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Taiwanese in China: Turn back and look for land
"Life is a bitter sea, turn back and look for land."
Professor Chang Ching-his
9/2/2004



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Editor’s Note: Taiwanese private companies are seen as the most successful foreign investment group in Mainland China because they speak the same language and share a cultural and historical background. But they also face difficulties there. Below is an article written by the famous Taiwanese economist – Professor Chang, Ching-Hsi - regarding the current difficulties Taiwanese private companies face in China.

Because of over investment in some industries, China is now suffering an energy shortage, and strict quotas for electricity usage have been imposed everywhere. Especially in areas where Taiwanese companies are concentrated, some have five days supply in one week, while some only have three days supply each week. Many Taiwanese companies have been unable to deliver products in time, and have lost business, and have even been fined because of this kind of on-and-off operation. Even before the power outages, some Taiwanese already had the intention of retreating from the Mainland.

As the Chinese saying goes, “Before the shower comes, the wind has already blown into the pavilion. What happened right now is just a warning of trouble on the way.”

Administrative Preferential Policies: How It Comes, How It Goes

When Taiwanese companies (as with many other foreign companies) set up their businesses, they can enjoy a lot of preferential policies. On the street of a city named Jiaohe located in China’s northeast province Jiling, there is a huge display board, “Whoever makes trouble with foreign investors, is making trouble with the Jiaohe people.” It shows how much the local officials care for foreign investors. But this kind of good treatment that goes beyond the law is fickle, and can be stripped away in a moment. Even your rights guaranteed by Chinese law can be stripped away unlawfully, and publicly. Many Taiwanese have experienced “a capsized ship in a sewer,” just because their factories were too profitable and high ranking officials began to take a fancy to them.

A free economy has three foundations: A sincere and honest society, a free market, and property rights protected by the government. Although China has already reformed, the society is short all of the three foundations.

China appears to have a free market, but actually does not, because government officials retain the right to examine and approve every aspect of a business, and interfere at any time. Regarding property rights, the most important defender of property rights for an enterprise is an impartial judicial system. From the book, “Record of Persecution of Taiwanese Businessmen by Mainland China Judicature” published by Taiwanese businessman Dr. Kao Wei-Pang, we can see that in the current, “No crime for robbing, Good reason for swindling” environment that is indicative of modern Chinese society, there is no place for justice.

The Chinese judicial system is not independent from the government. Rather, both are controlled behind the scenes by the Communist Party. All trials are show trials, since the judges who listen to witnesses and testimony, are not the adjudicators of cases. Cases are decided in backrooms by committees of Communist party-appointed officials, who can decide dozens of cases a day, without ever seeing or delving into evidence. In Mainland China, justice is determined according to unofficial policy, and the current policy regarding business disputes seems to be that the judiciary should always side with the domestic population.

What's the Real Problem: Over Investment, or the System Itself?

China's economy has too many problems--just do a normal diagnosis, and you will find the root of all the problems is the system itself. This has even been admitted by Premier Minister Wen Jiabao. Let's take the current problem of our “overheating economy” as an example.

In China, many investments are financed by the government. Because they use someone else’s money, government officials the world over often make large financial decisions with little caution. Without being responsible to an electorate, the Chinese government does things with even less caution. Duplicated investments and investments financed to bolster official’s prestige often occur. These investments cause shortages of energy. Prices of resources sky rocket in the short term, and over-supply increases in the long run. As a result, companies suffer losses, and loans become bad debts which the state-owned banks need to bear. We know the leaders of our country see the problem, so how can they remain indifferent?

Of course, the government has implemented a “cooling off” policy. But the very methods they have used to cool down the economy are authoritarian, rather than market orientated. They have ordered bank officials to give out less loans, and have increased reserve requirements. In taking this approach, officials have merely reinforced the communist nature of the economy.

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