US embassy cable - 05TAIPEI1511

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 001511 
 
SIPDIS 
 
DEPT FOR EAP/TC 
DEPT PLEASE PASS AIT/W 
 
E.O. 12958: DECL: 03/29/2015 
TAGS: ECON, EINV, TW, CH, Cross Strait Economics 
SUBJECT: TAIWAN BUSINESS COMMUNITY ALREADY PREPARED FOR PRC 
PRESSURE 
 
REF: A. TAIPEI 1437 
 
     B. TAIPEI 1438 
 
Classified By: AIT Director Douglas H. Paal, Reason 1.5 d 
 
Summary 
------- 
 
1. (C) Taiwan's business community agrees that Chi-mei's Hsu 
Wen-lung issued his pro-"one China" statement March 26 due 
entirely to PRC pressure.  However, it also agrees that the 
statement will not affect the level or growth of Taiwan 
investment in the Mainland.  Taiwan investors had already 
learned to keep their political opinions quiet and will 
continue to do so.  In general the impact on Taiwan's 
business community has not been great.  Nevertheless, this 
latest incident underscores the PRC's increasing ability and 
willingness to use economic interests to influence Taiwan 
investors politically.  End summary. 
 
They Made Him Do It 
------------------- 
 
2. (C) AIT/T's contacts in Taiwan's business community almost 
uniformly agree that Chi-mei founder Hsu Wen-lung's 
pro-"one-China" letter printed in the Economic Daily News on 
March 26 (ref B) was written entirely due to PRC pressure and 
does not reflect his own opinions.  Yu Long Motor Co. 
Chairman Ken Yen told us that the Hsu letter was clearly 
orchestrated by the PRC.  One contract described Hsu's 
motivation the letter as  "Beijing holding a gun to his 
head."  Another local commentator speculated that the only 
words in Hsu's statement that he actually wrote were the 
characters of his own name.  Powerchip Chairman Frank Huang 
has stood out in telling the media that he did not believe 
that Hsu had been threatened by the PRC.  However, 
Powerchip's Spokesman Eric Tang privately gave AIT/T a 
somewhat different interpretation.  He said that ultimately 
Hsu was a businessman and the future of his business depended 
on China.  Nowell Chernick, the head of Calvary Asset 
Management in Taiwan believes that Hsu was probably under 
intense pressure from Chi-Mai's senior management as well, 
who likely urged him to take this kind of step in order to 
end PRC disruption of Chi-mei's Mainland operations. 
 
Still Heading West 
------------------ 
 
3. (C) Business community contacts also agree that PRC 
political pressure will not slow Taiwan investment in the 
Mainland.  Chinese National Federation of Industries Deputy 
Secretary General Tsai Horng-ming told AIT/T that he believes 
 
SIPDIS 
that the level and growth of Taiwan's investment in the PRC 
would not be affected at all by Hsu's statement.  Taiwan 
Semiconductor Manufacturing Company Director of Market 
Analysis Justin Wang suggested that the PRC's political 
pressure on Hsu would have minimal impact on Taiwan 
investment and expects the overall trend of better 
cross-Strait relations to improve the environment for Taiwan 
investment in the Mainland.  Wang noted that this trend was 
interrupted by the PRC's passage of the Anti-Secession Law, 
but like many other observers he expects it to resume within 
a few months. 
 
4. (C) Calvary's Chernick also observed that like many other 
Taiwan firms Chi-mei needed to be in the PRC.  Chi-mei's core 
business has been petrochemicals, and much of its Mainland 
investment is in that industry.  Recently it has shifted much 
of its focus to the TFT-LCD industry and is now one of the 
world's top five TFT-LCD panel manufacturers.  Chernick 
pointed out that if Chi-mei wants to continue to grow in 
either of these industries it must expand in China as its 
competitors Formosa Plastics and AU Optronics have.  The 
Chi-mei example shows how Taiwan firms across a range of more 
traditional and high-tech industry need to invest in the 
Mainland to grow. 
 
But Keeping Quiet 
----------------- 
 
5. (C) Nevertheless, Taiwan's investors have taken note of 
PRC pressure and appear to be altering their behavior 
accordingly.  Acer President of International Operations T.Y. 
Lay told AIT/T that Acer had already learned to keep quiet 
about politics.  He recalled that after Taiwan President Chen 
Shui-bian named former Acer Chairman Stan Shih a presidential 
advisor at the beginning of Chen's first term, Acer's 
operations in the Mainland were disrupted on several 
occasions.  The PRC also rejected one of Shih's visa 
applications.  As a result, Acer and Shih have been very 
cautious about any appearances of political activity. 
Chernick observed that no major Taiwan business chief could 
afford to be in China's bad graces.  As Powerchip's Tang put 
it "if you want to do business in the Mainland, don't touch 
politics." 
 
Comment ) What's Next? 
---------------------- 
 
6. (C) While some in the Chen administration fear that this 
latest move by the PRC may be a sign of a renewed campaign to 
pressure Taiwan businesses (ref A), most of AIT/T's business 
contacts seem to have taken the news in stride.  One observer 
called it a political event not an economic one.  Market 
analysts seemed more focused on the impact of the March 26 
demonstration rather than the Hsu statement.  Firms operating 
in the Mainland have already heeded warning from the PRC and 
keep their political opinions safely hidden if they tend to 
be pro-Green or pro-independence.  Regardless of whether the 
Hsu statement is a sign of more pressure to come, the PRC has 
already been effective at silencing opposition among Taiwan 
firms invested in the Mainland. 
 
7. (C) In addition to its possibly impact on Taiwan 
investment in the PRC or the political activities of Taiwan's 
business leaders, the Hsu statement is also notable for once 
again underscoring the shifting balance in economic influence 
across the Strait.  The PRC continues to seek investment from 
foreign sources including Taiwan, but is increasingly willing 
to use that investment as a tool for political ends. 
Moreover, Taiwan firms now need to be in the PRC to survive, 
and even the most pro-independence business leaders may be 
susceptible to the PRC's influence.  End comment. 
PAAL