China gains as Taiwan fails to mimic Singapore

Written by Bloomberg | Updated: Jul 5 2011, 07:47am hrs
A decade ago, Wu Wen-nan earned $726 a month at a Taiwan factory run by Foxconn Technology Group, maker of Apples iPhones and iPads. Today, he peddles magazines and takes handouts from a charity.

I lost my job after the company moved production lines to China, said Wu, 47, as he sold copies of Big Issue magazine by a Taipei subway stop. Homeless for much of the past year, hes been unemployed since losing his Foxconn job 10 years ago. I dont have the skills needed for the big change.

Wu belongs to a generation of Taiwanese who relied on the islands success as a manufacturing center, from clothing and Mattels Barbie dolls in the 1960s to computers and HTC mobile phones in the past three decades. Policy makers slowness in easing investment rules and boosting finance, transport and tourism has hampered the creation of new jobs and restrained income growth.

As warmer ties with former civil-war foe China encourage an exodus of factories to the lower-cost mainland, Taiwans failure to develop new growth industries has caused it to fall behind Singapore and Hong Kong. That has bolstered opposition claims that the economic embrace with China championed by President Ma Ying-jeou has hurt workers. He is running neck-and-neck with opposition leader Tsai Ing-wen ahead of the January election.

Taiwan has done too little, too late, said Chu Wan-wen, a research fellow in Taipei at government-funded institute Academia Sinica and author of Globalisation and the Taiwan Economy. Taiwans competence in the service sector is quite limited because it opened up the sector too late.

The risks have partly been masked by a rebound in exports since the 2009 global recession, including a surge in shipments to the mainland that helped stimulate one of the worlds fastest expansions last year. Overseas sales are equal to more than two- thirds of the economy of Taiwan, home to the worlds biggest contract makers of semiconductors and laptop computers.

While electronics manufacturers including HTC and Foxconn benefit from producing at a lower cost on the mainland and reaching the Chinese market, Taiwanese companies tied to the domestic market, such as retailer Uni-President Enterprises Corp, have reported smaller sales gains.

The island ended a mainland-investment ban in 1991. Since then, officials have approved 38,685 projects, creating an estimated total of at least 7.7 million jobs in China, data compiled by the economy ministrys investment commission show. Foxconn alone employs more than 1 million people in China. By comparison, Taiwan had 2.9 million manufacturing jobs as of May.