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Wang Yung-ching wants to build an energy plant in Fujian

He is the patriarch of Taiwanese business, the canny tycoon who has prospered through five decades of relentless dealmaking and calculated risks. Now, at 80, Formosa Plastics Group Chairman Wang Yung-ching wants to take the biggest risk of all: building a $3.2 billion power plant in China's Fujian province. As the largest single investment by a Taiwanese company in China, the project is setting off fireworks in Taipei where officials fear other large companies will follow Wang's lead. But that doesn't bother Wang, who is relentlessly lobbying policymakers to sign off on his large investment. ''The government should approve this deal,'' Wang told BUSINESS WEEK in an interview (box). ''I'll do what I can to convince them.''

Wang is an old hand at playing China and Taiwan off against one another. Look at his $10 billion oil refinery and petrochemical complex under construction at Mailiao on Taiwan's west coast. Wang wanted to build a similar facility on the mainland seven years ago, but gave up in part because of Taipei's opposition. In the end, worried Taiwan officials rewarded Wang a five-year tax holiday and let him buy the Mailiao site for about one third of the going price.

WAYWARD SON. Wang will not get such concessions from Taiwan's government this time, so he's playing his China card as hard as he can. He thinks it's vital for his company to expand in China. Yet the push comes at an awkward time. Analysts foresee a global glut of petrochemical capacity, just as Formosa is committing $14 billion to new projects, including petrochemical plants in Taiwan and the U.S. Wang also is dealing with the fallout of a family drama. Late in 1995, he banished his eldest son, Winston, 46, from the company after news of his affair with a graduate student embarrassed his wife and family. Now it's unclear who will succeed Wang.

Wang is not letting these problems stop him in his China bid. But navigating the political waters is a daunting task. Taiwanese businesses already have invested a total of $32 billion in China. Formosa Plastics is building factories there, though nothing is on the scale of the proposed power project. President Lee Teng-hui fears Beijing is acquiring a potent weapon in the fight to determine Taiwan's future. So Lee is tightening the screws. The Ministry of Economics is now deciding on regulations for larger companies investing in China--and any new restrictions could spell trouble for Wang, who fears a major setback for his China ambitions if his deal doesn't go through. ''If I break my word this time, [Chinese officials] will hate me,'' Wang says.

Wang has gone so far as to break ground at the Fujian site to show how serious he is. Taiwan officials are not budging. ''Formosa [Plastics] is a special case,'' said Huang Chin-tan, deputy director of Taiwan's Investment Commission. ''If they invest in China, other large Taiwan companies will follow.''

Should Taipei keep blocking the project, Wang has said he will honor the decision. But that does not necessarily mean he will abandon it. Wang says he may turn over a controlling stake to foreign investors. Formosa Plastics Corp. Executive Vice-President C.T. Lee suggests Formosa may skirt the ban by transferring most of its investment to a U.S. subsidiary.

Wang's push comes as the company faces major overcapacity. Factories for ethylene--a petrochemical material in plastics--are coming on line in South Korea, Singapore, and other Asian dynamos. ''It's kind of scary because the expansion is so huge,'' says K.C. Kao, an analyst with ING Barings in Taiwan.

Wang expects to tough out a downturn. His Mailiao site will make ethylene, but there's a shortage of the stuff on Taiwan, so he hopes to dominate the local market. The project's deepwater harbor will position the company to compete with the Japanese and South Koreans in the China market by giving the company inexpensive access to China's ports. ''Every petrochemical company is afraid of Formosa,'' says Albert Hsu, an analyst at Worldsec Investment Consulting Co.

Wang is a fanatic about efficiency, which pays off in margins that never drop below 10%, even during downturns. A centralized management system uses computers to track all steps of manufacturing. An internal auditing unit, known to managers as the Red Guards, monitors the system for losses and swoops down on laggard divisions. ''Managers don't like to see us coming because we dig up problems,'' says Sandy Wang, the chairman's daughter, who is assistant director of the auditing unit. Managers no longer must endure lunch-hour grilling sessions with Wang, but they're not free of the family's scrutiny. Wang's brother, Wang Yung-tsai, now runs the dreaded lunches.

NEXT IN LINE. Many inside and outside the company wonder whether the group can make a smooth transition to a stable leadership after Wang. His brother is next in line, but at age 75, Wang Yung-tsai won't calm concerns over the company's long-term management. Children from two of Wang Yung-ching's three wives, as well as some nieces and nephews, work at the company, and it's unclear who among them--if any--will rise to the top.

Overall, he seems reconciled to the idea that professional managers will one day take the reins from the family. For now, however, he is the man to watch. His next few moves could have a profound impact on China-Taiwan relations.

By Jonathan Moore and Joyce Barnathan in Taipei


PHOTO: New Formosa Plastic Plant in China


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Updated June 15, 1997 by bwwebmaster
Copyright 1997, Bloomberg L.P.
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