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China is changing. Its miraculous growth is slowing. Wages are rising. The endless labor supply has reached its limit. It’s normal for economies to ebb and flow, but a more fundamental shift is emerging. This series explores that trend and the people for whom it's a daily reality.

China workforce 2012 08 01
Employment fair in Nanjing, China. (China Photos/Getty Images)
China

From Taiwan to China: Workforce ventures across the Strait

Taiwan's highly educated workforce has been moving to China for more lucrative employment and business endeavors, but the result is a brain drain in Taiwan.

TAIPEI, Taiwan — You'd think Beijing might show a little gratitude for Taiwan’s role in shaping China’s economic miracle. The island republic is the largest foreign investor and employer in the Middle Kingdom. Its technology, capital and management have done more than any other country to pave China’s road to becoming the world’s second largest economy.

China's status is deeply indebted to multibillion dollar investments, starting in the 1980s, from giants like Acer Computers, contract chipmaker Taiwan Semiconductor Manufacturing Corporation, and much-maligned Apple supplier Foxconn.

But it’s a new wave of Taiwanese businesses that could play an equally important role today.

Tens of thousands of small- and medium-sized enterprises have made the 100-mile voyage across the Taiwan Strait. Instead of the traditional investments in manufacturing, a growing number of firms have shifted focus to service industries, in the hope of tapping into the expanding legions of cash-rich Chinese consumers.

Despite the long-standing tensions between Beijing and Taipei, both sides stand to benefit. The investments are critical for China's economy, as investment and export growth begin to slow down. And Taiwanese see vast new opportunities that aren't available at home.

“There are so many opportunities in Beijing. It’s like Tokyo, but with more super-rich people,” says Ray Yu, general manager of Spark, a swanky club that caters to the glitterati set on both sides of the Taiwan Strait. “They love to spend here. Despite only opening six months ago, this club is doing twice the business we do back in Taipei.”

According to China’s National Bureau of Statistics, about 170,000 Taiwanese were living and working in the mainland at the end of 2010. That figure would make them the largest group of foreigners residing in the country if Beijing didn’t consider Taiwan as a renegade province, and count Taiwanese as “compatriots” in its census.

Compatriots or not, Taiwan’s government contends the figure is far higher.

Taipei estimates that about one million Taiwanese employees, investors or consultants are scattered throughout China. Investment figures of Taiwanese firms are equally murky.

Taiwan’s Ministry of Economic Affairs reports that $400 billion has been pumped into cross-strait investments. However, analysts say that grey area businesses, joint ventures and Taiwanese capital registered in offshore countries such as Hong Kong and Singapore, and tax havens such as the Cayman Islands, would most likely double that figure. The calculation does not include portfolio investment into securities.

However, with real wages in Taiwan down from 13 years ago, those numbers will continue to climb.

“More people are going to come from Taiwan. I’ve got friends who have been here for over 10 years because of the salaries and opportunities. More than half of my friends have doubled or tripled their old wages — particularly the management types. It’s simple. People follow the money,” says Yu.

Yu says that Taiwanese managers in service industries have built-in cultural and language advantages over South Koreans and Japanese, who comprise the second and third largest expatriate groups in the country respectively.

“China needs as much professional management as it can get. Service here is usually pretty terrible. For the club business, the scene reminds me of how Taipei was 10 years ago — poor service and bad security. Most spots aren’t real clubs either. They’re more like lounges with bad music,” says Yu. “We had to bring everything with us. The service manager, bar manager, music, marketing and entertainment managers, the DJs, they all come from Taipei.”

China is Taiwan’s most important market, raking in about 40 percent of the island’s exports and 70 percent of its total outbound investment. But that doesn’t mean it’s a two-way street. Despite a landmark economic agreement signed between the two sides in 2010, total Chinese investment into Taiwan is only about $300 million.

And this is where, critics say, “China fever” has led to a hollowing out of the island’s national industries and a brain drain that has exacerbated an already widening wealth gap.

In late May, Forbes reported that 26 of the 51 richest China-based expatriates were Taiwanese.

Want Want Group Chairman Tsai Eng-meng, who has strong ties to Beijing, topped Forbes’ list with a net worth $7.9 billion. His business interests in China span food and dairy products, media, real estate and hospitals.

While Taiwan is home to a highly educated workforce, producing solid middle-income per capita GDP of about $24,000, observers are concerned that with all that talent moving across the Strait, it won’t have enough left to compete with main trade rival South Korea.

Still, Yu says life in the Forbidden City isn’t all good times and heavy pay packets.

“Maybe I don’t have enough friends. When I have a day off, I just chill at home. In China all I do is work, rest, then work some more,” Yu says. “The club business has huge opportunities. We opened last year and we made a quick success of it. But if I finished my job tomorrow, I’d go work for one of my uncle’s Shanghai companies.”

http://www.globalpost.com/dispatch/news/regions/asia-pacific/china/120719/taiwan-china-workforce-service-industries