Beijing targets Taiwanese companies with operations in China

China has targeted a large corporate donor to Taiwanese political election campaigns with extensive business in the mainland as it broadens efforts to undermine support for the country’s governing pro-democracy party.

“We will not allow any company to make money in the Chinese mainland and then donate money to diehard Taiwanese independence groups,” Zhu Fenglian, a spokesperson for China’s Taiwan Affairs Office, told reporters.

Beijing’s warning to Taiwanese companies came after Chinese authorities fined the island’s Far Eastern Group , the largest corporate funder of election campaigns in Taiwan, Rmb88.62m ($13.9m) for environmental, labour and tax violations.

FEG, which is known in Taiwan for its upscale department stores and has assets worth $85bn in 10 industries, was the biggest corporate donor in the past three general elections, according to analysis by Taiwanese outlet Tianxia. The group donated money to both the ruling Democratic Progressive party and the China-friendly Kuomintang party.

The case underlines the increasingly fraught environment that an estimated 1.2m Taiwanese working in China face as Beijing ratchets up economic and military pressure on the island, which the mainland claims as part of its territory.

“This is the most significant example to date of China going after Taiwanese companies with mainland operations,” said Chen Kuan-ting, head of the DPP-linked think-tank NextGen. “These companies risk becoming a political weapon for Beijing to attack Taiwan.” 

Beijing insists that the fines against FEG subsidiaries were due to regulatory violations and rejects Taipei’s accusation that they amount to interference in its politics. But DPP officials argue that the timing of the punishment reveals the underlying political motivation.

This month, Beijing threatened to publish a blacklist of “stubbornly pro-independence” entities that would be prohibited from making money in the mainland. It also imposed sanctions against three prominent Taiwanese politicians, including Su Tseng-chang, head of the cabinet and premier, who received campaign financing from an FEG subsidiary in 2018.

“In China, ensuring you have good relations with the government is the most important way to avoid getting a fine,” said one Taiwanese factory manager in Wuxi in eastern China, speaking to the Financial Times on condition of anonymity. “The reality is that environmental and labour regulations are very strict and 99 per cent of manufacturers have no means of complying.”

“We have to be well behaved,” said the manager, explaining that for taishang, as Taiwanese businesspeople in China are known, that means working with the United Front organisation, a Chinese Communist party body promoting unification with Taiwan.

Even as relations between Taipei and Beijing have deteriorated, with the Chinese air force making regular incursions into the island’s air defence identification zone, China has resisted targeting Taiwanese living in the mainland. The CCP views these businesspeople as its most influential lobbyists back in Taiwan.

The FT found online records of meetings in Suzhou, a city bordering Wuxi, of meetings in 2018 between officials from the United Front and FEG’s Yadong Industry unit. These discussed preferential policies to support Taiwanese companies in China.

But the public rebuke of FEG, which is one of Taiwan’s best-connected companies in the mainland, has cast a chill through the taishang community. The FEG, with a network of 30 subsidiaries in mainland China, had a reputation for deftly handling its relations with the party.

Beijing’s threat to go after companies with links to Taiwan’s president Tsai Ing-wen also marked a significant escalation in its campaign to turn Taiwanese public sentiment against the DPP. China has already been accused of infiltrating the island’s media, spreading disinformation against pro-independence groups and using trade sanctions to punish Tsai’s government.

Beijing’s targeting of FEG came as a surprise, said Chen Fang-yu, an assistant professor in political science at Taiwan’s Soochow University, noting that the company did not have a pro-independence stance and had close historic ties to the KMT.

While it was common for large companies in Taiwan to donate to both parties during elections, they usually avoided endorsing particular candidates and avoided cross-strait politics, said Dafydd Fell, an academic at the Centre of Taiwan Studies at Soas University in London.

By targeting Taiwanese companies, Fell said Beijing risked alienating its closest allies on the island and inadvertently fuelling support for the pro-independence government.

“The KMT would like to argue that closer economic integration is the answer for Taiwan’s economic problems, but China’s threats make that argument less convincing to voters,” said Fell.

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