"These days, it seems to be a crime to be 'Taiwanese'," says a Taiwanese business owner who has worked in China for two decades. Deteriorating relations between Taiwan and China have made the position of such "Taishang" very difficult. They cannot be seen as pro-Taiwan independence, but they also cannot offend Taiwanese sensibilities and openly swear fealty to the Communist Party.

Long years of working in China means it is patently impossible to just leave for another market. All he can do is to be more careful than ever. He doesn't go to public events where he might meet the press, and his company doesn't hold any public events.

As relations across the strait grow frosty and the China-U.S. trade war, which started in 2018, intensifies over the course of four years, "silence is golden" has become the rule of thumb for Taishang everywhere. 

Taiwanese investments in China tallied up to US$5.86 billion in 2021. Compared to the annual investment of US$12.79 billion the year Xi Jinping took office, it was a drop of over 50%.

But when the Investment Commission of the Ministry of Economic Affairs conducted a survey on how the Regional Comprehensive Economic Partnership (RCEP) or U.S. policies have affected overseas investments, only 4.4% and 9.5% of Taishang, respectively, explicitly stated they would cut investments in China. The majority said their plans were "unchanged" or "under evaluation".

World's factory becomes China's factory

 "The idea that Taiwanese business is leaving China is ludicrous," says Lee Cheng-hung (李政宏), president of the Association of Taiwan Investment Enterprises on the Mainland. "No Taishang will completely walk away from a market of 1.4 billion people."

This year, the Taiwanese bicycle colossus Giant Group opened its assembly plant in northern Vietnam. However, it has not reduced production capacity in China. The only adjustment is that, while the Vietnamese and East European plants sell to Europe and the U.S., the factories in China will produce entirely for China.

Giant spokesperson Ken Li (李書耕) says that after lockdown restrictions were lifted in the second quarter, the Chinese market grew as fast as 30% to 40% every month.

"We foresee an increase in demand for high-end bicycles. Giant will not give up on China's domestic market."

(Source: Ming-Tang Huang)

In truth, even American brands are not about to give up selling to China. China used to be the world's factory. Now China's factories serve only China.

WW Holding Inc. (威宏控股) is one of the world's three largest bags manufacturers; its clients include famous American and European brands like Nike. Since the onset of the China-U.S trade war, it has opted for the strategy of diversification over throwing in the towel.

As the U.S. places additional taxes on the import of consumer products such as clothing and footwear, WW Holding has responded by opening factories in Vietnam and Cambodia. 

However, China still makes up 40% to 50% of the company's production capacity. These resources have now been diverted to producing for the Chinese market exclusively. 

"As long as orders from the domestic market keep rolling in, abandoning China is just not possible," says CEO Yung Yuh Hong (洪永裕). It goes without saying that situations may change and China may once again become an advantageous location for production. 

Another reason Taishang are loath to give up on China is the supply chain they've spent more than three decades building. 

Li points out that the value chain in bicycle manufacturing is very intricate and complicated. The suppliers of middle- to high-tier parts are not in the habit of setting up shop everywhere. Giant operates out of three plants in Kunshan, Jiangsu; it is also the base of operations for many Taishang that are part of the same supply chain. This makes it one of the few locations where every bicycle part can be procured at the drop of a hat.

Diversifying to be Made in China for China 

The enormous domestic market makes it possible to create a self-sustaining ecosystem. Due to this, many Taishang are also starting to take their companies public in the Chinese stock market.

Giant Light Metal Technology (Kunshan) Co. (鼎鎂), a subsidiary of the Giant Group that produces materials for light alloys, requested to be listed on the Shanghai Stock Exchange in June of this year, under the name Giant Alloy (鼎鎂新材料).

Located in Kunshan, Giant Alloy makes only 20% of its revenue by selling to its mother company. Besides the alloy used in bicycles, it also makes rims for motorcycles, and its industrial aluminum products are used in automobiles, rail-based transportation, and also civil aviation.

Li bluntly states that taking Giant Alloy public is a clear sign that the Giant Group is optimistic about the future of China’s homegrown auto industry.

The Acter Technology Integration Group (聖暉系統集成集團) is a Suzhou-based subsidiary of Acter Co. (聖暉工程), which is famous for its clean room tech and professional engineering services in the semiconductor sector. On October 13th it also became listed on the Shanghai Stock Exchange. It understands that as China invests in the production of its own semiconductors, there will be a growing need for the construction and maintenance of clean rooms, as well as other electric engineering-related services. 

For Taishang, having their subsidiaries go public in China is also an effective way of building a political firewall.

PwC partner Patrick Tuan (段士良) explains that if the political situation grows worse, Chinese firms partly owned by Taishang are far less likely to be boycotted than companies that are wholly “Taiwanese”.

 “After all, Chinese stockholders are also stockholders,” he says.

For Taishang who are famous for their versatility, keeping a finger on the pulse of market trends has never been the issue. Their greatest worry is political instability.

Who will come out on top after the storm subsides?

Lee points out that for most Taishang, besides hoping that the Chinese government can exercise greater “precision” in their efforts to prevent the COVID-19 pandemic from spreading, their other greatest wish is that the business environment will not be irrevocably damaged by rifts in Cross-Strait relations. These concerns reached a boiling point when U.S. House Speaker Nancy Pelosi visited Taiwan.

Lee feels that the new policy white paper titled “The Taiwan Question and China’s Reunification in the New Era”, published by the PRC State Council a week after Pelosi’s visit, was an olive branch extended to Taishang. It specifically promises “regulations and policies that fully guarantee that Taiwanese compatriots will receive full benefits and equal treatment in China” and supports “Taiwanese efforts to participate in the Belt and Road Initiative”.

However, an investment fund manager who frequently works all around China has an opposite take. He predicts that as China’s state enterprise advances and private sectors retreat, Taishang who lack connections will have a hard time winning the trust of Chinese companies and participating in the development of important industries. “Taiwanese people will have a hard time getting aboard China’s next big wave.”

Another Taiwanese business owner in the traditional industries, who set up plants in China in the early nineties, also has a pessimistic outlook. He points out that the same level of control the Chinese government has exerted on mega corporations like Alibaba and Tencent may one day happen to Taishang. “If I could turn back time, I would not have come to China 30 years ago. As things stand, all I can do is try to survive.”

Stay in the shadows; play by the rules. For Taishang trying to do business in the worsening political situation, this may be the only way for them to survive.

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Have you read?

• Video report: Taiwan's most wanted talents 
• Video report: Is Taiwan’s Air Force ready to meet China’s threat? 
• Pelosi’s Taiwan visit was a US-made crisis

Translated by  Jack Chou
Edited by TC Lin
Uploaded by Ian Huang