Investment disputes in China bad news for Taiwan investors

Dai Kaifeng

Taichung — The controversial “Shin Kong Place” incident has aroused the public’s attention in recent days. After nearly three weeks of negotiations, the two sides — “Shin Kong Mitsukoshi” and “Beijing Hualian Group” — agreed on “respecting history and facing reality, equal consultation and corresponding responsibilities,” the principles for a proper solution of the dispute in accordance with the law.

Apparently, under the strong intervention of Chinese high-level officials, the case ended up with “ekecheiria” (a “sacred truce”), but that result again highlighted that China is a society of people that completely lacks the rule of law under its Communist regime.

In fact, similar events abound, and the “Shin Kong Place” incident is only the tip of the iceberg. The matter could be resolved within 18 days simply because Shin Kong Mitsukoshi is listed as one of the 100 largest enterprises in Taiwan, and it caused concern both in Taiwan and in the international community.

With symbolic significance, the Chinese Communist government dealt with it promptly. According to the Taiwan Electrical and Electronic Manufactures’ Association, the “2007 mainland China investment environment and risk survey” shows that Taiwan businessmen in mainland China last year faced a total of 1,142 trade disputes. And just so far this year, the number has risen to 3,316, a sharp increase of 190.37 percent.

This fully shows that Taiwan businesspeople have more and more investing disputes on the mainland, and the risk is increasing as well. Taiwan businessmen are encountering more troubles in mainland China compared with other regions.

According to the Strait Exchange Foundation’s experience in dealing with investment disputes on the mainland over the years, cases can be broadly divided into joint venture disputes, labor disputes, contract disputes, ownership disputes, land issues, taxation and customs issues, trademark and patent infringement, improper administrative measures by mainland officials, the misappropriation of company assets, villagers’ demonstrations or other crowds incidents, and MTPs (Mainland Travel Permits for Taiwan Residents, commonly known as “Tai Bao Zheng”) or passports illegally detained or forced indebtedness because of economic disputes.

As for the common trade disputes, they are mainly involving defective products, purchase price disputes, commission or expensive gifts fraud in the name of signing contracts, in the guise of lading flaws and refusal to pay a bill, at the same time preserving the proceedings by withholding goods, or even withdrawing goods and personal security incidents derived from trade disputes.

Although in the Shin Kong incident both sides ended up in a reconciliation, the follow-up development under the table is worthy of our concern. This incident will undoubtedly provide our people with a pragmatic opportunity to face the real cross-strait economic and trade issues. Facts have proved that the mainland market mechanism is not governed by the rule of law at all. It cannot protect or safeguard Taiwanese investments, and even endangers personal liberty. Therefore, even if the Shin Kong controversy seems to have a temporary solution, the incident has cast a greater shadow over the investment of Taiwanese enterprises on the mainland. We expect such incidents on Taiwan businessmen in the future will be still emerging in an endless stream and will have no real ending.