Taiwan firms reshaping cross-Strait relations


Taiwan industrial companies have been reorganizing resources on both sides of the Strait to sharpen their competitive edge in the wake of tariff reductions that took effect earlier this year.


The Fair Friend Group, a leading Taiwan-based machine tool company, plans to invest NT$1.2 billion ($41.96 million) to build two new factories and a research and development center in Taiwan, said Jimmy Chu, the company's chairman.


"We plan to move the manufacturing of several high-end products from overseas to Taiwan, since export tariffs on machine tools to the mainland have dropped this year," Chu said.


The Chinese mainland has reduced tariffs on 539 goods since January, while Taiwan has decreased duties on 267 mainland goods. Within two years, the duties on these products will be reduced to zero.


The company reported 90-percent growth in orders from the mainland over the first six months of this year, compared with the same period last year.


According to the island's trade department, exports of machine tools from Taiwan to the mainland reached $300 million from January to June, a year-on-year increase of 61.9 percent.


In addition, the company will build two new factories and expand one of its existing factories on the mainland, Chu said.


"As the mainland factories improve their technological level and manufacturing capacity, we would like to move the manufacturing of high-end products to the mainland," he said.


In the future, Taiwan will be the company's research and operating headquarters, while the mainland will its manufacturing and training center, Chu said.


"Since the signing of the Economic Cooperation Framework Agreement (ECFA), economies in Taiwan and the mainland have seen deeper integration," he said. "If we can efficiently relocate our resources across the Strait, the company's competitiveness will be greatly sharpened."


The tariff reductions were part of the ECFA, which took effect in September 2010. The agreement aims to normalize cross-Strait economic relations.


The two sides are continuing to discuss agreements on commodity trading, which will likely lead to more tariff cuts.


Swancor, a Taiwan-based manufacturer of specialty chemicals, plans to build a new factory on the island. It already owns one factory in Taiwan, as well as factories in the mainland cities of Tianjin and Shanghai.


Robert Tsai, Swancor's chairman, said that the factories in Taiwan and the mainland will serve clients in different regions, allowing the company to minimize transportation costs.


"Many of our clients are located in the mainland's coastal regions. Sometimes, it costs less to ship products from Taiwan than from our mainland factories," Tsai said. "Tariff cuts have enabled us to take full advantage of all of our factories."


The mainland's tariffs on specialty chemicals from Taiwan dropped from 6.5 percent to 5 percent in January and will be completely eliminated next year.


Swancor is also working with its mainland clients to explore new markets outside of China, using its experience and resources in the international market, Tsai said.


In January, the mainland-based Association for Relations Across the Taiwan Straits (ARATS) and its Taiwan counterpart, the Straits Exchange Foundation (SEF), created a committee to handle follow-up agreements to the ECFA, creating six panels to handle the discussions.


Both sides have "tried their best" to initiate discussions since the committee first met in February, according to Chiang Pin-kung, the SEF's president.