26 August 2019
Kunshan is one of China's wealthiest counties with GDP surpassing that of some provinces. But now it faces some uncertainty following a tragic explosion at a Taiwan-invested factory. Photos: Xinhua, CCTV
Kunshan is one of China's wealthiest counties with GDP surpassing that of some provinces. But now it faces some uncertainty following a tragic explosion at a Taiwan-invested factory. Photos: Xinhua, CCTV

Factory blast ends party for Kunshan’s Taiwan investors

Taiwanese doing business in Kunshan (崑山), a bourgeoning county-level city that sits on the border between Shanghai and the neighboring Jiangsu province, should brace for a drastic change in their status and the treatment they receive from local officials.

After being accorded state guest-like privileges in the past, they could now be looked upon as tax dodgers and sweatshop operators.

All of these could have been avoided had it not been for a deadly explosion earlier this month at a Taiwan-invested factory named ZR (中榮) that supplies aluminum alloy wheels and hardware products for General Motors. The explosion claimed 75 lives and injured another 185, prompting harsh scrutiny from mainland authorities and the media.

Reports say ZR senior executives have been detained by the police after Chinese President Xi Jinping and Premier Li Keqiang instructed the State Administration of Work Safety to conduct a thorough investigation into the case. 

Before the tragedy, it was no secret that Taiwanese investors in Kunshan were given some “super-national” treatment in business operation and other aspects like education and medical services.

That is because Taiwan enterprises are the cornerstone for the local economy, helping Kunshan constantly top the list of China’s 100 most competitive counties.

Kunshan is the largest county economy in Suzhou, which in turn plays a leading role in boosting the gross domestic product of the Jiangsu province.

Nicknamed “little Taipei”, Kunshan is home to over 100,000 Taiwan businessmen. The city achieved GDP of 292 billion yuan (US$47.45 billion) last year, almost equivalent to that of provinces like Hainan and Qinghai.

Taiwan firms, including big names like Foxconn and Formosa Plastics Group, contributed more than half of the local government’s fiscal revenue, 80 percent of industrial investment and 90 percent of total exports. With a number of Taiwan tech firms and OEM factories clustering there, Kunshan is hailed as the capital of the world’s notebook and tablet sector.

Taiwanese investors in Kunshan knew too well that the local government needed them badly to boost industrial output and sustain regional growth. Hence, the investors were not shy in asking for all kinds of privileges.

Some Taiwan entrepreneurs threatened to relocate plants to other cities if the Kunshan government were to scrap tax rebates, according to The Economic Observer.

Some well-connected groups were even able to take their cases directly to provincial leaders or ministers if their factories in Kunshan faced fines or administrative penalties for irregularities.

Working conditions have been harsh. Long hours are common for factory staff. Employees were often asked to work on Sundays but told to take a day off on weekdays as the firms did not want to pay overtime compensation that is usually two times the baseline hourly salary.

Some workers have to handle hydrochloric acid or sulfuric acid compounds, but the only protection they get is a thin mask. Anyone who complains will be laid off as factory owners can easily find replacement workers.

Xinhua reveals that two years ago, dozens of former ZR employees blocked the factory entrance demanding compensation for severe occupational lung diseases suffered due to the poor working environment. But before long, the local government sent dozens of policemen and detained the protesters. ZR later only offered a one-off sum of 100,000 yuan with the condition that recipients must not make any further appeals.

Following the latest incident, however, life will be very different for Kunshan’s Taiwan investors.

Xinhua says a detailed report on the accident will be submitted to the State Council within three months and that all plants and factories in Kunshan will have to undergo emergency safety checks. 
The Ministry of Human Resources and Social Security and the State Administration of Taxation have also dispatched a joint group there to look into allegations of illegal employment and tax evasion.

It is rumored that Kunshan party chief, mayor and a number of other officials will soon be removed from their posts. Taiwan businessmen can now fear that more changes will come in their operational environment.

– Contact the writer at [email protected]


EJ Insight writer

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