Some business deals fit
the times so perfectly they help to define their eras. The world woke
up to Japan's intention to conquer the global economy when a Japanese
company purchased Rockefeller Center in 1989. Internet upstart AOL
signaled the rise of digital by buying last century's media giant,
Time Warner, owner of this magazine. China and Taiwan now have their
epochal deal, signed by scions of wealth and privilege from either
side of the Taiwan Strait. Winston Wong, the estranged son of Taiwan's
most colorful executive, has gone into business with Jiang Mianheng,
the low-profile son of Chinese President Jiang Zemin. They have started
a $1.6 billion venture to make integrated circuits in Shanghai-a partnership
that highlights the economic trend most worrying to Taiwan President
Chen Shui-bian.
Taiwan's two greatest
assets-silicon chips and human brainpower-are fleeing to China. The
island produces 10% of the world's integrated circuits, more than
60% of its motherboards and most of its notebook computers. All of
those businesses are finding futures on the mainland, thanks to lower
wages and a ready supply of bargain-priced engineering talent. At
the same time, Taiwan's own workforce, among the world's most inventive
and productive, is opting for China, not just as a place to invest
in but a good place to live. Roughly 300,000 people, mostly managers,
have moved to China, and Shanghai is the hottest destination. "The
more business moves to China, and the more people leave, the faster
China closes the technology gap," worries Lee Tai-an of the Ministry
of Economic Affairs' Industrial Development Bureau.
For
two decades, Beijing has lured Taiwanese investment to its shores
hoping to make the island more economically beholden, and it's a strategy
that has worked. In the 1980s, Taiwan's entire sneaker industry ignored
a Taipei-imposed ban on investment, laced itself up and moved to the
mainland. As China's economy boomed through the 1990s, the island's
investments there rose steadily to current estimates of $45 billion.
If Taipei hadn't lifted many of the restrictions, it was at risk of
turning its top executives into a criminal caste.
Now, the flow has become
a deluge. "It was amazingly abrupt-a year ago, suddenly everybody
wanted to work in China," says Manuel Lopez, who runs one of
Taipei's top head-hunting firms. Chiang Julin, a refugee from Taiwan's
sagging economy, arrived in Shanghai two weeks ago with a briefcase
of rEsumEs and experience in marketing for Campbell Soup Co. and Disney
theme parks. "I don't think I'll return," he says. "This
is where I'll make my home." Increasingly, his new home looks
like the one he left behind. The area around the Gubei district, where
many transplants live, is crowded with Taiwan restaurant chains serving
island specialties like fried oysters and clams with basil, while
sidewalk vendors peddle Taiwanese favorites like betel nut and barbecued
chicken sphincters on a stick. Taiwanese madams oversee karaoke bar-brothels.
Bemused new arrivals can get help with acclimation from books like
the bestseller Shanghai Migrants, which advises that "a few thousand
yuan a month will support a second wife, and that's a good deal because
she'll also cook and clean."
But it is the Wong-Jiang
chip factory that takes the trend far beyond the realm of sneaker
manufacturers looking for cheap workers. Winston Wong was once heir
apparent to his father's company, Formosa Plastics, one of Taiwan's
biggest firms. In 1995, Taiwan newspapers reported that Wong was cheating
on his wife with a university student; Wong's stepmother shoveled
them much of the dirt. It turned out she wanted her own children to
run the company. Her husband, Wang Yung-ching, who has three wives
of his own, backed wife No. 3 and forced his son to leave Taiwan for
embarrassing the clan. Wong (who spells his name differently than
his father), son of wife No. 2, lost his corporate inheritance, moved
to the U.S. for several years and, according to someone who has done
business with the family, "resolved to start his own empire to
prove himself to his father."
He won his chance when
he met Jiang Mianheng, eldest son of Jiang Zemin. The young Jiang
attended Philadelphia's Drexel University, where he earned a Ph.D
in physics, after which he founded Shanghai Alliance Investment Ltd.
The firm got stakes in the city's biggest infrastructure projects,
including its airport and the broadband network, and that established
Jiang the younger as Shanghai's kingpin of information technology.
He reportedly met Wong in 1995, during a visit to the U.S. The first
thing they found in common was their birthdays. Then they discovered
matching ambitions, and began talking deals.
Their Shanghai factory,
Grace Semiconductor Manufacturing Corp., is wholly foreign-owned,
with Wong as CEO and Jiang serving on the board of directors. It broke
ground in November and should start producing eight-inch (20 cm) silicon
wafers, used to make computer chips, starting late next year. It is
Taiwan's biggest high-tech project in China. Just 50 m away, however,
a nearly identical plant is under construction, this one owned by
one of Taiwan's best-known chipmakers, Richard Chang's Semiconductor
Manufacturing International. Combined, the dozen production lines
in the two factories should be able to produce about a fifth of Taiwan's
total output. Government officials privately concede that they're
also worried that Taiwan's biggest chip producer, Taiwan Semiconductor
Manufacturing Corp., will ultimately move production to China. "The
move to China is inevitable," says Chang. In five years, China
may have dulled Taiwan's technological edge and stolen its best people,
and that's bad news for any leader of Taiwan. Worse, "China's
growing economic leverage could intensify the domestic urge to unify,"
says Lin Chu-chia, professor of economics at National Chengchi University.
In which case, those who have already voted once with their feet will
be unlikely to cast a ballot for Chen Shui-bian.
