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RR RUEHCN RUEHGH
DE RUEHGH #0102/01 0450822
ZNY CCCCC ZZH
R 140822Z FEB 07
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 5549
INFO RUEHBJ/AMEMBASSY BEIJING 0835
RUEHCN/AMCONSUL CHENGDU 0456
RUEHGZ/AMCONSUL GUANGZHOU 0441
RUEHHK/AMCONSUL HONG KONG 0562
RUEHUL/AMEMBASSY SEOUL 0039
RUEHSH/AMCONSUL SHENYANG 0464
RUEHKO/AMEMBASSY TOKYO 0087
RUEHGP/AMEMBASSY SINGAPORE 0034
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 5906

C O N F I D E N T I A L SECTION 01 OF 04 SHANGHAI 000102 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EAP/CM, INR/B AND INR/EAP 
 
E.O. 12958: DECL:  2/14/2017 
TAGS: EINV PGOV ELAB ECON EFIN CH TW
SUBJECT: KUNSHAN'S TAIWAN BUSINESS COMMUNITY 
 
REF: 2005 SHANGHAI 1534 
 
CLASSIFIED BY: Simon Schuchat , Deputy Principal Officer,  , 
U.S. Consulate Shanghai. 
REASON: 1.4 (b), (d) 
 
 
 
¶1.  (C) Summary: Taiwan business people (Taishang) appeared to 
be thriving during a February 6 visit by Congenoffs to the 
Taiwan enclave of Kunshan, located 50 kilometers west of 
Shanghai.  Although some local governments in China were 
corrupt, the Kunshan government had been very supportive of 
Taiwan investment.  Difficulties included financing issues, the 
lack of a direct RMB exchange mechanism, and confusing customs 
practices.  Interlocutors were frustrated with Taiwan politics 
and complained that political issues were hampering economic 
relations.  One Taishang predicted that the KMT would win the 
2008 Presidential elections because the DPP was mired in party 
infighting.  Interlocutors noted that Taishang were trying to 
become more integrated with local Chinese and fewer firms were 
bringing Taiwan staff to work on the Mainland.  Despite this, 
many from Taiwan still came to the Mainland in search of their 
fortunes.  End Summary. 
 
 
 
¶2.  (SBU) On February 6, DPO and Congenoffs traveled to Kunshan, 
Jiangsu province to meet with Taiwan businessmen (Taishang) and 
discuss economic, political and social issues.  The visit was 
arranged by the Kunshan Taiwan Business Association General 
Secretary Zhou Zhihua.  Mr.. Zhou is also the Vice-Principal of 
 
SIPDIS 
the East China Taishang Children's School which is a private 
school that exclusively uses Taiwan educational materials and 
teaching methods.  Congenoffs visited Qi Yin Collateral Company, 
Wei Jun Electronic Company, Chang Hwa Representative Office, and 
Xin Bao (Sampo) Electronic Technology Company.  Congenoffs also 
attended a lunch with Kunshan Taishang. 
 
 
 
--------------------------------------------- 
 
Supportive Local Government, Few Difficulties 
 
--------------------------------------------- 
 
 
 
¶3. (SBU) Kunshan is a county-level city under the jurisdiction 
of Suzhou municipality in Jiangsu province.  It is located 50 
kilometers from Shanghai.  According to a People's Daily report 
in September 2005, Kunshan is the richest county-level cities in 
China.  It has an official population of 650,000 (around 1 
million according to unofficial estimates) and a GDP of 
approximately USD 10 billion in 2005.  Based on the unofficial 
population estimate, the per capita GDP is 10,000 USD.  In 
comparison, using Shanghai's unofficial per capita GDP is 6,000 
USD.  There are currently around 2,600 Taiwan companies in 
Kunshan and 60,000 Taiwan people are either working or 
conducting business in the county.  Most Taiwan companies in 
Kunshan are IT-related manufacturers. 
 
 
 
¶4.  (SBU) All of the interlocutors appeared satisfied with the 
local business environment.  According to Zhou Zhihua, Taishang 
were attracted to Kunshan because of the local government's 
welcoming attitude.  Zhou said the local government was very 
cooperative and never said "no" to the Taishang.  In his meeting 
with Congenoffs, Qi Yin Commercial Finance Guarantee Company 
Chairman Wen Shiming had a similar view of the local government 
and noted that the people of Kunshan generally supported Taiwan 
investment.  According to Wen, the investment climate in Kunshan 
was much better than that of other cities, particularly those in 
Southern China.  In other cities, local officials took bribes 
but said nothing positive about Taiwan companies.  This, he 
opined, led many local people to believe that Taiwan investors 
were taking land and profits away from the community. 
 
 
 
¶5. (SBU)  Wen, who has lived on the Mainland for over 19 years, 
 
SHANGHAI 00000102  002 OF 004 
 
 
said that financing issues were the most difficult aspect of 
being a Taishang.  It was not possible for people to directly 
exchange RMB for Taiwan dollars.  Taishang needed to go through 
a cumbersome process to exchange money.  In addition, Taishang 
had difficulty getting loans from mainland banks as most of 
their collateral was located in Taiwan.  The fact that Taiwan 
banks did not have permission to operate on the Mainland only 
added to the problem. 
 
 
 
¶6.  (SBU) To assist local Taishang, Wen established his fully 
foreign-owned, commercial loan guarantee company.  Wen said this 
was the first time mainland authorities had licensed such a 
business.  The company provided loan guarantees to Taiwan 
businesses on a variety of commercial transactions with mainland 
financial institutions.  The company enabled Taishang to 
leverage assets located in Taiwan.  Wen noted, however, that his 
company was not allowed to make loans or to receive deposits, 
mainland authorities considered it a non-financial institution. 
He was optimistic that there would be more progress in this area 
and that Taiwan banks would be allowed to operate on the 
Mainland in the near future. 
 
 
 
¶7.  (SBU) Chang Hwa Bank Representative Ji Rongnian was also 
optimistic that there would be progress in the financial arena. 
Chang Hwa Bank is a Taiwan bank, formerly state-owned, 
headquartered in Taipei.  Ji noted, for example, that his bank 
on the Mainland now had corresponding banking relationships with 
Taiwan banks.  Chang Hwa has had a representative office in 
Kunshan for nearly five years.  The office stands largely empty 
and Ji spent most of his time playing golf and attending 
lunches.  According to Ji, although Taiwan banks were not 
allowed to operate on the Mainland, three banks currently had 
representative offices.  Chang Hwa opened up its Kunshan office 
because one out of every nine Taishang in China lived in 
Kunshan.  In addition, Kunshan was close to Shanghai and Suzhou, 
both of which had large concentrations of Taiwan businesses.  Ji 
hoped that Chang Hwa would be able to begin banking operations 
this year.  Economic relations seemed to be improving and there 
was already an agreement for direct charter flights during the 
Chinese New Year.  The number of flights might increase to 
weekly flights and there were rumors that Chinese tourists may 
soon be able to visit Taiwan. 
 
 
 
¶8.  (SBU) Wei Jun Electronic Company Chairman Su Laide was less 
optimistic about charter flights.  He said it would take another 
one to two years before there would be weekly direct charter 
flights between the Mainland and Taiwan.  He has lived in China 
for ll years and opened a factory in Kunshan because most of his 
suppliers and customers were in nearby Suzhou.  For Su, the most 
challenging aspect of working in the Mainland was dealing with 
local leaders.  In most other places one only needed to please 
the customer, but in China one must also please local leaders. 
One must find ways to help leaders rise up in the system by 
improving the local economy and increasing jobs.  The Mayor of 
Kunshan when he arrived 11 years ago has now been promoted all 
the way up to be a Vice-Governor of Jiangsu.   Like Wen, Su 
complained about the difficulties Taishang had in raising funds 
in China. 
 
 
 
¶9.  (SBU) Sampo Electronic Technology Vice President David Chou 
also noted financial issues as the biggest problem in doing 
business on the Mainland.  In particular, he complained about 
limits imposed by the Taiwan government on Taishang investment. 
Currently, Taishang could only own 40 percent of a mainland 
company.  Chou also noted that it was difficult to deal with 
mainland customs practices, which he said were far more 
complicated than those of Taiwan.  He was pleased overall with 
the local government and said that Sampo opened a factory in 
Kunshan specifically because of local government assistance. 
Sampo also had production facilities in Suzhou, Dongguan and 
Tianjin.  Interestingly, Chou felt that the business environment 
in Dongguan was not as good as it was in Kunshan. 
 
 
 
SHANGHAI 00000102  003 OF 004 
 
 
 
¶10.  (SBU) On labor issues, Chou said Sampo had no problem 
attracting skilled labor, including from Kunshan and from other 
cities and provinces.  The average salary ranged from USD 130 to 
USD 150.  Because many of the factory's workers came from 
outside the area, Sampo provided dormitories.  Chou estimated 
Kunshan's real population was 1 million of which half came from 
elsewhere.  Chou also mentioned that Sampo's Kunshan factory 
employed 1,300 workers, only four of which were from Taiwan. 
This ratio of Taiwans to Mainlanders was below the average of 
other Taiwan factories. 
 
 
 
------------------ 
 
Comfortable Living 
 
------------------ 
 
 
 
¶11.  (SBU) All of our interlocutors appeared to be very 
comfortable living in Kunshan.  They had access to four Taiwan 
TV channels and were up on the latest political developments in 
Taiwan.  As noted above, there was even a school that catered to 
the children of Taishang.  The East China Taishang Children's 
School provided a Taiwan education to its approximately 580 
students.  All of the interlocutors appeared to have done well 
on the Mainland.  According to Su, many Taiwan enterprises in 
Kunshan were profitable and had grown two to three times since 
they began operations in Kunshan. 
 
 
 
¶12.  (SBU) Wen noted that Taishang were trying to become more 
integrated into the local community.  They were selling off 
residential property that had previously been used exclusively 
for Taiwan employees.  The Kunshan Taiwan Business Association 
(Tai Xie Hui) was also encouraging Taishang to live among the 
local people and not to live in exclusively Taiwan communities. 
 
 
 
------------------------------- 
 
Taiwan Politics: Leave Us Alone 
 
------------------------------- 
 
 
 
¶13.  (C) Our interlocutors appeared to be happy with the local 
government and their life in Kunshan, but many expressed 
negative views on the Taiwan government and life in Taiwan.  Wen 
complained that it was impossible to de-link political issues 
from economic issues.  The tense cross-Strait political 
relationship had a negative impact on the economic relationship 
and politicians were distorting economic issues to gain votes. 
Wen put all of his hopes on the KMT winning the 2008 
Presidential election.  He believed it would be impossible for 
the DPP to win the elections as it would be difficult to find a 
candidate to unite the various factions within the DPP.  Chen 
Shui-bian was able to unite all of the factions because when he 
first came to power he was able to trick people into thinking he 
was a good leader.  Wen explained that there were four different 
"kings" in the DPP at present.  Annette Lu and Frank Hsieh 
represented the independence faction, while Su Tseng-Chang 
represented the more moderate reform faction.  The last king was 
Yu Shih-kun and he was closely connected to Chen Shui-bian.  All 
four "kings" needed to cooperate for the DPP to retain power. 
This was impossible and the KMT would win the 2008 election, 
whether Ma Ying-jeou was the candidate or not. 
 
 
 
¶14.  (C) Su was also frustrated with Taiwan politics.  Taiwan 
needed to fix its internal problems, which included the economy 
and the education system.  However, politicians were not 
focusing on these issues and did not have any good plans to fix 
Taiwan's problems.  It was ridiculous waste of both time and 
money that he could not fly directly to Taiwan.  He was 
 
SHANGHAI 00000102  004 OF 004 
 
 
particularly upset with changes to the Taiwan educational 
system, in which students only studied Taiwan's history.  There 
was no real difference between the Taiwan people and the people 
on the Mainland and students should learn about the history of 
China.  He said that he did not plan on going back to Taiwan for 
the Chinese New Year as he no longer felt comfortable in Taiwan. 
 Su avoided answering directly whether he was an indigenous 
Taiwan person (bendi ren) or whether his family migrated to 
Taiwan when the KMT left the Mainland (waisheng ren).  He noted, 
however, that the vast majority of the people of Taiwan had 
emigrated from the Mainland at one point or another. 
 
 
 
¶15.  (C) Both Wen and Su were also non-committal about whether 
Taiwan people would be willing to live beneath "the communist 
flag."  Su acknowledged that currently it would be difficult for 
Taiwan people who enjoyed freedoms not found on the Mainland, to 
live under a communist government, but noted that the Mainland 
was now on the road to economic development.  Wen avoided this 
question and simply said that Taiwan people did not want to be 
ruled by outsiders.  He recalled the KMT take-over of Taiwan and 
noted that many people still remembered the 2/28 incident. 
 
 
 
¶16.  (C) Our interlocutors noted that it was very difficult for 
young people in Taiwan to get jobs.  Sampo Vice President Chou 
said that it was not difficult for them to recruit people to 
come to the Mainland as people in Taiwan had "no choice" but to 
try to find work elsewhere.  Both Wen and Chou noted, however, 
that Taiwan companies were bringing fewer staff from Taiwan. 
Wen said that a company could hire 10 local people for every 
person it brought from Taiwan.  Wen said, nevertheless, Taiwan 
people were still coming to the Mainland.  The Mainland was a 
big market, and many Taiwan business people found success there. 
JARRETT