No Profit Seen From a Taiwan War

If war were to break out in the Taiwan Strait, where Chinese forces on Tuesday began live-fire military exercises, a likely early casualty would be the rapidly expanding business and trade relationship between Taiwan and the mainland.

And that is precisely why many Taiwanese business people operating in China doubt that a serious military conflict will take place. In business terms, they say, both sides have much to lose.

“I feel that the rest of the world, particularly in Japan and the United States, is more worried about war than we are,” said Lin Win-chung, a Beijing-based executive with President Enterprises, a Taiwanese food conglomerate that is the island’s biggest investor in China.

Officially, Taiwanese companies have invested more than $24 billion in the mainland, most of it in the past five years. After Hong Kong, Taiwan has emerged as the biggest outside player in the Chinese market, touching everything from amusement parks to computer components to instant noodles.

Unofficially, the extent of investment is much greater, experts say, because much of Taiwanese business in China is conducted through front companies in Hong Kong or Singapore.

The growing economic interdependence represents one of the most significant changes in the Taiwan-China relationship since the defeated Nationalist army under Chiang Kai-shek fled to the island in 1949. With a per capita annual income that now exceeds $12,000, Taiwan has increasingly turned to the mainland for the cheap labor it needs to manufacture its products.

This economic shift has produced a generation of business executives on both sides of the Taiwan Strait who are more interested in profit and developing the vast Chinese market than they are in the classic cross-strait standoff that once characterized the Taiwan-China relationship.

Today, for example, the chairman of the Taiwan Business Assn. in Shanghai made a public appeal for peace in which he criticized both the Taiwanese push for independence and the mainland’s demand for reunification.

“The two sides should put aside this confrontation,” Yang Dazheng, a Taiwanese national, told the Reuters news agency. “Confrontation leads to lack of agreement. We should go back to the Chinese tradition of tolerance and moderation.”

The economic ties have also influenced the push for independence that once dominated Taiwan politics.

“Business is business,” said Hank Pai, the young Taiwanese manager of a T.G.I. Friday’s chain restaurant that opened recently in Beijing as a joint venture between Taiwanese and mainland investors. “All we are concerned about is getting our concept into the Chinese market and creating new opportunities.”

If war were to erupt in the Taiwan Strait, the restaurant manager said, “it would just push Chinese society back five to 10 years. But it would still be only temporary. It would not stop what is happening here.”

Like many of the Taiwanese business people operating in China, Pai professed to be apolitical, with little or no interest in the democratic process blossoming in Taiwan. The island’s first direct presidential election, widely heralded in the West, is set for March 23.

Encouraged by Beijing, which regards the burgeoning economic links as an important step toward eventual reunification of Taiwan with the mainland, the bustling cross-strait business relationship provides a sharp contrast with the bellicose posturing by the two militaries. Although China and Taiwan are theoretically at loggerheads, the Taiwanese business presence on the mainland is pervasive and growing.

Taiwanese business representatives here are the main customers for Dragon Air and Air Macao airlines, which connect with flights from Taiwan in Hong Kong and Macao. To facilitate the traffic, fledgling Air Macao last year inaugurated a nearly direct flight between Taipei and mainland Chinese cities, with only a brief stop in the Portuguese colony.

The Beijing Taiwan Affairs Office, which coordinates trade in the Chinese capital, reports that the number of Taiwanese companies operating here has increased from 84 in 1991 to 1,555 at the end of 1995. The growth began in 1991, when the Nationalist government of Taiwan formally renounced its intention to recapture the mainland from the Communists.

A spokesman for the Taiwan affairs office said 70 of Taiwan’s top 100 companies have “come to Beijing to investigate investments.” The biggest increase in recent months has come in service-oriented businesses, he said.

“Our business has never been better. We can’t keep up with demand,” said President Enterprises executive Lin, who supervises one of the company’s successful instant-noodle factories.

The current crisis has brought signs of an economic setback. But for the most part, Taiwanese companies in China remain optimistic that the crisis will evaporate after this month’s election and that business across the strait will continue to thrive.

“There is always the danger of an accident,” said the manager of a $100-million Taiwanese real estate development in Shanghai, who agreed to a telephone interview on the condition that his name not be used. “We’ve seen a slowdown in the flow of capital during the recent tensions. But in general, I think most of us are pretty calm about the situation.

“What happens is beyond the control of a small-business man. The best we can do is hunker down and see what is going to happen.”