Taiwan firms to ride out global financial crisis

SHANGHAI: On the 18th floor of a high-rise in Shanghai's Lujiazui, Taiwan businessman Wei Jen Tiao looks out of his office at a void in front and below.

"Soon there will be another skyscraper here," he said pointing at the construction site for a new building.

With a series of financial MoUs (memorandum of understandings) expected to be signed soon, Tiao, who works for CSC International Holdings, the first representative office of Taiwan non-banking financial services on the mainland, is confident of his company's future, despite the global financial crisis.

"I think the situation depends on different businesses and different companies. But most of Taiwan companies are ready for at least two years hardship," he said.

Tiao came to Shanghai in 1989 looking for business opportunities, one year after the State Council announced preferential policies to encourage Taiwan investment on the mainland. He told his friends that Shanghai's Pudong area was a real estate treasure at the time and most thought he was joking.

He's since proved them wrong.

In 1997, Tiao bought the whole floor of Shanghai International Tower for $4 million to set up an office for CSC International Holdings and 11 years later, it's worth more than 10 times the original.

"Looking at how fast the mainland has been developing in the past two decades, I can imagine a more prosperous future," he said. And Taiwan businesses are sharing in the prosperity.

"Taiwan is too small and you have to come to the mainland," said Li Maosheng, chairman of Shanghai Sunmax Enterprise Company and chairman of the Shanghai Association of Taiwan Businessmen Invested Enterprises.

According to Tiao, almost 90 percent of Taiwan's major enterprises have a presence on the mainland.

Taiwan now ranks as the fourth highest investor on the mainland, after Hong Kong, Japan and the United States.

More than 500,000 people from Taiwan live in the Yangtze River Delta, investing $80 billion yuan in more than 350,000 projects.

The companies provide millions of jobs and have played a key role in the area's development over the past two decades. In Shanghai, Taiwan's investment represents 15 percent of all overseas groups.

But they are also feeling the pinch of the global economic downturn due to shrinking overseas orders.

Liu Jingfang, Nantong Quanyong Electronic Industry Company and chairwoman of Taiwan business association in Nantong, said she gets cancellation orders frequently now.

"I receive calls to cancel or suspend orders every day," she said. "The remaining orders are only 50 percent of those in September.

"Like most other Taiwan companies in Nantong, I am maintaining the operation by cutting working hours."

Liu said that her company used to frequently work overtime but "now, there is no overtime at all. If the situation continues, more businesses will have to close down because of the rupture of the cash chain."

Li Maosheng, whose Shanghai Sunmax Enterprise's annual turnover accounts for 70 percent of market in Japan, America and some European countries for plastic gloves, said he is seeing lower profits.

Dennis Chang, with Kunshan Hutek Corporation, said that their CD and DVD business for low-end markets has lost about one-sixth of its previous business.

"But I believe we will survive," Li Maosheng said. His company is exploring other businesses, including clean energy and farming.

"I don't see large numbers of Taiwan enterprises in Shanghai closing," he said. "And only several days ago, about 20 Taiwan businesses in Jiading district signed agreements to increase investment."

Li came to the mainland to set up his business in 1994 because he saw no further development on the island.

Wei Jen Tiao said, "(In the process of development), painful times can't be avoided. And it can be an opportunity to restructure your business model."

Tiao said that many of the businesses in Yangtze River Delta region are purchasing materials locally and exporting products overseas and have established a stable supply chain that has not been influenced that much by the crisis. And some of them have established channels to sell some of the products locally.

He said the Pearl River Delta has more original equipment manufacturing factories, which imports materials and exports the finished products.

Yan Jianhui, 25, working at Altek Trading in Kunshan, said many of his friends from home, Baoji, Shaanxi province, are returning to their home provinces earlier than before due to companies shutting down and reduced working hours. "(But) I have not felt anything yet," he added.

Steve Chou, general manager of this original design manufacturer, who supplies Sony, Kodak, Pentax, Sanyo and BenQ, said that the company is doing well because it's upgrading its technology and production process and trying to increase its presence in the local market.

"Yes, the price of digital cameras is dropping, but our costs are dropping too," he said.

(China Daily 01/19/2009 page6)