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Decoding China

China punished Taiwan’s Far Eastern Group, who will be next?

China punished Taiwan’s Far Eastern Group, who will be next?

Source:CommonWealth Magazine

Why is Beijing going after Far Eastern Group Chairman Douglas Hsu, even though he is known to sympathize with Taiwan’s China-friendly blue camp? As cross-strait ties continue to deteriorate, Beijing would seem to care less about Taiwanese entrepreneurs’ allegiance to certain political parties than their support for “Taiwan independence”. With a growing number of Taiwanese businesses making it onto Beijing’s black list, speculation is rife whether the time of reckoning has come.

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China punished Taiwan’s Far Eastern Group, who will be next?

By Allison Hsu
web only

In a recent news article, China’s Xinhua News Agency reported that the textile and cement businesses under Taiwanese conglomerate Far Eastern Group were slapped with a hefty fine of 474 million yuan and had idle plots of land withdrawn for violating laws and regulations in five Chinese provinces. When the news broke, it sent shock waves through the cross-strait business community.

Eight days later, Hsu declared in a letter to the editor published in a Taiwanese newspaper that he “opposed Taiwan independence.”

Hsu is not the first business tycoon from Taiwan to bow to Chinese pressure to protect his business interests in China. In 2005, Shi Wen-lung, founder and former chairman of performance materials manufacturer Chi Mei Corporation, shocked the business community when he voiced support for China’s Anti-Secession Law. Shi, however, used to be an ardent advocate of Taiwan independence, whereas Hsu and the Far Eastern Group are known to sympathize with the blue camp around the major opposition Kuomintang (KMT), which is generally perceived as friendly toward Beijing. Many Taiwanese businesses are now asking themselves whether, if Beijing is coming after pan-blue entrepreneurs and forcing them to take a stance against “formal Taiwan independence”, does that mean a sweeping crackdown is under way?

Hsu hedges his bets across the political spectrum but donates more to the green camp than to the blue camp

“The key point is whether one violates China’s bottom line; it’s not about political leanings but whether you are found out having funded Taiwan independence activists,” explains a Taiwanese businessman who has been active in the Chinese market for more than two decades.

Noting that, for entrepreneurs, business is business, the businessman states that hedging one’s bets is quite normal and that Beijing’s Taiwan Affairs Office is well aware of that.

The Far Eastern Group was slapped with a heavy fine because Beijing felt there is irrefutable evidence that it had funded “Taiwan independence figures”.

Statistics by Taiwan’s Control Yuan show that, among Taiwan’s top 50 large enterprises, the Far Eastern Group was the top political donor during the past three legislative elections. Although the donations went to politicians from the blue and the green camps, the Democratic Progressive Party (DPP) received a greater share of donations from the group after it reclaimed power from the KMT in 2016.

Hsu draws China’s ire over the funding of ‘Taiwan independence hardliners’

The Control Yuan figures not only show the ups and downs in donations to the two political camps but also that Hsu massively increased funding to the DPP over time while still hedging his bets. In 2018, when Taiwan’s current Premier Su Tseng-chang ran for mayor in New Taipei City, the Far Eastern Group affiliate Oriental Securities Corporation donated NT$1 million to his campaign. Su is what the Taiwan Affairs Office calls a “die-hard Taiwan independence activist”.

A veteran Taiwanese businessperson reveals in private that the Taiwan Affairs Office was already warning Taiwanese investors in 2016 against making political donations to the DPP and its allies. Beijing was early on aware that entrepreneurs were eager to curry favor with both political camps.

In late 2020, the Taiwan Affairs Office warned it would publish a list of “Taiwan independence advocates” who would be slapped with sanctions. On October 27 this year, it said that a special law would be passed to curb moves toward “Taiwan independence”. The law would allow the restriction of “die-hard promoters of Taiwan independence and their supporters” from having contacts or cooperating with people in China, and to “hold them criminally liable for the rest of their lives.”

Not long after this harsh announcement, the Taiwan Affairs Office on November 5 directly named the politicians Beijing considers culprits: Premier Su Tseng-chang, former Premier Yu Shyi-kun and Foreign Minister Joseph Wu.

That Beijing acted on its much earlier warning only now can be attributed to increasing cross-strait tensions.

Since Taiwanese President Tsai Ing-wen took office in 2016, Chinese President Xi Jinping has been strengthening his grip on power. With Tsai and the China-critical DPP in full control of the government in Taiwan and Xi leading an autocratic regime in China, the two sides of the Taiwan Strait have become more estranged than ever. The doors of communication slammed shut a long time ago.

Chen Min-chi, associate professor at the Institute of Sociology of National Tsing-Hua University, believes that the “Douglas Hsu incident” shows that Taiwanese businesses are facing unprecedented risks in China. Given that not just known DPP sympathizers must take a stance against “Taiwan independence” but even pan-blue companies must do so means that “China’s approach has changed dramatically in comparison to the past when it wooed Taiwanese businesses.”

Xi zeros in on ‘proponents of Taiwan independence’ 

Professor Wang Hsin-hsien, chair of the Graduate Institute of East Asian Studies of National Chengchi University, notes that, amid increasing confrontation between China and the United States, Taiwan has become a weapon in the hands of these two powers. The more the Tsai administration leans toward the United States, the more the Taiwan Affairs Office increases the volume of its warnings that “relying on the U.S. to plot independence will cause endless disaster for Taiwan.” The increasing frequency of incursions into Taiwan’s air defense identification zone by Chinese military planes is just one of China’s intimidation measures.

In the latter half of 2021, Xi has several times publicly made major statements about Taiwan policy, constantly mentioning the Taiwan independence issue. Speaking at the Chinese Communist Party’s 100th anniversary celebration, Xi even declared that “resolving the Taiwan question and realizing China's complete reunification is a historic mission and an unshakable commitment of the Communist Party of China (CPC).”

As Wang sees it, Xi’s speech shows that Beijing believes putting out the word via the Taiwan Affairs Office does not suffice anymore. Instead, active steps to attack “pro-independence forces” have to be taken. The aim is to use precision strikes against prominent figures as a warning to others to achieve the “isolation of Taiwan independence forces”.

By imposing hefty fines on a Taiwanese businesses with pan-blue leanings, Beijing can achieve its goal of cutting off official donations from large Taiwanese business donors to deep-green politicians. If these donors attempt to make political donations under the table in the future, they will have to factor in the legal risks pertaining to the violation of Taiwan’s Political Donations Act.

Even Nike bows to Chinese pressure as making money comes first

The argument that rising cross-strait tensions will only accelerate the ongoing exodus of Taiwanese businesses from China is currently very popular.

But not all agree that it is a valid one. Johnson Hou, president of Universal Cement Corporation, had already pulled his operations out of China ten years ago. He points out that, while the confrontation between China and the United States might be serious, the reality is that “whoever wants to grab the Chinese market is forced to obey.” “This applies also to Nike, the NBA. If you want to make money from them, there is no other way,” says Hou.

Whether Taiwanese businesses decide to relocate to escape Chinese pressure ultimately depends on commercial factors. Even if they move their operations to member nations of the Association of Southeast Asian Nations (ASEAN), they will face “many problems such as authoritarian governments and anti-Chinese sentiment,” Hou points out.

Taiwanese investment in China peaked in 2010 and 2011, according to statistics by the Investment Commission under the Ministry of Economic Affairs. In 2019 investment fell to a record low of around US$4.1 billion, only about one third of peak time investment. Among the reasons were rising production costs due to soaring land prices and higher labor costs as the Chinese economy grew. Cost-conscious Taiwanese businesses who saw their margins shrink decided to relocate to cheaper locations; they did not necessarily pack up because of deteriorating cross-strait relations.

On the other hand, local Chinese companies proved increasingly competitive, so many Taiwanese businesses became expendable as southern China implemented an industrial restructuring and upgrading strategy. Wang thinks that the changing industrial environment and the tense political atmosphere both contributed to the predicament of Taiwanese enterprises in China. Those who remained in China despite the difficulties knew that they needed to be pragmatic and keep a low profile to play it safe.

However, amid the current political situation Taiwan, China and the United States are all facing their own problems and are therefore not really interested in escalating tensions. Wang thinks that, given that the Taiwan Affairs Office has not yet publicly branded Tsai and Vice President William Lai as “Taiwan independence hardliners”, Beijing apparently “is still exerting some restraint.”

Biggest risk: Xi’s unpredictability and ambition to go down in history

Professors Chen and Wang both regard the unpredictable nature of Xi’s policymaking as the biggest risk factor.

On top of that, the power struggle between China and the United States continues unabated. Cross-strait relations are also tense because Washington is “playing the Taiwan card”, says Wang. He is concerned about Xi’s way of creating “accomplished facts”, starting from the purge of powerful leader Zhou Yongkang, a member of the 17th Political Bureau Standing Committee, in the name of an anti-corruption drive in the early days of his rule to the recent proclamation of the Implementation Rules for Article 43 of the Hong Kong National Security Law. Xi now holds enormous power in the absence of any corrective mechanism. Since decisions that Xi takes can hardly be unmade, “political risk is higher than ever”, Wang believes.

On November 16, the CPC announced its third resolution on history, which secured Xi’s position in the history of the CPC. In a 631-character passage, the resolution listed Xi’s achievements in “ruling Hong Kong” but contained only 357 characters on Taiwan. Aside from the meeting between Xi and then Taiwanese President Ma Ying-jeou in Singapore in November 2015, the resolution did not list any real achievements on Taiwan. “Xi might think that he has to make up for this shortcoming,” warns Wang.

Wang expects Xi to turn up the heat on Taiwan. This would most likely happen after the 20th CPC national congress in the second half of 2022 when Xi will have secured the blessing of the party’s top body for his role as China’s unchallenged top leader. In order to leave his mark on history he might increase the pressure on Taiwan, including military intimidation, says Wang. This is the scenario behind Douglas Hsu’s siding with Beijing, and that’s what the people of Taiwan should keep their eyes on.


Have you read?

♦ The four referendums have failed: What’s next for the KMT?
♦ Why the Chinese Military Has Increased Activity Near Taiwan
♦ Is China really poised to attack Taiwan?

Translated by Susanne Ganz
Edited by TC Lin

Uploaded by Penny Chiang

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