Bloomberg News

Taiwan Inc. Backs Ma Re-Election in Push for China Business

January 23, 2012

(Adds Lee endorsement of Tsai in 20th paragraph.)

Jan. 11 (Bloomberg) -- Taiwanese tycoon Douglas Hsu made no secret of his desire for President Ma Ying-jeou to win a second term this week as he cut the ribbon in opening his $6.7 million Mega City department store in Taipei.

“Change isn’t good,” Hsu, chairman of Far Eastern Group, said in an interview at the ceremony last week, speaking over blaring music as a high school marching band passed by. “The present policy is a soothing, consistent, continuous development,” he said, ahead of the Jan. 14 election.

Hsu, who crafted a deal to sell a stake in Far EasTone Telecommunications Co. Ltd. to the mainland’s China Mobile Ltd. a year after Ma took office, is joined by executives including the chief of Apple Inc. supplier Foxconn Technology Group in publicly backing Ma. With opposition candidate Tsai Ing-wen advocating a more cautious approach to China, the group says any policy change might disrupt the flow of Chinese tourists and limit access to 1.3 billion potential customers on the mainland.

Ma’s moves to sign trade agreements and ease restrictions on air, sea and postal links saw outbound investment to China rise 22 percent from a year ago to $12.4 billion in the first 11 months of 2011. The mainland overtook Japan as Taiwan’s biggest source of overseas tourists in the same period, with 1.6 million visitors, 69 percent more than a year earlier, according to Tourism Bureau Data.

Asset Protection

“Executives will do whatever possible to protect their assets, and they’ve concluded that regime change isn’t good for business,” said Alexander Huang, a professor of strategy and war-gaming at Tamkang University’s Graduate Institute of International Affairs and Strategic Studies. “They may not want to antagonize China, which could affect their business” by declaring support for Tsai, he said.

The Taiwan Stock Exchange’s Taiex Index has tracked the performance of the MSCI Asia Pacific Index of equities under Ma, whereas it lagged behind under predecessor Chen Shui-bian, who advocated independence. Since Ma took office in 2008, the Taiwanese gauge is down about 24 percent, against the 26 percent drop for the MSCI measure. Under Chen, the Taiex was up 1.9 percent while the Asia Pacific index climbed 35 percent.

Samuel Yin, chairman of Ruentex Group, which has textile factories and retail stores in China, took out half-page ads in Taiwan’s business newspapers in support of Ma.

“We know deep inside that only when there is cross-strait peace can the economy develop and people live and work,” one ad said. “Taiwan cannot again bear the uncertainty and the breakdown in cross-strait relations.”

Beijing Warning

China regards Taiwan, ruled separately since a civil war ended in 1949, as its own territory and criticized a push by the DPP’s Chen to seek sovereignty during his tenure from 2000 to 2008. Beijing has warned that relations would suffer if Tsai wins.

Closer ties under Ma allowed China and Taiwan to sign an economic cooperation agreement in 2010 and paved the way for Cathay Financial Holding Co. Ltd. and Fubon Financial Holding Co. Ltd., Taiwan’s largest listed financial-services companies, to expand business there.

Ma’s promises to support businesses with land distribution spurred Foxconn Chairman Terry Gou to announce a research and development hub in the south of Taiwan. He also plans a factory- automation center in central Taiwan, marking the company’s largest local investment in new facilities in at least a decade.

“The global economy is very unstable right now, and changes come quick,” Gou said at a groundbreaking ceremony for a cloud-computing center with Ma in December. “The previous financial tsunami brought one-meter waves, and now we’ve got ten meter waves, so we need a skilled, experienced helmsman.”

Past Precedent

A relative lack of public support in the business community for Tsai, the chairwoman of the Democratic Progressive Party, may stem from China having linked the political stance of executives to their ability to invest in China in the past, Huang said.

China’s state-run People’s Daily ran an editorial in 2004 saying the country didn’t welcome investment from Taiwanese businesses that “use money made on the mainland to support independence.” The story singled out Hsu Wen-long, then chairman of Chi Mei Optoelectronics Corp., who was an adviser to then-President Chen.

“Hsu donated money to the DPP, which got him labeled as pro-independence,” Huang said.

Tsai Concern

In her campaign, Tsai pledged to address Taiwan’s wealth gap and says closer economic links with China could result in Taiwan bartering away its autonomy.

“A lot of these executives have business interests in China, so their support for Ma isn’t surprising,” said Hsiao Bi-khim, a DPP spokeswoman. “They may also be getting pressure from China to show their support.”

Tsai recognizes the importance of Taiwan’s economic relationship with China and won’t turn her back on the mainland if she’s elected, said Tang Ching-ping, a political science professor at National Chengchi University in Taipei.

“Tsai has appealed a lot to the working class who want the government to do more to help the average citizen, and this has helped boost her support,” Tang said. “She’s also very pragmatic on China.”

Former Taiwan President Lee Teng-hui today publicly endorsed Tsai, taking out a half-page advertisement in major newspapers asking people to vote for her. Lee resigned as chairman of Ma’s Kuomintang party in 2000 at the end of his two terms and infighting helped end 50 years of Nationalist rule.

“China must realize that it’s not dealing with a party, it’s facing the Taiwanese people,” Lee said in the statement.

Widening Lead

Ma was widening his narrow lead over Tsai in public opinion polls taken prior to a blackout period for voter surveys that began Jan. 4. Taiwanese law bars publication or release of polls 10 days prior to presidential elections.

Far Eastern Group Chairman Hsu says the improved ties with China create new opportunities. Along with plans to open more malls in Taiwan, the company’s parent aims to invest $500 million in China.

“The world’s all connected together, and the market of 1.3 billion is over there, so where am I going to go?” he said. “I used to be envious of my colleagues in the States and Europe because they have such huge markets. Now they turn around and say to me: ‘Hey, I am envious of you.’”

--With assistance from Janet Ong in Taipei. Editors: Nicholas Wadhams, Chris Anstey

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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