Hon Hai’s Foxconn is where it is today because of the distinctive militaristic culture it enforced in its factories, something Taiwan’s younger generation may have to get used to. It certainly seems to work with the more than 800,000 workers the company employs in China.
However, this year could well prove a turning point in the company’s fortunes. Following a run-in with China’s BYD Electronics, there has been much negative coverage in the local media, only exacerbated by the suicides of 12 employees at one of its plants.
Beijing can easily silence its media about a given issue if it so chooses. However, the state-owned China Central Television (CCTV) aired a program severely critical of Foxconn. The program was picked up by the press in other countries, who then started referring to the plant as a sweatshop. This turn of events caused the company’s stock market price to fall dramatically, forcing chief executive Terry Gou (郭台銘) to apologize to shareholders. He also brought in Taoist monks and Catholic priests to bless the plants, to little apparent effect.
Gou was then left with no alternative but to announce an immediate raise for Chinese employees. He also decided to speed up the expansion of his factory in Sichuan Province and agreed to end the company policy of making employees sign an understanding to the effect that they would not file claims for additional expenses.
Finally, he promised a more humane management culture in his factories.
Although US$240 billion evaporated from Hon Hai’s total value, the suicides have so far miraculously stopped. It is not easy to predict, however, what will happen next. For example, if striking workers are granted a wage increase and a new plant, what impact it will that have on workers at state-run enterprises?
The suicides were regrettable, but something positive has come out of it. The wage increases will rapidly stimulate domestic demand. If repeated in other companies, it will help reduce the poverty gap in China and enable the development of the country’s vast western region. These are, in fact, the three principal goals of China’s 11th Five-Year Plan.
There are many examples of non-Chinese companies experiencing problems as they try to set up in China. The department store Shin Kong Mitsukoshi saga is still fresh in the memory, where the Beijing store was confiscated by the authorities and the Taiwanese staff replaced by Chinese nationals. Evergreen Group founder and shipping tycoon Chang Yung-fa (張榮發) used to support the “three small links” between Taiwan and China, but was unable to operate flights to other international destinations from there.
There are other examples, too. Hong Kong business tycoon Li Ka-shing (李嘉誠), the mining company Rio Tinto and Winston Wang (王文洋) have all had their share of difficulties in China. US search engine giant Google was forced to withdraw from China, and many other Taiwanese and foreign companies have been forced to move out.
China might seem to offer a lot of inducements for firms to set up there, but these are often not as big as they initially seem, considering the games officials seem to enjoy playing. Many Taiwanese businesspeople might now be looking to return home.
The “early harvest” list of the proposed economic cooperation framework agreement proposes tariff reductions on 500 items for Taiwan against 200 for China. This is bait and Taiwan must not be lulled into a false sense of security.
These examples are warnings. Companies need to wake up from their “one China market” dream and their fantasies of huge profits. The China market clearly does not provide any substantial or long-lasting gain for Taiwanese businesses, whatever their size.
Chang Yeh-shen is chairman of the Taiwan Hakka Society.
TRANSLATED BY TAIJING WU
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