Taiwan businesses struggling with more expensive labour in China should move up the value-added chain, Chinese officials said on Saturday, though they offered little relief to help the companies cut costs.
Taiwan companies, which have invested as much as $100 billion in China, had hoped that the Chinese government would dole out a slew of incentives at a weekend forum to discourage them from investing elsewhere, such as Vietnam. "We didn't hear any concrete measures at this forum and it's a bit of a disappointment," Paul Yu, vice president of Taiwan Merchant Association Shenzhen, told Reuters at the forum in Nanchang city in China's central Jiangxi province.
Taiwan firms, like other foreign companies already reeling from high raw material costs, a stronger Chinese yuan and the elimination of many export tax rebates, have been complaining about squeezed profit margins because of a new labour law.
The new regulations, implemented on January 1, is forcing some foreign companies, which make everything from sports shoes to computer chips in China, to shift production to other countries. But China's Taiwan Affairs Office, which oversees relations with Taiwan and is host of the forum, said there was no need for Taiwanese businesses to move out of China yet.
China, Taiwan's top trading partner, has so far been the favourite destination of Taiwanese firms mainly due to a common culture and a potentially huge consumer market. With rising costs along China's coast, shifting production to less affluent inland provinces and moving up the value-added chain might solve the problem, Chinese officials said.
"Businesses can increase their brand awareness. They can also come up with higher value-added products," said Zheng Lizhong, deputy director of the Taiwan Affairs Office, told more than 200 Taiwan business delegates at the forum, though he stopped short of spelling out concrete incentives. Executives said Zheng's suggestions were easier said than done.
"We can very well move up the value-added chain, but the problem is, there is little protection in intellectual property rights. The locals make pirated copies of our new products just days after they hit the shelves," said a Taiwan businessman, who declined to be identified.