Sunday, June 13, 2010

ECFA, Bikes, and the Mythology of the Chinese Toothbrush

Gift Horse

For well over a decade the news media, foreign business communities, Chambers of Commerce and governments from the local to the federal levels, have been whipping themselves into a lather over the potential of the elusive "China Market". The analogy has been put to me many a time by Taiwanese and expat business types alike, that if I could sell a toothbrush to every Chinese... blah, blah, blah.... And Oh, how we just need to use the power of our superior system to make them come around to "our way" of doing things. All these guys are standing around with blue-balls over the elusive China market and can't seem to get any play despite the promises.

Here is the rosy picture being promoted by the Chinese side of things for the Taiwanese bicycle industry out of CIIP.COM:
According to reports from Taiwan media, appreciating the huge potential of the mainland market after the signing of the ECFA, Taiwan Giant Global Group plans to strengthen the capability and competitiveness of the mainland headquarters this year by launching a new investment plan to invest an initial RMB 1.16 billion for the establishment of the Bicycle Industrial Park in Kunshan, Jiangsu Province.

Reports disclosed that with the expansion of the market, Giant Global Group will increase its investment to raise its market share in the mainland bicycle market. Based on its original SUV brand GIANT, the Group will vigorously develop a new brand MOMENTUM to raise the market share of passenger vehicles. The medium-priced brand will be aggressively promoted through about 2,000 distribution channels.

Giant Global Group plans to increase its investment to build a bicycle plant in Kunshan, which has gained great support from the mayor of Kunshan Guan Aiguo. The 40-hectare new plant will consist of plants for bicycles, frames, carbon fiber and electrical vehicles. Besides, the cycle track & bicycle theme park plan will also be pushed forward. The investment in the initial stage amounts to USD 36 million (NTD 1.16 billion).

Sources revealed Giant Global Group currently possesses a bicycle plant in Kunshan with an annual output of 2.5 million. As the Group's largest manufacturing base in the mainland, the plant boasts about 50% of the products meeting the domestic market demands. After being put into operation, the new plant will meet the market demands for both GIANT and MOMENTUM and the plant will trade with Taiwan bicycle plants after the signing of ECFA.
Of course, the latest negotiations on the "early harvest list" have broken down and all these grand plans the benefit China, a few wealthy industrialists and a few connected politicians are still up in the air. Moreover, the promise of greater capital outflows to China is stalled so Taiwanese will have to keep showing up for work to receive the same salary they received 10 years ago despite rising inflation. Michael Turton has a wonderful analysis on the matter on his blog here.

In the 1960s the KMT government was desperately seeking foreign investors in the burgeoning electronics sector and all but killed off Taiwanese textiles and footwear in the process. Taiwanese recovered from the early waves of capital outflow and the replacement of traditional industries. Much of this resilience was based upon the small to medium sized enterprise and the the ability to exploit local relationship networks.

Still, politics has never been too far from the agenda. In Ian Skoggard's excellent book, The Indigenous Dynamic in Taiwan's Postwar Development: The Religious and Historical Roots of Entrepreneurship, one Taipei based informant declares in a manner we often hear from ideologues on both sides of the Taiwan Strait:
The U.S. doesn't care about the appreciation of the NT dollar. They just want their price.They don't care if we are starving. The U.S. market is getting very cruel. We are such a small country. We are being mistreated by the U.S. No matter how rich we are, we are still Taiwan and not the R.O.C. The U.S. forces us to take their farm products when we have everything here we need, and our farmers complain. Maybe some day when we go back to China, we'll stand on level ground to talk. p. 123
The myth that Taiwan is too small was dispelled in the 1990's, when Taiwan, while allowing investment in China, also sought to diversify its centers of production by courting Southeast Asian nations as well. This also coincided with Lee Teng-hui's Taiwan-centered economic framework that sought negotiations from a position of strength than the more conciliatory approach of demure weakness. That approach is gone in the name of unbalanced, unchecked, economic and political annexation by China.

It should be important to note that Giant Founder, King Liu, is currently working for the Ma Administration as a consultant for transportation, tourism and the economy. No doubt there is a pretty penny in it for him.

This wouldn't be the first time government economic schemes have resulted in major outflow of capital from Taiwan, but it would be the first economic project where the economic benefit and the interests of the Taiwanese people have been placed on the back burner for politics and ideology.

The bicycle industry is a major part of Taiwan's economy and national identity... and not to forget JOBS... and needs to be promoted and protected at home.

All of this comes hot on the heels of recent Ministry of Economic Affairs moves to quietly bring Taiwanese firms back home. The great pancea of the "China Market" to heal Taiwan's economic woes is proving to be elusive as a reality. So while ECFA is being trumpeted as an economic necessity, China is proving to be a sour investment for many at the cost of quality, safety, security, and jobs.


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