When Andrew Yeh first set out to find a new home for his cable and wire business ten years ago, it was a matter of survival. He chose China's Dongguan area, and now his company is ten times bigger, though he never thought he would make `a big fortune in China.' Yeh is the chairman of YFC-Boneagle Electric Co Ltd and also is the standing vice president of the the Taiwan Businessmen's Association of Dongguan. In this interview with Taipei Times reporter Cybil Chou, Yeh explains what attracted him to Dongguan and the opportunities that can be found there
Taipei Times: Why did you decide to invest in Dongguan?
Yeh: I set up our first factory manufacturing cable and wire in Dongguan in 1990, primarily so the company could survive amid an increasingly expensive labor market in Taiwan. Our business relies heavily on labor for product processing.
PHOTO: GEORGE TSORNG, TAIPEI TIMES
Like many successful Taiwanese firms in China, the idea of "making a big fortune in China" did not occur to me then. I made the decision to invest there after investigating Indonesia, the Philippines, Malaysia and Thailand.
We invested less than NT$10 mil-lion then, and now the investment has grown to NT$100 million. Meanwhile, the number of employees has increased from 100 to more than 1,000 at present. Also, our revenue has grown ten-fold in the past decade.
TT: Did you change your production lines since moving to China, taking advantage of the different strengths of China and Taiwan?
Yeh: In 1994, we began to shift all of our original production to China and kept R&D in Taiwan. We moved into high-tech LAN cables used in Internet systems in order to take advantage of the booming market.
Despite not upgrading our manufacturing equipment, our LAN cables were among the 32 brands worldwide that had passed international safety standards in 1997.
TT: Were there any problems during the initial period of your investment?
Yeh: It was ten times tougher to do business in China ten years ago than it is now. The poor infrastructure over there had made delivery of materials difficult. Additionally, the poor material supply from the city forced us to rely heavily on supply from Taiwan. Delivery would take at least ten days to one month, compared to three to four days now.
As a result, extra expenditures in delivery and warehousing had been incurred.
Also, communication with local Chinese officials in our business proceedings back then counted more on luck than rules.
Take our experience for example. After we offered local officials meals, then packs of cigarettes and finally gave them some money, we finally managed to operate the three telephone lines we had applied for. But this situation has improved now.
TT: What are Taiwanese businessmen doing in this city?
Yeh: Currently we have about 2,800 company members in our association, representing quite a diversity of industries. In the initial period, a large percentage of investment centered on labor-intensive manufacturing industries, which mostly exported outside China. Now a lot more of it is in high-tech industries.
Red tea chain stores or betel nut businesses are also prevailing here. Meanwhile, over the years, a Taiwanese business community has formed, and business opportunities have been created among Taiwanese businessmen themselves.
TT: Dongguan, as well as other southeastern cities such as Shenzhun Shanghai, in the past decade have attracted the largest percentage of Taiwanese businessmen. Why?
Yeh: The most significant reason is the easy access to supply chains for these Taiwanese manufacturers. Ninety-five percent of production materials can be locally supplied now.
Additionally, its geographical proximity to the southeastern coast is convenient for shipping.
TT: A recent survey conducted by a local business association found that the southeastern Asian region has been considered as one of the more dangerous regions for investment. What do you think ?
Yeh: At present, about 10 people in this city are in jail for alleged tax evasion; some did it on purpose, while others lacked knowledge of the complicated tax laws, violation of which is a violation of criminal laws.
As for murders reported here, I think it is more a matter of businessmen themselves lacking personal discipline. The murders reported here are mostly associated with money or love affairs.
Taiwanese businessmen should be more disciplined or avoid showing off wealth, which brings on trouble.
TT: Can you cite any successful or unsuccessful investment cases there?
Yeh: Pou Chen Corporation (寶成工業股份有限公司), which is now among the world's top shoe makers, and some electronics manufacturers, such as Delta Electronics Inc (台達電子股份有限公司) and Primax Electronics Ltd (致伸實業股份有限公司).
One of Pou Chen's factories has employees reaching more than 100,000 people in a town with a population of just 40,000.
In earlier years, many Taiwanese companies doing business with Chinese state-run firms failed because of the diverse ideologies between them.
TT: What opportunities do you see for Taiwanese businessmen after China joins the WTO?
Yeh: A significant impact of China's entry into the WTO will be on the long time rampant smuggling along the eastern coast, which proliferated based on good Guanxi (personal connections). The smuggling had discouraged other traders because they had to pay taxes and couldn't compete.
A survey indicated that general tariffs for China will decrease from the current average 24.6 percent to 9.44 percent after its accession to the WTO.
Despite new laws issued last year to allow foreign firms -- including those from Taiwan -- to invest, or even merge with Chinese state-run firms, I think it will take some time to evaluate the opportunities, because most of the state firms are in debt.
TT: Recently a local business association urged a "let-go" of local banks, allowing them to set up operations in China in order to help solve the loan problems of Taiwanese businessmen. What do you think?
Yeh: Taiwanese banks may not expect a promising business opportunity competing against Chinese or foreign banks, unless they are permitted to operate using yuan.
Chinese banks have been gradually increasing loans to foreign investors, including those from Taiwan, in order to lure opportunities that may come with the expected increase in foreign investment after China joins the WTO.
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