Indications of the motivations driving Taiwanese firms to mainland China
come from several sources. For example, some two-thirds of the business
association leaders interviewed by authors in the late 1990s indicated that
pollution and other environmental standards caused serious adjustment
problems, and this had prompted plans to move older factories across the
strait.^58 In short, an argument can be made that Taiwan improved its
environmental climate in the late 1980s and 1990s by exporting old
smokestack industries to China, an example of negative horizontal diffusion
effects.
However, this research also indicated that a smaller number of business
firms manufactured and sold environmental technology to China wholesale.
Although Taiwan’s labor costs were rising, its relatively high level of
industrial technology gave it a comparative advantage in production, much
like that enjoyed by Japan in the 1980s. Most of the firms focused on the
Chinese market, where their sales had increased dramatically in recent years.
These firms were the clearest example of positive horizontal diffusion.
The expansion of global trade has increased the risk of environmental
degradation. The entrance of both China and Taiwan to the World Trade
Organization (WTO) in 2002 signifies the increased penetration of corporate
forces, while WTO rules do little to enhance environmental protection.^59 In the
global bid to remain competitive, countries may fail to strengthen
environmental regulations, a process which is referred to as the ‘race toward
the bottom’, a ‘political drag’ on environmental policy making. Interna-
tionally, there is mixed evidence of a race to the bottom, and that would seem
to be the case for cross-strait trade.
Economic relationships between China and Taiwan are complex,
convoluted, and subject to several degrees of political entanglement. China
welcomes investment from Taiwan, and Taiwan’s policies have failed to halt
the stampede into the Chinese market. The business community in Taiwan has
developed political networks on both sides of the Taiwan Strait to maximize
economic benefits. Too, investment projects in China are potent bargaining
chips for Taiwanese business firms to use in gaining domestic advantages.
Irrespective of state controls and prohibitions, the Taiwanese business
community is autonomous in its explorations of the Chinese market.^60
Our first case concerns Taiwan’s ‘plastics king’, Wang Yung-ching. In mid-
1990, after several trips to the mainland, Wang, president of the Formosa
Group, announced plans to build a US$5 billion petrochemical complex on
Haicang Island near the coastal city of Xiamen in Fujian province. The
Haicang Project was a major challenge to Taiwan’s ban on direct investment
in mainland China, and opened a new round of state-business bargaining. In
late 1991, under pressure from high-ranking government officials, Wang
postponed but did not cancel the Haicang Project. Simultaneously, he urged
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