Taiwanese businessmen escaped from mainland with only half of the investment left from 10 years ago

Translation and commentary: Jenny Ball
Editor: peacelv

The picture shows a factory scene of a Taiwanese factory.(STR/AFP via Getty Images)

China’s economic situation has experienced severe turbulence in the past six months, and many industries have been purged one after another. It is also facing problems such as a real estate bubble, large-scale electricity rationing, and “common prosperity”. Scholars said that the ratio of Taiwan’s investment in China has dropped from 61.2% to 33.3% in the past ten years, “almost half of it ran away.” Face the risk of being killed to get eggs.

The civic group “Economic Democracy Union” recently held an online forum on “Taiwan Businessmen Going Westbound for 30 Years, Will Go Prosperity Together or End with Retreat?”, inviting experts to discuss the pros and cons of Taiwanese businessmen going west to China, as well as the current benefits and risks of investing in China.

Lin Zonghong, a researcher at the Institute of Sociology at the Academia Sinica in Taiwan, said that in recent years, the problem of low wages and inability to afford housing among young people in Taiwan has been a concern. According to his research, since 1998, Taiwanese capital began to enter mainland by a large margin. The result of a large amount of capital migration has led to the closure of local factories in Taiwan while labor unemployment, and stagnant wages for the young generation. The two results are almost linearly correlated. Judging from the results of the data, the expansion of cross-strait economic and trade exchanges can be said to be the main culprit for the low wages of Taiwan’s youth and the increase in poverty.

  • Cross-Strait investment data can be divided into three periods

Lin Zonghong said that cross-strait investment data can be divided into three periods.

The 1st is the “Golden Time” from 1992 to 2007. Taiwan’s “direct foreign investment (FDI)” in Mainland has been on the rise, and after 2002 it accounted for more than 60% of Taiwan’s outflow of capital.

The 2nd period, the “Time of Huge Wave ” is between the 2008 financial tsunami till the  Sunflower Movement in 2014;

In the 3rd period, the “The Ebb Tide”, starting in 2015 when Taiwanese capital as a whole showed a significant outward migration and decline.

He said that after the President of the Communist Party of China came to power, it was an obvious watershed. Taiwan’s investment in China has dropped from 61.2% to 33.33% since 2012, almost half of the investments” ran away”, which is equivalent to returning to the year 2000 as period of “no haste, be patient”. During the period, the funds were going to the new Southbound countries, and there was also a large amount of investment in the United States, which shows that Taiwanese capital is escaping mainland in large numbers.

Lin Zonghong said that not only Taiwanese business funds, but the current global funding trend is also withdrawing from CCP China. However, the FDI announced by the CCP has great doubts as fraud. Even IMF President Kristalina Georgieva has recently been revealed that during her tenure as the CEO of World Bank, in order to please Beijing, She pressured the staff to improve CCP China’s ranking in the “Business Environment Report”.

  • The ratio of foreign investment in CCP China is seriously overestimated

Lin Zonghong said that China’s FDI is currently seriously overestimated, because Hong Kong funds are also included in China’s FDI, accounting for an average of 75% to 80%. But the truth is that Chinese funds go to Hong Kong and then detour back to China. It then became foreign capital, enjoy tax reduction, and it forms a circulation in the body. If Hong Kong funds are deducted, the current foreign capital of the CCP is actually a net outflow.

Speaking of the changing situation of Taiwanese businessmen in CCP China, Lin Zonghong said that in the past, Taiwanese businessmen who went to China were able to get preferential treatments such as tax reductions, land reductions and exemptions, and cheap labour. However, since 2007, CCP China entered a period of industrial upgrading. Many Taiwanese businessmen were driven to inland areas such as the central and western regions. Tax incentives for Taiwanese businessmen have been cancelled, and  even social security funds. They were even asked to pay the “five social insurances and one housing fund” include endowment insurance, medical insurance, maternity insurance, unemployment insurance, work-related injury insurance and housing provident fund. The domestic demand market is fiercely competitive. Therefore, even the industries participating in Chinese domestic demand are also retreating.

What more, Taiwanese businessmen are also facing the crisis of being replaced by the red supply chain(CCP’s companies). Lin Zonghong took the “Top 1000 Companies in the Mainland, Taiwan and Hong Kong” as an example. In 2007, there were still 356 Taiwanese businessmen. In 2017, there were 124. Last year, there were only 108. “Basically, it has been squeezed out of the market by the CCP’s red supply chain.”  

  • The gross profit margin of Taiwanese companies in Taiwan is higher than that of Taiwanese companies in Mainland

He divided the total assets of Taiwanese businessmen in mainland into He divided the total assets of Taiwanese businessmen in China into:Zero assets; less than 20% and more than 20%. After analyzing these three categories, it is found that Taiwanese companies with zero assets in China had an average gross profit margin of only 3.3% between 1995 and 2011, and increased to 5.7% after 2012; while for companies with less than 20%, the average gross profit margin increased from 7.4 %  to 11.2%; yet companies with assets higher than 20% fell from 5.5% to 4.9%.

Lin Zonghong took TSMC as an example. TSMC is a company with a total assets of less than 20% in CCP China. Although its strategy is to deploy globally, more than 80% of its capital and employees remain in Taiwan. Even with high wages, its gross profit margin has been maintained at more than 30%, and there will still be more than 30% in 2019. 31.9%; on the other hand, Hon Hai, which is higher than 20%, has more than 900,000 Chinese employees, but its gross profit margin is only 2.2% in 2019. “For companies with roots in Taiwan, the gross profit margin of enterprises is significantly higher than (remaining) in mainland. “

He said that after Xi Jinping came to power, the profits of Taiwanese and Chinese companies have reversed by 10 years. Coupled with China’s large-scale power cuts, real estate bubbles, and demand for “common prosperity,” Taiwanese businessmen’s profits will soon become a negative number. It means that “in the future, these large-scale factories will not be able to sustain themselves if they want to prosper together with the CCP.”

  • Taiwanese businessmen’s situation is an alarm to Taiwanese in CCP China

“The situation of Taiwanese businessmen is an alarm to all Taiwanese in mainland China.” Lin Zonghong reminded that it is necessary to recognize the risks of doing business in CCP China. The total number of investments is declining. There are still some Taiwanese businessmen who cannot come out though are reducing the amount of investment. They are unable to withdraw quickly because the money has been tied to China. They may also face the risk of being killed “for the golden eggs”.  

However, he also emphasized that although Taiwanese businessmen are retreating, it does not mean that they will withdraw all. If it is maintained between 10% and 20%, it is normal. Even if the United States and Germany were in confrontational relationship at the beginning of WWII,  there was still trade between two sides, so it is unlikely to drop to 0%. We should strike a balance between national security and economic security.

Commentary: The situation of Taiwanese business investment can be applied to all the foreign investment to CCP China. The lure or trap was  they would “get preferential treatments such as tax reductions, land reductions and exemptions, and cheap labour.”

  • Tax reductions is for you to break law with CCP’s consent and later CCP would blackmail you for tax evasion. In fact it seemed that you didn’t pay the listed tax, but any businessmen to CCP China knew they got to pay much more which are not listed, such as the entertainment, gifts and money to make local government official happy. And it puts you as the servants of any official.
  • Cheap labour is for you to enslave the Chinese the way CCP does for 1.4billion Chinese.

CCP has always lured the foreign investments with notorious idiomatic: it’s a win win for both parties. The truth is sad that CCP won twice or both. Not only your business patents will not more yours, you are facing all kinds of blackmails even risk you life as per CCP’s mood. 

Lessons learned is the money paid worthy. If you still can’t see the CCP’s tricks and have illusions about its baits, just look at the experience of Taiwanese businessmen.

Link of the source article: hk.epochtimes.com

Disclaimer: This article only represents the author’s view. Gnews is not responsible for any legal risks.

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