China does not treat Taiwanese companies as family members, Foxconn Technology Group chairman Terry Gou (郭台銘) said on Nov. 5 at the Zijinshan Summit for Entrepreneurs across the Taiwan Strait in Nanjing, China.
To illustrate his point, Gou said that the Chinese Ministry of Industry and Information Technology ha not included any Taiwanese firms in the first wave of telecom operators allowed to offer added-value services. Gou said that while Foxconn is not afraid of the competition, the competition had to be fair.
This is not the first time Gou has complained about the Chinese government. In 2008, Foxconn sued Shenzhen-based mobile phone component maker BYD Electronic for patent infringement. A Shenzhen court initially accepted the case, but dismissed it at the end of the year on grounds of insufficient evidence. BYD chairman Wang Chuanfu (王傳福) is a member of the Shenzhen Municipal People’s Congress, which may have had something to do with the court’s decision.
Later, Gou said that Beijing’s all-out support for BOE Optoelectronics Co Ltd and China Star Optoelectronics Technology was resulting in excessive productive capacity and declining prices.
Gou knows that Beijing will do all it can to support China-based companies, making fair competition in that market unlikely. Foxconn has responded to this by diversifying its investments to Brazil and Indonesia. However, that has not stopped the firm from becoming more entrenched in China — it still sees the country as its main market.
There are other Taiwanese businesses that find themselves in a similar predicament to Foxconn. For example, local solar power companies must vie with Chinese competitors like JA Solar Holdings Co Ltd, Yingli Green Energy Holding Co and Suntech Power Holdings Co; LED makers face San’an Optoelectronics Co and Elec-Tech International Co Ltd; computer firms Acer Inc and Asustek Computer Inc have to compete against Lenovo Group; semiconductor maker MediaTek Inc has to rival Spreadtrum Communications Inc; while smartphone and tablet manufacturer HTC Corp contends with Lenovo Group, ZTE Corp and Huawei Technologies Co.
All these Chinese companies get strong support from their government in the form of state investment, low-interest loans, policy-based subsidies, government procurement, local protection, headhunting and judicial protection, among other things, which has caused Taiwanese electronics enterprises to gradually lose their competitive advantages.
As a result, apart from Taiwan Semiconductor Manufacturing Co, the other half-dozen DRAM makers included in the Taiwanes government’s “Two-Trillion and Twin-Star Industries” (兩兆雙星) plan 11 years ago have mostly all crumbled and collapsed.
First, they were surpassed by their South Korean rivals, then chased and overtaken by up-and-coming Chinese competitors. The predicaments these firms face is reflected in national economic data. Taiwan’s purchasing managers’ index (PMI) for last month hit an eight-month low of 51.6, in contrast with the PMIs for China, Japan and South Korea, which are all climbing. It will be hard for Taiwan to achieve even the low-end forecasts of 2 percent annual GDP growth this year.
Despite the unrelenting pressure Taiwan-owned firms face as a result of the preferential state treatment given to their Chinese competitors, the government has never included the issue of unfair competition in its agenda for cross-strait economic and trade negotiations, nor has it protested on behalf of businesses. For example, the government did nothing when the Shenzhen court dismissed Foxconn’s case against BYD.
Taiwanese companies in China will certainly encounter more cases of unfair competition in the future. However, the cross-strait economic and trade policies that Taiwan is ready to agree to are all centered on the Economic Cooperation Framework Agreement (ECFA), which is geared toward securing the nation’s position in the global free-trade system. When it comes to the unfair competition faced by local businesses operating in China, Taipei has offered no response whatsoever.
If this situation continues, enterprises are likely to become more estranged from Taiwan. They will be left to look out for their own interests, which will lead them to ask the Chinese government to accept them as businesses belonging to the “Chinese nation.” If — or rather when — that happens, Beijing will be able to use these companies to press Taipei into complying with its wishes.
Julian Kuo is a former Democratic Progressive Party legislator.
Translated by Julian Clegg
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