The truth
about China's 'gold rush'
2002/01/08
Taipei Times
Taiwan's accession to WTO on Jan. 1 means that
the Taiwanese economy will become much more internationalized.
It also means that the normalization of economic relations
between Taiwan and another WTO member -- China -- is approaching
like a runaway freight train.
For many Taiwanese businessmen, therefore, WTO accession is
an opportunity to open up virgin markets in China. The Taiwanese
government is for this reason moving to an "active opening
and effective management" policy. Now, a new China fever
is taking off on the wings of the WTO.
Is China really an international factory with low labor costs
and unlimited domestic markets where gold can be picked directly
off the ground? Let's not be overly optimistic. Results from
a sampling survey done late last year by the Taiwanese Chinese
National Federation of Industries (全國工業總會) show that although
investments by Taiwanese businesses are growing in size, with
over 50 percent of companies investing in excess of US$1 million,
78 percent of respondents believe it will be difficult for Taiwanese
businesses to break into China's domestic market.
In the past, Taiwanese investors in
China have tended to make joint investments with local people,
thereby using local contacts to overcome market obstacles. The
survey, however, shows that 80 percent of Taiwanese businesses
now operate through independent investments.Due to a mutual
lack of confidence between Taiwanese and Chinese businessmen,
their different management ideas and social values, conflicts
often arise and many Taiwanese businessmen feel cheated. Having
lost hard-earned capital, they therefore prefer independent
investments.
Also, China's backward legal system, corrupt bureaucracy, and
inefficient administration often leave Taiwanese businesspeople
at a loss for what to do, causing them to miss market opportunities.
Besides, China's commodity distribution and marketing systems
are quite backward -- the situation differs vastly in locations
around the country -- making it difficult for people doing business
in China to seize business opportunities and develop the market.
According to the CNFI survey, even
if Taiwanese businesses in China enjoy smoother market expansion,
they still end up losing money, because 61.1 percent have been
unable to collect payments. This is due as much to the prevailing
habit in China of not paying back loans, as to the fact that
local buyers and the marketing system fail to implement contracted
conditions of payment as well as deadline obligations. Default
on payments is the succubus of Taiwanese businesses in China.
The myriad investment difficulties facing Taiwanese businesses
in China have left an increasing number of staff stranded there.
Some have been left temporarily jobless, some unable to find
work for several years. The Taiwan Business Weekly (台灣商業周刊)
calls it the "Taiwan flood." (台流) This is similar
to the term "blind flood,"(盲流) used to describe the
jobless, incomeless, homeless people who drift between China's
major cities.
According to the Business Weekly report,
the "Taiwan flood" numbers about 20,000 people, consisting
of investors who suffered setbacks in China; unemployed high-level
executives who were replaced by locals; those whose professions
in Taiwan were already hopeless; and those who have defaulted
on Taiwanese bank loans and thus dare not return home. These
people are ashamed and are unable to return to Taiwan. They
also do not dare reveal the truth about China's "gold rush,"
preferring to endure inferior living conditions and become part
of a new marginalized class of Chinese society. This is the
tragic and largely unknown reality of Taiwanese businesses in
China.
If you still have fantasies about China's gold-rush fever,
have a look at the CNFI's survey. Read of the bitter experiences
of the "Taiwan flood" -- it's a true-life Book of
Revelations for Taiwan businesses in China.