The Tiger Leading the Dragon by Shelley Rigger;

Author:Shelley Rigger;
Language: eng
Format: epub, pdf
Publisher: Rowman & Littlefield Publishing Group, Inc.
Published: 2021-05-22T00:00:00+00:00

The PRC governs its economy with Five Year Plans. The eleventh Five Year Plan, which covered the period from 2006 through 2010, revealed Beijing’s intention to take China’s economy back from foreign investors. The plan was concrete proof of something many Taiwanese had suspected for some time: Beijing was no longer prioritizing Taiwanese and other foreign investment. After decades of special treatment, Taishang were starting to find themselves competing on a level playing field—and in some cases, on a playing field tilted in favor of PRC domestic firms. Across a range of industries—from steel and petrochemicals to equipment—China’s imports from Taiwan were steadily declining in favor of domestic production.

For decades, the primary concern for Taiwanese authorities was finding ways to help Taishang access opportunities in China. Increasingly, though, the challenge for Taiwanese firms was not market access or the overall business environment but competitiveness. The Taishang mantra “cost down” was nothing new, but the pressure to lower costs intensified as domestic PRC firms made their way into supply chains. By the time Ma took office in 2008, Taishang had a new buzzword: “transformational upgrading” (zhuanxing shengji). Transformational upgrading means moving up the value chain in order to remain competitive and profitable even as the cost of production in China rises. Firms that failed to transform and upgrade would not survive the surging growth of PRC firms.

Another option for Taishang—especially after the financial crisis of 2008 exposed the fragility of their established markets in North America and Europe—was to focus on China’s domestic market, a topic I explore in chapter 8. Moving into the domestic market forced Taishang out of the relatively protected export-oriented sector and put them in direct competition with PRC firms. Meanwhile, Ma’s market-opening reforms allowed some PRC-based firms to operate in Taiwan, forcing Taiwanese firms to compete in both markets.

During Ma’s presidency, management consultants and government officials redoubled their advice to Taishang to undertake transformational upgrading in order to remain competitive in an ever-more-challenging PRC market. The advice was extensive but not always consistent. Management scholars Lu Hong-de and Luo Huai-chia advised businesses to think of the years 2011 to 2015 as “Taishang 3.0” and to take their cues from Beijing’s twelfth Five Year Plan by switching to services, finance, and green manufacturing and by moving operations farther into the Chinese interior. Chang Pao-cheng of Taiwan’s China Productivity Center recommended upgrading Taishang management practices to become more efficient, up-to-date, and service-oriented.11 It was good advice, no doubt, but not easy to put into practice.

One industry that took this advice to heart was bicycle manufacturing. Taiwan’s bicycle industry has been part of the scene almost from the beginning of Taiwan’s industrial age. Early on, Taiwanese firms did contract manufacturing for global brands such as Raleigh, Schwinn, and Trek. In 1972, King Liu founded one such contract manufacturer, Giant, in a small town in central Taiwan called Tachia. In the early 1980s, Liu transformed Giant from a contract manufacturer to a branded company, opening its first international sales operation in the Netherlands in 1986.

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