There’s gold in China’s hinterland for Taiwan’s companies

By Sherry Lee and Benjamin Chiang

China’s coastal cities once dominated the attention of entrepreneurs, political leaders and foreign experts, but western China seems to be at the top of their itineraries today. Taiwan’s five major electronics vendors (Hon Hai/Foxconn, AsusTek, Quanta, Compal, and Acer) are no exception. To better compete for orders, they are following in the footsteps of Hewlett-Packard and Dell by pulling out of eastern China and moving 2,000 kilometers inland to Chongqing and Chengdu in Sichuan Province and Zhengzhou in Henan Province, where they intend to forge new production bases. The traditional path taken by Taiwanese companies to establish a presence in China is also gradually changing. At the airports of Chongqing, Chengdu, Zhengzhou, Guiyang, Hohhot in Inner Mongolia and Urumqi in Xinjiang, it is no longer uncommon to run into businessmen from Taiwan, as well as from Hong Kong, Macau, Europe, North America and the Middle East.

Among Taiwanese companies, major manufacturers are not the only ones looking west. Several trading companies and venture capitalists have also joined the wave in search of opportunities.

Not long ago for example, Him Han, manager of Taiwan’s biggest organic foods distributor Leezen, traveled from the capital of Qinghai Province, Xining, to the 3,000-meter high Qaidam Basin 400 kilometers to the west in search of organic wolfberries, or gouqi in Chinese. He has made over 20 trips into China in recent years to source the 30 tons of organic wolfberries and 50 tons of organic Chinese red dates Taiwan requires per year, but because China’s coastal areas are too humid and highly vulnerable to plant diseases, Han has turned to the country’s inland highlands, which have become his most important production and supply source. China’s New Blue Ocean Investors are flocking to western China hoping to find a new “blue ocean.” York Chen, the president and managing partner of iD TechVentures, Inc., a subsidiary of the iD Soft Capital Group founded by former Acer chairman Stan Shih, has been posted in China since 2000. In his first five years there, he looked for investment opportunities primarily in Beijing, Shanghai, Guangzhou and Shenzhen. But because the competition in China’s coastal areas grew too intense, Chen began looking west three years ago. At the end of September this year, he chose Chongqing as the site for a major meeting of venture capitalists. “In the past, there was nobody who would fly for three hours to inland China to check out the possibilities,” Chen said. Companies are once again active in inland China, the place they read about in their history textbooks that has now taken on a completely new look. Supporting Cast Gets Leading Roles In 1999 when Jiang Zemin was president, the government launched a strategy to develop western China and stimulate the rapid rise of the central part of the country, hoping to balance economic development that even then was already clearly tilted toward the coastal part of the country. The key development areas in inland China are now Lanzhou, Xining and Yinchuan in the northwest; Hohhot, Baotou and Ordos in Inner Mongolia; Chengdu and Chongqing in the west; Changsha, Zhuzhou and Xiangtan in central China; and Nanning and Liuzhou in the southwest. China’s state capitalism policies have heavily buttressed development of its interior. For every 10 renminbi spent in the west’s 12 provinces, regions and cities, four come directly from the central government.