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China Is Closing Another Major Bridge to Taiwan

China Is Closing Another Major Bridge to Taiwan

Saturday, 27 November, 2021 - 05:45

For the past decade, political, economic and cultural ties between China and Taiwan have withered under the strain of an increasingly assertive Beijing and a Taipei that refuses to bend under its will.


Yet one part of the relationship has held together well: The pragmatic businesspeople on both sides toiling behind the scenes to help each other make money while often acting as a backchannel for politicians who can’t risk speaking to each other, let alone meet. Now, it appears even that connection is being severed by China’s failure to understand the machinations of democracy.


Beijing has said it will punish businesses and political donors with links to anyone backing Taiwan independence, Bloomberg News reported. In practical terms, that means an individual or entity that dares show support for the governing Democratic Progressive Party is persona non grata.


Far Eastern Group, a Taipei-based conglomerate that includes cement, textiles and telecommunications, was fined for alleged infractions relating to environmental protection, labor standards and product quality across five different Chinese provinces, the official Xinhua News agency wrote Monday. Those fines total 474 million yuan ($74 million), Zhu Fenglian, a spokeswoman for China’s Taiwan Affairs Office told reporters Wednesday. Two of Far Eastern’s listed group companies outlined 88.6 million yuan of those penalties in Taiwan exchange filings.


But comments from the TAO, the Chinese ministry that governs its cross-strait relations, speak to the broader motive.


“Businesses and financial sponsors associated with supporters of Taiwan independence will be penalized according to law,” Zhu told reporters earlier this week when asked whether Far Eastern’s punishment was for such connections.


Far Eastern made donations to both the ruling DPP and the opposition Kuomintang in the lead-up to last year’s presidential election, Taipei-based Wealth Magazine reported, citing government statistics. Far Eastern declined to respond beyond its exchange filing, Bloomberg News reported.


The choice to target Far Eastern is interesting. In April 2009, its Far EasTone Telecommunications Co. was at the heart of what was expected to be a new era of open trade and investment across the Taiwan Strait. In a landmark deal, state-controlled China Mobile Ltd. agreed to take a 12% stake in the Taipei-based telco. Taiwan’s Taiex index climbed by the largest amount in 18 years as investors anticipated a flood of dealmaking.


But that was a different era, when power was held by the KMT, the nationalist party that fled to Taiwan after defeat by Mao Zedong’s communists in the Chinese civil war. Then-President Ma Ying-jeou’s legacy of nurturing closer relations, including strengthened business ties, with the mainland would be marred by the 2014 Sunflower Movement against policies perceived to be pandering too much to Beijing. The DPP’s Tsai Ing-wen won elections in 2016 and 2020 in large part due to growing sentiment that China doesn’t hold Taiwan’s interests at heart.


Tsai has walked a fine line. To the irritation of many party supporters, she strategically hasn’t advanced an independence agenda, a fact not publicly acknowledged by China. But her refusal to embrace Beijing’s one-China stance, an issue that her predecessor and the KMT were willing to discuss, has led Chinese leaders to ban select officials from visiting the mainland and to belittle countries that show support for Taiwan. Exchanges on the political, cultural and economic level have suffered.


The relationship has been held together by the business connections that still function with a degree of normalcy. Factories owned by Taiwan companies continue to churn out products in China. Over a million Taiwanese businesspeople — known as Taishang — live in or travel to the mainland to manage operations and close deals, even during the pandemic, which has seen travelers face mandatory quarantines upon arrival at both sides. Taipei-based Foxconn Technology Group, best known for making Apple Inc.’s iPhones, was heralded last week by state-run China Daily as being the largest single overseas contributor to China’s economy.


And, yes, like in most democracies, companies can — almost need to — participate in politics. Foxconn’s founder Terry Gou even unsuccessfully attempted to become the KMT’s presidential candidate. Donations are common — sometimes going to both parties to cover all bases, a common practice in the US But that doesn’t mean that firms giving to the DPP are pro-independence, as China is asserting.


By punishing corporations such as Far Eastern for getting involved in democracy, Beijing may well achieve a short-term objective in ensuring executives dare not aid and abet the DPP. In the long run, such measures reiterate what businesspeople from Taiwan have known for years: China is a politically risky place to operate and they ought to look elsewhere.


China would be the bigger loser. As it seeks to become technologically independent from the West, its government and corporations can learn a lot from the thousands of engineers and managers from Taiwan who live and work locally. Scores of Chinese tech companies are staffed with talent lured from leaders like Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp.


Yet such harsh reactions mean that every time a Taiwan company’s board of directors chooses where to build its next factory, the likelihood decreases that it will be China. Beijing still has a chance to build a fruitful relationship with Taipei, nurture affinity and gain valuable knowledge. Acting harshly risks scaring away the last cohort of people willing and able to build a bridge across the increasingly cavernous divide.


Bloomberg


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