BusinessWeek: January 17, 2000

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A Taiwan Candidate Has Beijing Baring Its Teeth

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A Taiwan Candidate Has Beijing Baring Its Teeth

The Wal-Mart Effect

A Mexican Media Sale


With Taiwan's presidential elections set for Mar. 18, the contender Beijing warns it won't tolerate as successor to President Lee Teng-hui is navigating carefully. Chen Shui-bian is a blunt-speaking pol best known for advocating independence from China. But these days his TV ads feature Bao Gong, a legendary Song dynasty judge known for executing corrupt officials during the 11th century. By shifting focus, Chen has climbed to first place in the polls and introduced a dangerous new element to Beijing-Taipei relations.

With a third of the electorate still undecided, Chen is now backed by 20% of voters. That gives him a marginal lead over independent James Chu-Yul Soong-- and a decisive jump on Lien Chan, the lackluster candidate of the ruling Kuomintang. If Chen builds on this lead, tensions with Beijing are bound to increase. As the firebrand leader of the pro-independence Democratic Progressive Party, Chen inflamed Beijing even while he was mayor of Taipei in the mid-1990s.

So far, no one expects a preelection outburst similar to 1996, when China used missile tests in a bid to intimidate voters from electing Lee, who also upset Beijing. Chen is now backpedaling on his earlier calls for a referendum on independence, but he still upholds Taiwan's right to decide its future. If Chen is elected President, his views could trigger a crisis even without a referendum. Last summer, President Lee himself provoked an uproar by calling for "state-to-state" talks with China.

In the past, the ruling KMT managed to keep Chen and his firebrand followers from acquiring too much power. In 1998, for example, Chen was narrowly defeated for reelection as Taipei's mayor after the KMT fielded Ma Ying-jeou, a candidate with strong clean-government credentials. Though Chen is moderating his rhetoric this time to avoid alienating skittish citizens, Beijing's watchful glare could give voters pause again. "People are cautious, and there is a lot of anxiety," says Andrew Yang, secretary-general of the independent, Taipei-based Chinese Council of Advanced Policy Studies.

That's why Chen must keep voters focused on his pledge to clean up government. "If money politics and corruption continue to be the main issue, then I think Chen can win," says Chiou I-jen, Chen's campaign director. Indeed, the KMT's increasingly soiled reputation has limited Lien's progress with voters despite his party's impressive resources. President Lee is locked in a slugfest with Soong over the latter's alleged mishandling of millions in party funds. A former KMT man who broke with the party last year when it refused to support his presidential aspirations, Soong had an early lead in the polls. Mainland-born Soong advocates talks to establish a formal agreement on relations with Beijing.

BIG STEP. Although an independent investigation cleared Soong of wrongdoing, his popularity has plummeted. But the scandal-mongering has also tarnished the KMT. Speculation is rampant about the sources of Lien's apparently considerable wealth. And an investigation into KMT charges that Soong used party funds for vote-buying has implicated a key member of Lien's campaign. Lien pledges to place the KMT's business assets in trust if he's elected. But that won't erase popular perceptions of the party as corrupt and obsessed with its enemies.

A Chen victory would be an immense step for Taiwan--and not only because of his position on China. Although President Lee is Taiwan's first native-born leader, he is a KMT man nonetheless. A Chen presidency would mark the decisive end of 50 years of KMT rule and take Taiwan a big leap down the path to full democracy. The question is whether Taiwan's citizens are ready for such an uncertain new era.

By Sarah Davison in Taipei; Edited by Patrick Smith

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The Wal-Mart Effect

Things are about to get even tougher for local German retail chains. Their market shares and profit margins have been eroding ever since U.S. giant Wal-Mart Stores Inc. moved into Germany back in 1997. On Jan. 3, Wal-Mart announced that it was slashing the prices of hundreds of goods by up to 20% in its 95 German outlets. To compete, local retailers such as Metro and Karstadt need to cut their own prices or lose yet more customers to their brash transatlantic rival. But German regulations prevent retailers from selling products below cost, so local companies can't simply declare a price war. "It's because we've improved the efficiency of our systems and the way we work with suppliers that we've been able to introduce these prices," says Ron Tiarks, president of Wal-Mart Germany. It's a tough act for the Germans to follow.

Edited by Patrick Smith

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A Mexican Media Sale

Media giant Grupo Televisa's holding company, Grupo Televicentro, is looking to cash in on the booming Mexican stock market. Televicentro plans to raise $950 million by selling off a 9.1% Televisa stake this month and use the proceeds to pay down its debt. The sale will not dilute the Azcarraga family's holdings. Emilio Azcarraga Jean, Televisa's 31-year-old chairman, retains his 51% stake in Televicentro.

The Televisa offer would be the largest for a Mexican company in six years and cap a spectacular year for the Mexican market--up 88% in dollar terms--and for Televisa, whose shares soared to an all-time high before yearend.

Edited by Patrick Smith

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