Doing Business in China Is Foolish

" The Chinese may be signing a contract to humor their guests."
Taiwanese businessmen often get more trouble than they bargained for

Every year an astonishingly large number of business investors from Taiwan are victimized in China, according to data obtained from cross-strait agencies for both countries.

Known as taishang, many of the Taiwanese businessmen are cheated out of horrendous sums, have their property expropriated in violation of due process and are often dragged into court on trumped-up charges by local governments.

One of the victims is William Kao, who went to China with a family-invented technique to strengthen steel. He invested US$500,000 to establish a factory in Hebei, only to have his machine tools, molds, raw materials, finished products and computers looted shortly afterwards.

Local officials not only ignored Kao's request for help, he says, but also attempted to silence him with a fabricated court case. The entrepreneur returned to Taiwan and made it his mission to pressure the government to ban Chinese officials who wronged Taiwanese businesspeople from entering Taiwan.

And, whether the Chinese Communist Party and Taiwan's ruling Kuomintang like to admit it or not, even in times of much-applauded growing economic cross-strait ties, the individual safety of Taiwanese living in mainland China is still an issue.

This is made apparent by 20 years of data made available to Asia Sentinel by Tung Chen-yuan, a Taiwanese professor who analyzed statistics of Taiwan's Straits Exchange Foundation (SEF), the semi-official organization set up by the Taiwan government to handle technical or business matters with mainland China.

What Tung, a professor at Taipei's National Chengchi University, found is striking. In the last two years alone -- the years when cross-strait relations supposedly have been at their best ever – at least 84 taishang were killed by accident or illness and another nine were murdered.

In the same period of time, Tung found, 132 taishang were injured and hospitalized. Another 52 were victims of looting, destruction of property or extortion; 35 were abducted or illegally detained; 308 were detained by law enforcement agencies in disputes gone bad, and 160 businessmen or their dependents went missing.

In addition, Tung's statistics show that from 2008 to 2010, there were 1046 cases in which Taiwanese were involved in property and trade disputes in China. There could well have been lots more that were not reported.

Although the incidents took place in mainland China, the professor expects answers to the questions his findings have raised from the Taiwanese government.

"The Ma administration owes the Taiwanese an explanation as to why the individual safety of China-based Taiwanese businesspeople continued to deteriorate while cross-strait relations ostensibly improved," he said. "It shows that the channel of communication between the KMT and Chinese Communist Party is of questionable value."

The British Embassy in Beijing, in a paper titled Doing Business in China, warned that "traditionally, commercial law scarcely existed in China and certainly indicated bad faith. The early appearance of a draft legal contract was seen as inappropriate or, more likely, irrelevant, because it carried no sense of commitment. The business clauses might form a useful agenda, but obligations came from relationships, not pieces of paper. Today, returning home with a signed piece of paper is a symbol of progress, but nothing more. The Chinese may be signing a contract to humor their guests."

Led by William Kao, Taiwanese businessmen who had a particularity bad stint in mainland China have founded the Victims of Investment in China Association (VICA). Kao says information from Beijing's Taiwan Affairs Office, the Chinese body responsible for setting and implementing guidelines and policies related to Taiwan, showed that every year, around 2,000 Taiwanese business investors are victimized in China.

"In the past 20 years, not a single Chinese official has been punished for actions targeting Taiwanese businesspeople," Kao said in an interview.

One of the Chinese officials Kao wants to hold accountable is China's top cross-strait negotiator, Chen Yunlin, chairman of the Association for Relations Across the Taiwan Straits (ARATS), who is scheduled to visit the island on February 23.

Chen headed Beijing's Taiwan Affairs Office for more than 14 years. Kao claims that while Chen was at the helm of the agency responsible for the coordination with overall planning the economic relations and trade related to Taiwan and exchanges, he received 30,000 complaints related to the victimization of taishang.

"In the best case, those people lost everything; in the worst case, they were thrown in jail or murdered," Kao said. "Chen Yunlin claimed that 86 percent of these cases were settled, but that's a lie." Kao's NGO investigated more than 100 such cases, he said, in none of which justice was achieved.

As an example, Kao tells of the fate of a Taiwanese investor named Liu Yi Jin. Liu signed a contract for the development of a park in Jiangxi with local authorities. In exchange for a US$900,000 investment, Liu was promised the right to conduct business in the park for 25 years. As stipulated, Liu built bridges, arbors and shops. Shortly after completion, however, the local officials told him to go. When Liu protested, walls surrounding the park were demolished overnight, and within days without the walls as protection, even the last flower pot in the park was stolen. Liu's local employees sensed trouble and left. Fearing for his personal safety, Liu went back to Taiwan, financially ruined.

The Chinese government goes to great lengths to avoid publication of news of victimized taishang, Kao says.

"When a case happens, agents sent by the Taiwan Affairs Office show up immediately to make things calm," he says. "They then make a deal with the Taiwanese: 'We assure that you will get justice as long you don't tell anybody.'"

That, Kao said, is a delaying tactic. Only those who ultimately lose all trust in the Taiwan Affairs Office's assurances make their stories public.

But by then the Taiwanese media may well have decided they are so stale that they are no longer worth reporting. The defrauded consequently don't function as political ammunition for Taiwan's opposition parties, which oppose the KMT's policy of rapid cross-strait rapprochement.

To illustrate his claim that Taiwanese victims are silenced by China's Taiwan Affairs Office, Kao brings yet another example into account. Zhang Zunyi, Kao said, bought a villa at Jiangxi 's Lushan mountain. When Zhang set out to move into his property, he discovered that the locks had been changed and someone else was living there.

"Yesterday, Zhang went back to China to go to court against the seller," Kao says. "But I know what will happen: He will be back in Taiwan in a month and will not be willing to breathe a word about the whole issue."