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Taiwan Enticed by ‘Huge Market’ in China

By John Pomfret, Washington Post, Monday 27 March 2000; A19

TAICHUNG, Taiwan-Antony Lo, president of Giant Bicycles, does not like to talk about politics or relations with China.

We mind our own business and we go with our own agenda, said the 51-year-old chief of one of the world's biggest bicycle firms as he sipped tea on the top floor of his airy corporate headquarters here in central Taiwan.

But like many other firms in Taiwan, Giant is being sucked irresistibly toward the mainland. While Lo insists that Giant will balance its future between mountain and racing bike sales in the West and Japan and selling mid-priced bicycles in China, his numbers show a marked tilt toward Beijing: More than half Giant's 3.6 million bikes this year will be made in China, and sales there have doubled in three years.

As Taiwan prepares to inaugurate a new president, its businesses are becoming increasingly reliant on the mainland, not only for manufacturing but also for sales. This is a key reason why many expect the president-elect, Chen Shui-bian, who once advocated independence from China, to tread softly in his approach to with Beijing.

Businessmen and analysts said Chen, even more than outgoing President Lee Teng-hui, has no choice but to improve relations with China, especially commercially.

Elected with just 39 percent of the vote, Chen rode to power on a wave of dissatisfaction with official corruption and dirty politics. To accomplish his ambitious domestic agenda, he needs quiet across the Taiwan Strait.

In addition, Chen was propelled to victory by support from voters in southern Taiwan, the poorest part of the island. If he wants to be reelected, analysts said, he will have to expand his base, strengthening ties to people with money and influence. The Nationalist Party, which has run Taiwan in the half century since fleeing Communist forces on the mainland, still controls a business empire and has links with many of the island's business leaders.

Chen has already started pushing closer business ties with China. Soon after he was elected March 18, Chen met with C.F. Chang, who runs the Evergreen Marine Corp. Ltd., a shipping giant, and asked him to sit on a presidential advisory panel. Chen also backed the move by the legislature on Tuesday to break with a 55-year-old policy and instigate direct links between several small islands controlled by Taiwan and the mainland.

Taipei's stock exchange has responded heartily, jumping 16.1 percent over three days.

Whoever is president, Lo said, is going to have to face reality. And the reality is: China is there, it won't go away, and it has a huge market that we are uniquely positioned to exploit.

Giant's story is being repeated in businesses throughout Taiwan. Acer Inc., Taiwan's biggest computer company, is moving much of its production to the mainland and now looks to China as its next big market. If China enters the World Trade Organization, garment merchants said they expect to move dozens more textile factories to China, to produce and market clothes.

China is key to our future, said Stan Shih, Acer's president. We see their up and coming computer firms, and we are not afraid. We have higher quality goods. And now that we are producing in China, we are poised to do very well there.

Lee opened the door to doing business in China in 1991, but not without restrictions. He adopted a policy he called no haste, be patient, limiting the amount a company can invest in China and maintaining a ban on direct trade, airline flights and shipping.

Regardless, two-way trade hit a record $25.8 billion last year, up 14.5 percent from 1998. Taiwanese firms have invested more than $40 billion in 40,000 enterprises in China. In January alone, investment hit $319 million, more than six times higher than January of last year.

Chen has promised even more trade and investment. Throughout his campaign, he said he supports China's entry into the WTO. Under a deal worked out between Beijing and the outgoing Nationalist government, Taiwan will not be allowed to join separately but only be allowed to follow China into the group, and as a customs territory called China Taipei.

Some officials close to Chen's camp, however, have reservations about Taiwan strengthening its economic ties with China, saying they worry this could give Beijing too much leverage over Taiwanese politics.

Wu Hsin-hsing, the deputy secretary general of the Straits Exchange Foundation, a semi-governmental body designed to pursue ties with China, said he is concerned that the influence of Taiwan's businessmen will grow to such an extent that they, not politicians, will determine policy.

Another concern, he said, is the persistent fear that Taiwan's money is enriching China and hastening the day that Beijing becomes strong enough to take Taiwan by force. China regards Taiwan as a province, and has threatened military action against the island if it attempts to declare independence.

From a security standpoint, doing business with China really is a double-edged sword, said Wu, who, although a member of the Nationalist Party, is considered close to Chen's Democratic Progressive Party. Should we help them to make themselves strong? Or should we let them go their own way?

Taiwanese businessmen, although eager for stronger ties with China, are not nearly so eager for reunification, Wu said, a point underscored by a series of polls of business leaders. If anything, he said, they know China better, having experienced first hand its lawlessness, corruption and repression.

But sentiment is bullish for investment in China. The President Enterprise Group, which runs the 7-Eleven chain in Taiwan, announced recently it has no plans to cut its $1.1 billion investment on the mainland. Some companies listed on the Taiwan Stock Exchange are eager to get into the act. C.Y. Kao, the chairman of the Chinese National Federation of Industries, Taiwan's largest business group, will soon lead a delegation to Beijing.

We back the idea of more trade and investment, said Peter Chen, a former member of Taiwan's National Security Council and now an adviser to Chen. It's a non- zero-sum game. They win. We win.