Direct links a poison pill, not a panacea

Politics Taiwan Politics
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Sorry, I’m going to refrain from commenting on this article for now. Idiocy gives me a headache.

taipeitimes.com/News/editori … 2003327280

[quote]
Direct links a poison pill, not a panacea
By Su Lung-chi 蘇龍麒

Tuesday, Sep 12, 2006,Page 8

At present, Taiwan’s China-bound investment accounts for 71.05 percent of its total foreign investment. This is five times more than the amount invested in the British Virgin Islands, which is the second-largest recipient at 14.9 percent, and 19 times more than that invested in the US, which at 3.7 percent ranks third among destinations for Taiwanese foreign investment. Clearly, Taiwan’s outbound foreign investment is seriously tipped in China’s favor.

Once China’s economy begins to falter, Taiwanese businesspeople’s lack of understanding of the need to hedge their investments means that they will find it difficult to cope. If Taiwanese companies in China begin to fall apart at the seams, Taiwan’s economy will also go down the tubes.

Although Japanese investments in China have increased in recent years, China only received 12.96 percent of Japan’s total foreign investment in 2004, making it the fourth-largest recipient. Japanese foreign investment is being equally spread over different regions of the world. Clearly, Japanese companies have hedged their positions well, and unless there is an economic crisis of global scale, Japan’s economy will not suffer because of political, economic or social disturbances in a few regions.

Japanese businesspeople clearly have a better understanding of the need to hedge their investments than their Taiwanese counterparts and therefore avoid putting all their eggs in one basket.

Many believe that since China has the largest population in the world, it is also the world’s biggest market. However, a big population does not necessarily amount to strong consumption power. China’s population accounts for 20.25 percent of the world’s population, but its GDP only accounts for 4.35 percent of the world’s GDP. It trails far behind the 25-nation EU, whose collective population accounts for 7.08 percent of world’s population while its GDP accounts for 30.14 percent of global GDP. China is thus not one of the largest markets in the world.

This data proves two things: a large population does not translate into a large market, and the biggest markets in the world are the EU, the US and Japan, not China.

If Taiwanese businesspeople do not realize this simple fact, they will not be able to invest wisely.

Many also believe that Taiwan only stands to benefit from the opening up of direct transport links with China. However, according to a report released by the Mainland Affairs Council in 2003, the normalization of cross-strait transportation links would lead to an increase of China-bound investment by NT$280 billion (US$9 billion). The report also said that the number of China-bound tourists would increase by 2 million people, who would spend NT$60 billion, for a total of NT$340 billion.

If direct transport links are established, Taiwan could save NT$13.3 billion on air freight and NT$800 million in freight transport, for a total of NT$14.1 billion. This means that if cross-strait links are established, Taiwan will lose NT$326 billion a year.

Furthermore, a survey entitled “Taiwanese Businessmen on China-bound Investment” issued by the Chinese National Federation of Industries last year said that if direct transportation links are normalized, only 27.4 percent of Taiwanese companies would be willing to increase their investments in Taiwan, while 52.3 percent said they would increase their investments in China.

It seems that rather than a panacea for Taiwan’s economy, the normalization of direct cross-strait transportation would be a poison pill.

Su Lung-chi is an assistant to the Taiwan Solidarity Union legislative caucus.[/quote]

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Makes sense to me.

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I guess TT has a lack of reporters that have been here for more than 10 minutes, give the guy a break, he probably was given the assignment “go away and show how bad direct links would be, and give it to me by the end of today”. Didn’t have a first clue about anything, seached a few statistics , bent them to fit his goal, ommitted those that didn’t, ignored studies and groups would suggest he is talking out his a-hole and voila!! he presents his feces.

[edit] Oh my bad, didn’t see he was a political fanatic [edit]

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[quote]However, according to a report released by the Mainland Affairs Council in 2003, the normalization of cross-strait transportation links would lead to an increase of China-bound investment by NT$280 billion (US$9 billion). The report also said that the number of China-bound tourists would increase by 2 million people, who would spend NT$60 billion, for a total of NT$340 billion.

If direct transport links are established, Taiwan could save NT$13.3 billion on air freight and NT$800 million in freight transport, for a total of NT$14.1 billion. This means that if cross-strait links are established, Taiwan will lose NT$326 billion a year. [/quote]

:notworthy: :notworthy: :notworthy:

Completely in awe of his economics analysis.

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Well, looking at the Benq investment in Europe, other companies would win more for getting the level of capacity and quality European can give. Looking at how much Japan invests in Netherlands (by example), you can get a number which is bigger than all that Taiwan invests in all Europe.
Truth is, direct links in the way China wants (only TW-China way) is a bad thing, because it will take only investment out of TW. direct links on both sides would increase the level of investment on this side, but would mean that the chinese logistic companies would be at the mercy of the Taiwanese ones, who are far better. Also, it would mean that more and more companies would have HQ is Taiwan and factories in China, and that would kill in part the HK market, as many of these companies would work direct without their HK counterparts.

So, the guy just tried to make with numbers a story, and he got it completelly bad. For sure that Taiwanese companies are less keen on investing outside China, because that is what Taiwanese companies do - they are mostly OEM’s. How many Taiwanese companies are capable of even getting on the world top brands? Just a few handfull, cause they miss all that “brand selling” part that their US/EU counterparts have. In an IPOD(tm of Apple Computer, Inc), who you think gets the biggest share? Apple or Foxconn?

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it’s the old, old, story. Taiwanese businessmen are too stupid to be allowed to do business without the government telling them how to do it. I suppose the government figures that as it’s shit at being the government, it had better turn its hand to overseas direct investment. Because we know when the government hands out taxpayers’ money willy-nilly overseas it gets great value for money. I tell you, those incompetent loss-making Taiwanese businessmen have a lot to learn from the government. Oh. Er, um, I forgot. They are the government. NEXT!

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I have no idea what led you to the impression that China only wants direct-links in the TW->China direction. It’s completely inaccurate.

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I noticed that as well, and was thinking more of an explanation might have helped. But then there were a couple of others and I gave up , like the quote below about Apple and Foxconn, this is really a simplistic view. Its hard to know where to begin.

And who takes the risk?
Who comes up with the concept?
Who does the marketing?
Who does the after sales?
Who has to handles distributer training?
Who is paying out royalties to companies like Gracenote?
Who has to develop iTunes?
Who handles website downloads and so on?
Who deals with the media?
Who has the brand name?

Its a different ball game to manufacturing.

Just saying move from manufacturing based companies to own brand name companies is really not looking at the logistics involved. It could be compared to when Chen Shui Bian had said lets send half a dozen kids of to soccer camps in Brazil so that they can be in the world cup finals. Easy to say, not so easy to achieve.

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Branding is always easier done when the company first learns with a local market. You really need keen market awareness and influence. Japan’s effectiveness in branding electronics/autos is very much a product of the size/nature of the Japanese domestic market.

Taiwan’s domestic market is totally insignificant and its companies are perpetually outward-facing. Taiwanese companies will forever be at a disadvantage when competing with overseas companies on oversea markets.

Any company that thrives with the couple hundred million middle class consumers in urban China will, given 5-10 years, thrive overseas as well.

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[quote=“cctang”][quote=“mr_boogie”]
Truth is, direct links in the way China wants (only TW-China way) is a bad thing, because it will take only investment out of TW.
[/quote]
I have no idea what led you to the impression that China only wants direct-links in the TW->China direction. It’s completely inaccurate.[/quote]

As far as movement of goods, that is what China is proposing. In case you missed the news, I’ll try to check them for you.

As a product manager working in Taiwan with OEM manufacturers and some brand name manufacturers, I can tell you, in the IT biz at least, it is all about keeping the hype. Ipod is all hype, not about product quality. If you count how many mp3 players there are on the market, and compare them side by side, you’ll see the IPOD will loose instantly. What keeps them up? The hype. The proud of ownership.

What proud of ownership can TW companies produce? Ask Asus and they will let you know. Ask Lian Li and they will let you know. It is all about keeping an image of excelente, of being permanentely above the rest. Why the rest does not follow? Because they lack the vision and the wisdom to do so. And I know so many lousy bosses in Taiwan the it makes me puke when I get out of meetings with them. All they try to sell is the cheap price, “A+ quality” (whatever that means), and library visits. They don’t even bother to understand what the guy in the other side is.

On the other hand, a visit to the HK Suppliers Spring Fair is even a more striking event. Is like a visiting a downgrade market for cheap products. Don’t even know where to start. In a full fair, I sat down 2 times, and it was to talk with HK companies that I allready work with. All the rest was just a paraphernalia of electronics with plastic covers…

It reminds me of the new Benq-Siemens cellphone, which the Taiwanese boss sayd it was developed in a new record time for all Benq products (about 1 month from concept to production), all because it was developed in Germany. They were amased on how it is possible to streamline a product so quick. By reducing the concept time, they say the end-cost price is a lot lower, so they are thinking of changing the “think” division of Benq comunications to Germany.

But in the end, it all comes down to expertize in the market. Look how Hanspree is working with local companies (mine included) to open HS shops worldwide. Only by streamlining a product from production to sales, you can ensure you’ll be in the right position in the market. And only working with the local brain power, you will achieve that. That is what many japanese companies discovered long time ago. That is what taiwanese will discover, sooner or later.

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Asus is still competing in a low margin game. It might be winning relative to other players in the same game, but it’s no rival to Apple’s margins on the Ipod.

I don’t think we disagree on the importance of “localization”, here. To win at high margins in Western markets, you need Western branding and execution expertise. Taiwanese companies, like most private enterprises in mainland China, are more interested in total control and low-hanging fruit than true partnerships with overseas marketers/retailers. And until that changes, Chinese companies on both sides of the strait will continue to compete based on price.

I still don’t understand what you’re claiming that China is “proposing” in reference to cross-strait direct links. What proposal? Do you have something concrete, or is this your own strange interpretation of the state of events?

The international economic order is “proposing” that shipments from Taiwan to mainland China be largely uni-directional. That’s what happens when Taiwan has no domestic market, and Taiwanese ports are less efficient than mainland versions. The international economic order is also “proposing” that shipments from mainland China to the United States are also uni-directional. None of this is due to government ‘policy’, at least beyond the fact that intelligent governments are cogniscent of these inevitable trends and try to position their societies to best take advantage of them.

In terms of cross-strait policy, the goal of Beijing is crystal clear. The sooner goods and people can freely cross the Taiwan strait, the better.

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The proposition of China + KMT was that only manufacturing equipment from Taiwan can be used as Cargo. No finished goods can be transported. This is clearly a preservation of the status quo, that only helps Hong Kong. Allowing finished goods to fly back directly to Taiwan would be a major blow, because Taiwanese companies could start doing stock control in Taiwan, and not in their HK offices. Also, allowing finished goods to fly back directly would render Hong Kong based Taiwanese branch offices or likes almost without significance. That would be a major blow for Hong Kong, as it is viewed as a major hub for Taiwanese companies.
Also, you shouldn’t forget that the unwillingness of the CCP of dealing directly with the ROC government does not help a little bit on the matter. The accept “One China” first, talk later policy is the major obstacle for any good relationship between Taiwan and China. But, maybe in 2 years, we will see Ma accepting it, so they can all live together happily.

Also, you should remind yourself that China is a major importer of Steel, and the US are still a big player in the steel market.

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The biggest loser in the direct link is Hong Kong.

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Yet the biggest fear-mongerer on the direct links is not Hong Kong. That is telling. Oh, the wonders of ideology.

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One must be careful when blindly repeating what one has heard without using critical thinking. Please I don't mean to be disrespectful, but I am assuming you are quite young, also I'm sure you haven't really looked in fine detail what it is the ipod provides and to say "Ipod is all hype, not about product quality" this is really off the mark and it is also quite a complex topic and I understand how many in the IT field get to this conclusion. (espesially in Taiwan)

 In fact it has been argued by many that there are other portable media players that offer more features. (to refer to it as an MP3 player is misleading. MP3 is a lousy format that any idiot can make a product for, the iPod can play a range of formats all better). Note I didn't say that there are other portable media players that offer higher quality. iPod's quality (not discussing the hardware side) is defined by the sampling/bit rate, which since its running on an ARM chip is able to offer uncompressed CD quality sound, something that a crappy MP3 player doesn't do and yes it is this quality that partially at least has led to its success.

The idea that more features need to be offered at a cheaper price (as opposed to quality) is really an example of manufacturing mentality. Think about this comment.

 Finally, since I have made this long I will wrap up. Looking for the future, will Apple dominate this market in years to come. Absolutely. And why ? the answer is not because they designed this great product first (they didn't design it), or that its filling system and iTunes are hard to emulate (they didn't design these either, designed by Gracenote, anyone can have them for the money).

So why? In the world of audio (and video) Apple is the operating system of proffesionals, Windows works ok for a consumer application that is not to tasking but really is not in the same class (I know you may be tempted to agrgue with me, do a litle research before posting your opinion). When these devices are capable of a lot more than what is being provided in terms of media content, it’s Apple that can provide top notch quality audio/video. The requirements made by the proffesional audio industry that almost exclusively use Apple computers means its a lot easier for them to use experience gained here and use it in a “prosumer device”, than it is for other companies to learn the whole thing from scratch.

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What proposition? What in the world are you talking about? Are you just making this stuff up, or what? When has “China” proposed anything of this kind? And how can you claim this is a preservation of the status quo, when at present “manufacturing equipment” from Taiwan can’t be shipped directly to the mainland either?

What bizarre resource are you using for your information?

Ok, consider myself reminded. Now, what in the world does this mean, and what does this have to do with cross-strait links?

What does it mean that the US is a “big player” in the steel market? Do you realize that the United States is the world’s largest steel importer, and that China is the world’s largest steel exporter? Did you realize that China produces 4x the amount of steel that the US produces? Do you realize that Europe is also a net-importer of steel?

For more statistics, see: issb.co.uk/

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His bizarre “resource” lies in bed and whispers sweet nothings. As they say, garbage in, garbage out.

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Mick, Ipods, comparing to players of the same price, loose normally by points.
First, although IPOD does have a better chipset (Portalplayer) than the cheapest stuff you see in the market, it doesn’t when compared to other companies who have similar offers. But if you see similar offers by Sony, Panasonic, Toshiba, Iriver, Sandisk… you’ll see you will get more from your dough, without loosing sound quality. I would say, like many reviewers say when reviewing the Ipod - if you can live without Itunes, you have better offers.

zeugmite, my wife refrains in talking about politics, she is too inteligent for that.

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[quote=“mr_boogie”]Mick, Ipods, comparing to players of the same price, loose normally by points.
First, although IPOD does have a better chipset (Portalplayer) than the cheapest stuff you see in the market, it doesn’t when compared to other companies who have similar offers. But if you see similar offers by Sony, Panasonic, Toshiba, Iriver, Sandisk… you’ll see you will get more from your dough, without losing sound quality. I would say, like many reviewers say when reviewing the Ipod - if you can live without Itunes, you have better offers.[/quote]

Well, youve changed you’re tune. First we talk about audio quality, and now we have a shift to features provided. By the way the Portalplayer chip is an ARM chip. You can’t keep shifting the posts to suit your needs. And to mention “if you can live without ITunes” is not to see the potential of a device that has ineractive ability with software on the compter, it is a major sell point, and it will continue to be an ever larger sell point and one that other companies find increasinly difficult to catch up with as Apple have decades of experience in this area.

Some of it is hype, there is the “halo” effect that iPod gets from Apples’ computers. The interface to the device is intuitive (something nearly all the competitors screw up), some featues Apple have deliberately left off beacuse they want to monopolize the format of the audio. The list goes on , and the only reason I am argueing the point is , athough in technology I can provide hard facts and very little is opinion, so we can see the original sweeping statement you made was erroneous and simplistic , I wish you can apply the same critical thinking to political statements you make which are in many cases much more open to opinion. Infact Im not trying to give you a hard time and enjoy discussing with you.

About the comment you made on Japan. Its my opinion, there is a very different mentality than the one we see in Taiwan and China. CCtang is right aout the domestic part, but it is more than that. The Japanese are very picky when it comes to product quality, in my opinion it is why you see many of Sony’s products have had a lot of love and care put into the concept and design and the small details that eat up man hours but make consumers feel “yeah this is sexy”. Your exapmple of 1 month turnover from concept to production, is one the Taiwan busnessmen love to use, it fits thier manufacturing mentality of turning the whole process to something that can be equated to time to assemble. BUT, in the end, the product is shoddy and realeased with problems, perhaps looks ugly, functions in a way that is not intuitive, with little support and so on.

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Direct links are not a poison pill or a blessing, they just make sense.

There’s lots of business to be conducted between the mainland and Taiwan, why are people still flying through Hong Kong to Shanghai? Does this make sense? No, and it costs a fortune too.

If they can resolve the issue of the “air space” and just agree not to talk about “domestic” or “international” routes, then all the better.

While we’re on the topic of flights, the PFP’s idea to open up Songshan airport to flights from Hong Kong and Macau is a splendid idea. (the first time I can ever say that about anything the PFP has proposed)

Imagine, fly directly from Songshan to HK and Chiang-Kai Shek International Airport to Shanghai! You know this new airport name, it’s kinda like when the Vietnamese Communists tried to rename Saigon “Ho Chi Minh City.” Most of the locals still call it Saigon…