The preferred investment destination of the nation’s largest enterprise groups might be shifting from China to potential members of the Trans-Pacific Partnership (TPP) trade pact, according to a survey published yesterday by China Credit Information Service Ltd (CCIS, 中華徵信所).
The Taipei-based agency said that the shift reflects the dwindling profitability of Taiwanese conglomerates in China and urged the government to step up efforts to seek TPP participation.
Last year, the number of Taiwanese companies investing in China rose by just 43, the smallest annual increase since 2006, amid soaring manufacturing costs in the nation, China Credit said.
On its index that accounts for labor, utilities and other factors, the agency said that it gauged manufacturing costs in the US at 100, which is not far from its rating of 96 for China.
The agency found that although revenues from companies’ China-based operations last year grew only 5.6 percent year-on-year to NT$11.61 trillion (US$359.06 billion), aggregate net income expanded by 48.28 percent annually to NT$232.5 billion.
China Credit said that to gain a more accurate picture of Taiwanese companies’ performance in China, it found that by excluding two prominent Apple Inc suppliers, Hon Hai Precision Industry Co (鴻海) and Pegatron Corp (和碩), overall sales growth would fall to 3.31 percent, with net income dipping 3.7 percent annually, declining for the second consecutive year.
At the same time, revenues made at potential TPP member states had seen marked growth, rising 116.41 percent in Japan, 11 percent in the US and 3.86 percent across ASEAN nations.
The US, Japan and 10 other Pacific Rim nations concluded TPP negotiations on Oct. 5 after more than five years of preparatory talks. The trade bloc covers about 40 percent of the global economy.
“As Taiwan has been left out of the TPP, the nation’s vanguard enterprises must find a path in the cracks between major regional trade blocs that are taking shape around the world,” China Credit said.
North Korea was the only other nation in the region not included in the pact, the agency added.
Meanwhile, growth in total assets among Taiwan’s top 100 conglomerates last year was concentrated among the nation’s five leading financial holding groups.
By contrast, the nation’s most renowned names in the technology sector, including Acer Inc (宏碁), Asustek Computer Inc (華碩), HTC Corp (宏達電) and Yageo Corp (國巨), have grown more susceptible to acquisition attempts amid diminished net worth and low shareholding by their respective management.
Unlike other experts, CCIS department of business credit editor-in-chief Jen Liu (劉任) said that it is possible for Taiwan to participate in both the TPP and the Beijing-backed Regional Comprehensive Economic Partnership.
“Taiwanese enterprises must strive to break the mold of competing on price, and transition away from the business model of taking orders in Taiwan, then fulfilling those orders at manufacturing bases abroad, which as of last month contributed to an 18-month run of tumbling exports,” Liu said.
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