business relations?”
This is a loathsome legal package, which encourages rent-seeking activities to benefit the wealthy, while creating opportunities for power and business corruption. It must be abolished.
Translation by Jason Pan, staff writer