China jolts Taiwan Inc. with $74m fine on Tsai corporate backer
Far Eastern Group chairman denies supporting island's independence
TAIPEI -- The hefty financial penalties China imposed on a Taiwanese conglomerate that has donated to President Tsai Ing-wen's political party caught the island's business community by surprise as cross-strait tensions spill over to the economic realm.
The fines and extra taxes, totaling 474 million yuan ($74.1 million), are the results of an investigation launched against Far Eastern Group's subsidiaries operating in China. Authorities charge that those firms have violated rules in such areas as environmental protection protocols at factories.
But it was the additional comments by Zhu Fenglian, the Taiwan Affairs Office spokesperson who announced the fines, that raised eyebrows.
"No one or any company is allowed to provide financial aid for 'Taiwan independence' secessionists while making money on the mainland," Zhu said during a news conference last week.
The term "secessionists" refers to Tsai's ruling Democratic Progressive Party. While the DPP is independence-minded, the opposition Kuomintang party is strongly colored by its Beijing-friendly bent.
Far Eastern is a major DPP donor, which Chinese officials view as problematic. The ongoing investigation of the conglomerate could generate additional fines, and may extend to other Taiwanese companies.
What especially surprised the Taiwanese corporate community is that Far Eastern is a conglomerate with a long pedigree founded by a mainlander who moved from Shanghai to Taiwan. The company has been known for its pro-Beijing slant, but that did not keep it immune from being punished.
In an open letter published in United Daily News on Tuesday, Far Eastern Chairman Douglas Hsu said, "I have always been opposed to the independence of Taiwan."
"Like most Taiwanese, I also hope cross-strait relations can be maintained at the status quo," he said. "Under the current political environment in Taiwan, it seems that companies have to bear with a sense of guilt if the companies are investing in mainland China."
Far Eastern is one of the most generous political donors in Taiwan and had long supported Kuomintang. But when the DPP won the presidential and legislative elections in 2016, the group decided to split its donations evenly between the Kuomintang and the DPP.
During the 2020 elections, Far Eastern directed most of its funds to the DPP, a decision seen as a gambit to ward off friction for the group's business interests in Taiwan. But that maneuver has caught the unwanted attention of the Chinese government, according to many in Taiwan's business circles.
"China would not tolerate a company that played nice with both the Chinese government and Taiwan's DPP government in an attempt to run business smoothly on both sides of the strait," said an insider in Taiwan's business community.
Taiwanese firms first started expanding onto the mainland in the 1990s with many attaining success, most notably Hon Hai Precision Industry, the iPhone assembler known as Foxconn.
The taishang, as such businesspeople are called, now number close to 1 million on the mainland. They have developed strong ties with the Chinese government over many years, contributing to their success stories.
Due to that background, the majority of wealthy taishang are friendly with Beijing and support the Kuomintang.
Now Chinese disciplinary enforcers have targeted Far Eastern, a Taiwanese conglomerate that had enjoyed strong ties with China's government. Consequently, the taishang are faced with a choice between continuing to earn money on the mainland or supporting Tsai's DPP, at the risk of losing the massive market that is China.
Beijing's ultimate aim is to sever ties between the DPP and deep-pocketed Taiwanese corporations. Next year, the island will hold regional elections, which act as a bellwether for the next presidential election.
A steep decline in donations from Taiwan's corporate community to the DPP would indirectly promote a victory in those elections by the Kuomintang, which has championed a conciliatory course with China. If that momentum is maintained, the Kuomintang would regain power in the 2024 presidential election according to China's script.
"Chinese pressure has shifted to a new phase from the past," said Tung Li-wen, an advisory committee member at the Taiwan Thinktank, which delves into cross-strait relations. China "has increased pressure on the economic front, and not just on the political and military sides, and the pressure from the Communist Party is approaching extremes," Tung added.
Additional reporting by Lauly Li in Taipei.