Making Capitalism in China: The Taiwan Connection

Making Capitalism in China: The Taiwan Connection

Making Capitalism in China: The Taiwan Connection

Making Capitalism in China: The Taiwan Connection

Synopsis

Even as relations between Taiwan and the People's Republic of China continue to be strained, investment by Taiwanese businesses in China is growing every year. Between 1978 and 1994, Taiwan businesses invested $10 billion in China, 10% of the total foreign investment during that period. This study describes the magnitude and importance of this investment. Hsing demonstrates the role of a shared cultural heritage and language and the role of Chinese local government in building networks of firms in the two countries.

Excerpt

The increasing regional disparities in China and the consequent massive migration from the interior has brought an oversupply of workers to the coastal south. Because of the abundant supply of migrant workers with diversified qualifications, Taiwanese investors were able to employ a strategy of "people sea" to expand the production capacity rapidly in southern China. Such a strategy was combined with exploitation of unorganized and unprotected migrant workers. in some factories, Chinese workers did enjoy better benefits, working conditions, and skill training when the investor had a more stable source of orders and a longer term investment plan. However, in most cases the Taiwanese competitiveness in the world shoe markets was still based on a labor practice of free hiring and firing, low wages, and very intensive work.

Taiwanese Investment Strategies

As a strategy for tapping the abundant supply of cheap and unprotected migrant workers in southern China and to maintain competitiveness on both price and quality fronts, most Taiwanese shoe producers expanded their in- house production capacities rapidly with minimum fixed capital investment. They managed to increase productivity with a more elaborate division of labor on the shopfloor. At the same time, labor exploitation was evident in the practice of hiring and firing, overtime, and pay rates. But for those firms that had more stable sources of orders and longer term investment plans, there was greater concern for workers' benefits and training.

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