The Economist - USA (2020-11-21)

56 TheEconomistNovember 21st 2020

1

H

undreds of jobseekerslined up out-

side a factory gate on a recent autumn

morning. Uni-Royal, a Taiwanese maker of

electronic components for such brands as

Samsung and Toshiba, was looking for ex-

tra help at its plant in Kunshan, an hour’s

drive west of Shanghai. New factory hands

could earn 4,000 yuan ($610) a month,

double the local minimum wage. Kunshan

is dotted with hundreds of Taiwanese

manufacturers like Uni-Royal. More than

100,000 Taiwanese call Kunshan home.

“Little Taipei”, as Kunshan is known, il-

lustrates a broader phenomenon. Exact es-

timates vary, but as many as 1.2m Taiwan-

ese, or 5% of Taiwan’s population, are

reckoned to live in China—many of them

business folk. Taiwan Inc has not let

fraught political relations with China,

which views the island as part of its territo-

ry, get in the way of business. Taiwanese

companies have invested $190bn in Chi-

nese operations over the past three de-

cades. Foxconn, a giant Taiwanese contract

manufacturer of electronics for Apple and

other gadget-makers, employs 1m workers

in China, more than any other private en-

terprise in the country.

As the West grows increasingly suspi-

cious of communist China’s rise—a trend

that America’s next president, Joe Biden,

may slow but not reverse—Beijing seems

keener than ever to bolster cross-strait

commercial bonds. It sees Taiwanese firms

as a source of investment and critical tech-

nologies such as computer chips, the ex-

port of which to China Washington has

tried to curtail. At the same time, corporate

Taiwan is cooling on its giant neighbour.

Geopolitics is not the only reason.

When China opened up to foreign in-

vestment in the 1980s, entrepreneurs from

Taiwan were the first foreigners to open

their wallets. Enticed by cheap labour and

land across the strait, they quickly set up

shop in the coastal provinces closest to Tai-

wan. To this day Jiangsu (which includes

Kunshan), Zhejiang, Fujian and Guang-

dong attract most Taiwanese money (see

map on next page). A common language

and shared culture helped reduce transac-

tion costs. Foxconn built its first Chinese

factory in Shenzhen in 1988. By 2008

around a sixth of China’s stock of inward

investment came from Taiwan, making it

the biggest foreign investor in China.

Today three of China’s 12 most popular

consumer-goods brands by revenue are

Taiwanese. Chinese gobble up Master Kong

instant noodles, Want Want rice crackers

and Uni-President juices. Apple’s three

biggest China-based suppliers—Foxconn,

Pegatron and Wistron—are all Taiwanese. 

Now China is going out of its way to re-

cruit more businesses from Taiwan. Be-

tween 2018 and 2019 the government un-

veiled no fewer than 25 policies aimed at

luring them. Measures include tax credits

and, more striking, a special right to bid on

lucrative government contracts, from rail-

way construction to “Made in China 2025”,

an innovation scheme centred on ad-

vanced manufacturing. In May the Chinese

Taiwan Inc in China

Scaling back

KUNSHAN

Cross-strait commercial ties helped build China’s economy. They are

beginning to fray

Business

57 Germany’sguestentrepreneurs

58 Walmart’sbeastlyquarter

59 AirbnbchecksintotheNasdaq

59 ThedashforDoorDash

60 Bartleby:Theboardgame

61 Schumpeter: Wring out those Bells

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