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Export-oriented Taiwan business seeks breakthrough in mainland amid global downturn
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13:47, May 09, 2009

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As orders from North America and Europe shrink amid the global downturn, many Taiwan businesses are restructuring their strategies and the mainland market is moving up in their agenda.

Tu Chi-bing is running an aluminum alloy plate factory for the Taiwan-based bicycle company Giant in Kunshan city of eastern Jiangsu Province, which produces 40,000 tonnes of plates annually.

While a large portion of the products is sold to developed countries, he found that business potential in the mainland's commercial aircraft industry has just taken off.

The mainland has invested about 50 to 60 billion yuan (7.25 to 8.7 billion U.S. dollars) in developing domestically built large commercial aircraft. They are expected to be put on the market by 2020.

"My company can supply quality aluminum alloy plates for this project," Tu said.

"We can see a trend that both Taiwan and mainland businesses are trying to find a way to integrate industries so that they can benefit from each other's advantages," said Prof. Li Fei from Taiwan Research Institute of Xiamen University.

Taiwan and mainland business people have been busy talking with each other since the beginning of this year. In February, telecom companies from both sides held a forum in southwestern Chongqing Municipality to discuss industry standards that can be applied on both sides. A month later, LED solar lamp producers met in Taipei to seek opportunities of cooperation.

Some Taiwan companies are moving their factories from more developed coastal areas to the interior, and not only for the sake of cutting labor costs.

"It will also help us expand the mainland market," said Lin Shean-jhang, deputy president of Guangzhou Association of Taiwan Investment Enterprises who runs a mineral company in Guangzhou.

Now he plans to move factories to the central or western provinces, change the Guangzhou company to the marketing headquarters and set up a new marketing department in Beijing to take charge of the mainland market.

Taiwan electronic appliance maker Airmate reported 800-million-yuan (115.94-million-U.S. dollars) sales revenue in the mainland market last year, a year-on-year increase of 40 percent. This helped the company pull through the slowdown in the Western market, said Tsai Cheng-fu, vice president of Airmate Electrical (Shenzhen) Co. Ltd.

"The global downturn has made many Taiwan companies realize the importance of balancing Western and mainland markets," he said. "If you had not included the mainland market, you should have done it now. If you did not do it now, you would regret it tomorrow."

Besides adjusting their marketing strategies, Taiwan companies are turning to new business fields, from labor-intensive industries to those producing more added values, from traditional manufacturing to the service sector.

In Kunshan, a Taiwan investment hub in the mainland, more than 400 Taiwan companies are registered as service businesses, including catering, e-commerce, logistics and consulting.

A few insurance companies and banks in Taiwan have dabbled in the mainland's financial business. Taiwan Life Insurance and Fubon Financial set up joint ventures with mainland companies in Xiamen city in southeastern Fujian Province last year.

"Taiwan financial companies will see a faster growth in the mainland as the two sides have signed a new agreement on financial cooperation. This market is very important for them," said Peng Jin-peng, a researcher from the Department of Political Science under the "National Taiwan University."

The agreement, signed at the meeting on April 26, was about cooperation of money regulation, accessibility of financial institutions to each other's market, and an arrangement for information exchange for financial regulatory purposes. The two sides also agreed to encourage commercial banks from both sides to start business on money exchange and the like.

Some companies, especially small and medium-sized ones, are not willing to risk for new business or large sum of investment in marketing and updating technologies but they consider another way out -- to unite.

Taiwan shoe makers, whose factories are in China's manufacturing hub the Pearl River Delta, plan to establish a new complex in Guangzhou.

The project, supported by the Association of Taiwan Investment Enterprises on the Mainland (ATIEM), will not only have factories but also set up designing and marketing centers that serve all companies in the complex.

"Many Taiwan shoe makers just make shoes based on designs that their Western clients order but they do not have the resources to develop their own design or brand. The complex can provide such a service for them," said ATIEM deputy president Yu Yue-jiang.

He is talking with Guangzhou government about land use and infrastructure for this complex.

"Through this new idea, we hope to reform a traditional labor-intensive industry," Yu said. "We have to do it sooner or later if this industry wants to go further. The global downturn makes it happen earlier."

Source: Xinhua

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