20100627 The cost of doing business in China

The cost of doing business in China

By Huang Tien-lin 黃天麟
Sunday, Jun 27, 2010, Page 8

While the scandal surrounding the recent suicides at Foxconn’s “sweatshops” in China seems to have been put to rest by the company’s pay increases, these 12 suicides are just the tip of the iceberg.

The real problems run much deeper, and are warning signs that Taiwanese businesspeople with operations in China and the Taiwanese cannot afford to ignore.

This reveals several things to Taiwanese businesspeople.

China is a large country where anything can happen and few can predict what kinds of things could happen there.

One example of this is the Huang Chao peasant uprising that contributed to the fall of the Tang dynasty. A more recent example was the emergence of the Red Guards during the Cultural Revolution. The ramifications of these events were far greater than the 12 suicides we have seen recently at the Foxconn plant.

The next thing we should learn from these recent events is that the implications of the word “sweatshop” by certain Chinese media outlets run deeper than one might think. The word “sweatshop” will now follow Taiwanese businesspeople everywhere they do business in China and is a curse that could wreak havoc on their business activities at any time. On this point, this curse is most likely to reveal itself on the operations of Taiwanese businesspeople once unification through economic means has finally been achieved.

The fact that pay at the Foxconn plant was raised by about 20 percent shows that Foxconn had indeed been running a “sweatshop” and abusing the rights of its workers, just as the Chinese media had accused.

This is not something that will be forgotten just because the company raises salaries: It could be used against Taiwanese businesspeople when they are looking to set up factories in China in the future.

When this happens, under orders from China’s new generation of Red Guards, investment guarantees will be worth nothing and no Taiwanese will dare ruffle feathers in China. Running back to Taiwan will also be of no avail since Taiwan will have already “returned to the embrace of the motherland.”

Taiwan as a nation should learn three things from this.

We can now see how shortsighted the plans made by Taiwan’s economic experts and government officials were. They were originally supposed to move production to China while keeping operation, research and development in Taiwan.

However, the plans merely resulted in Taiwanese businesspeople becoming enslaved in China and saw them go down the path of setting up “sweatshops.” There is no going back from there.

Perhaps the aforementioned shortsighted economic plans were the result of China’s use of economic means to promote unification and Taiwanese businesspeople using their businesses in China to influence political decisions and policy here in Taiwan.

However, our government’s economic experts should have been aware that businesspeople are only interested in profits. Surely the government should be held accountable for its misguided policies based on listening to Taiwanese businesspeople and their calls to have cross-strait resources integrated.

The suicides at Foxconn prove that putting down roots and conducting business from one’s own country is the only lasting way to go about doing business, as the Korean companies Samsung and LG have done.

This is also the only way that industries can be upgraded. In the past, Taiwanese investment accounted for half of China’s direct foreign investment. Korean exports, however, overtook Taiwan’s exports to China a long time ago.

It is clear that Korea has bettered Taiwan by maximizing its quality and technology and this proves that the sweatshops Taiwanese businesses have set up by integrating resources from Taiwan and China were just a shortsighted way to make a quick buck.

Perhaps in the short-term this may prove beneficial to Taiwanese businesspeople, but for Taiwan as a whole it is very damaging. The government’s policy of opening up to China, an economic cooperation framework agreement and a “One China Market” are just going to hasten self-destruction.

With disaster approaching, I hope that things can be turned around before it is all too late.

Huang Tien-Lin is a former national policy adviser.