Taiwan businesses explore more options on the mainland

Even as orders from North America and Europe shrink, Taiwan businesses are restructuring their strategies, with the mainland market moving up in their agenda.

Taiwan-based bicycle company, Giant, which has an aluminum alloy plate factory in Jiangsu province's Kunshan city, is planning to expand the scope of its product base - 40,000 tons of plates, annually - in the mainland.

According to employee, Tu Chi-bing, a large portion of the plates are sold to developed countries but the business potential for the industry in mainland may have just taken off.

The mainland recently invested about 50 to 60 billion yuan to develop domestic commercial aircrafts, which are expected to be out in the market by 2020.

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

Taiwan and mainland businessmen and trade organizations have had much dialogue since the beginning of this year and the trend seems like it will continue.

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

In February, telecom companies from both sides held a forum in southwestern Chongqing municipality to discuss industry standards. A month later, LED solar lamp producers met in Taipei to seek opportunities of cooperation.

Some Taiwan companies are even moving their factories from developed coastal areas to the interiors, for reasons other than cost cutting on labor.

"It will 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.

He now plans to move factories to the central or western provinces, make the Guangzhou office the marketing headquarters and set up a new marketing department in Beijing.

Taiwan electronic appliance maker Airmate, reported a sales revenue of 800-million-yuan 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 do it now. If you don't do it now, you will regret it tomorrow."

Seeking new business

Besides adjusting their marketing strategies, Taiwan companies are also looking at new business fields - from labor-intensive industries to those producing more added value, 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 of Taiwan's insurance companies and banks have also dabbled in the mainland's financial business.

Taiwan Life Insurance and Fubon Financial set up joint ventures with mainland companies in Xiamen city of the Fujian Province last year.

"Taiwan's 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 Taiwan University.

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

Meanwhile, some companies - especially small and medium-sized ones - that are not willing to risk large sums of investment in marketing and updating technologies for new businesses are considering another way out - to unite.

Taiwan shoe makers, who have factories in China's 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 make shoes based on designs that Western clients order. They do not have the resources to develop their own design or brand. The complex can provide them that service," said ATIEM deputy president Yu Yue-jiang.

Yu is still in talks with the Guangzhou government about land use and infrastructure for the 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."

Xinhua - CBW News

(China Daily 05/18/2009 page5)