International Symposium on Global Chinese Entrepreneurship

Welcome to the UCLA Asia Pacific Center's

International Symposium on Global Chinese

Entrepreneurship.

Great to see you from all

over the world virtually.

Thank you for coming

and welcome.

My name is Min Zhou.

I'm Professor

of Sociology and Asian American Studies, the

Walter and Shirley Wang Endowed Chair in U.S.-China

Relations and Communications, and Director

of the Asia Pacific Center at UCLA.

The UCLA

Asia Pacific Center promotes greater knowledge

and understanding of Asia and the Pacific

region on campus and in the community through

innovative research, teaching, public programs,

and international collaborations.

We focus

on intra-Asian and trans-Pacific connections

from historical, contemporary, and comparative

perspectives and encourage interdisciplinary

work on cross-border and supra-national issues

on language and culture, politics, economy

and society, and sustainability in the ongoing

processes of globalization.

Our center runs

the Program on Central Asia, Taiwan Studies

Program, the Hong Kong Studies Program, and

we are also an academic partner of the Global

Chinese Philanthropy Initiative.

The International

Symposium on Global Chinese Entrepreneurship

is beginning with a keynote speech on Taishang,

referring to Taiwanese business people, China

and the global value chains by Dr. Jieh-min

Wu, followed by four panels of research paper

presentations, one right after Dr. Wu's keynote

speech this evening via Webex and three panels

tomorrow via Zoom.

The central theme of our

symposium is global Chinese entrepreneurship.

We particularly focus on diasporic Chinese

entrepreneurship, which is a long-standing

phenomenon for scholarly research in the social

sciences.

The historian and Sinologist Wang

Gungwu coined the concept of huashang, meaning

Chinese merchants and business people, and

developed a theoretical model for understanding

centuries-old Chinese migration and diaspora

formation, viewing huashang Chinese business

people as the foundation of the Chinese diaspora.

Historically and in contemporary times, entrepreneurship

has been a vital aspect of diasporic Chinese

life.

One cannot possibly understand Chinese

migration, diasporic formation, transnational

engagement, and homeland development without

looking into entrepreneurship.

This symposium

aims to investigate this phenomenon in greater

detail.

We have selected 21 papers written

by authors from mainland China, Taiwan, Hong

Kong, New Zealand, the UK, Germany, France,

Canada, and the United States.

These papers

cover a wide range of topics ranging from

changes in the distinctive patterns of Chinese

entrepreneurship, gender dynamics in business

families, relations between diasporic Chinese

entrepreneurs with the economies of their

host countries and countries of origin, the

ways in which Chinese migrants start and run

their businesses in different national and

transnational settings, the importance of

local and transnational networks in business,

consequences of entrepreneurship that are

distinctly Chinese or are based on sub-ethnic

identity, to the most recent and timely topic

exploring how Chinese businesses are affected

and capitalizing on the COVID-19 pandemic.

So this symposium is organized and hosted

by the UCLA Asia Pacific Center and co-sponsored

by the Center for Global Management at the

UCLA Anderson School of Management and the

Contemporary China Research Cluster at the

University of Hong Kong.

The symposium is

supported by the Taiwan Studies Lectureship

from the Taiwan Ministry of Education represented

by the Taipei Economic and Cultural Office

in Los Angeles.

I thank our partners for their

co-sponsorship and funding support.

I would

also like to thank in particular my center

staff: Executive Director Elizabeth Leicester,

Assistant Director Aaron Miller, and student

assistant Lauren Nip for their incredible

support and tireless work behind the scenes.

And thank you all for coming.

The entire symposium

will be recorded and will be made available

on our center's website.

Please use the Q&A

function to submit your written questions.

During the Q&A time after the speaker's presentations

we will select your questions for our presenters.

Now I am pleased to introduce today's keynote

speaker, Dr. Wu Jieh-min, who is a senior

research fellow at the Institute of Sociology,

Taiwan Academia Sinica.

His research interests

are in political economy, political sociology,

and social movements.

In recent years he has

published a number of highly influential books

on Taishang and cross-strait relations, including

Rent-Seeking Developmental State in China:

Taishang, Guangdong Model and Global Capitalism,

published in 2019; The Anaconda in the Chandelier:

Mechanisms of Influence and Resistance in

the "China Factor," published in 2017; The

Double Helix of Power and Capital: A Taiwanese

Perspective of China/Cross-Strait Studies,

published in 2013; Third View of China; and

The Era of Significant Changes: Taiwan 1990-2010.

And the list of his publications can run on

and on.

Now without further ado, let's welcome

Dr. Wu.

Dr. Wu, please go ahead.

Thank you for inviting me to this event and

your very kind introduction.

Today I'm going

to present a story about the Taishang which

may not have been presented in the same argument

as I will do below.

Can I have my slides?

Min, can you see my slides?

Not yet, but it should come on I think.

Okay, is Aaron there?

Can you put on my slides?

I think I already shared it.

I just finished

again.

Just one second.

Please bear with us.

No problem, it happens.

It's...

actually it's you know almost...

And Jieh-min you cannot share your slides?

I already shared it but it did not appear

on the screen.

Can you see it on your screen?

I cannot.

No, mine either.

So can I do it?

Oh okay,

now we are seeing it.

Okay.

Talking about China's development model must

begin with Guangdong, and talking about the

processing threat growth model in Guangdong

means starting with Taishang, but this is

a very sensitive subject on both sides of

the Taiwan Strait.

Any mention of the Taiwanese

contribution to the Chinese economy inevitably

involves value judgments, so this is why this

contribution has long been treated as unclear

or even unmentionable.

At the Bo'ao Forum in 2018, Chinese President

Xi Jinping announced: "Today, China has become

the world's second largest economy, its top

industrial nation, its top trading country

and its top holder of foreign exchange reserves.

Today, the Chinese people can proudly say

that China's second revolution of opening

reform has not only profoundly changed China,

but has also profoundly influenced the entire

world.

During the forum, Xi Jinping also met

with Taishang and some Taiwanese politicians.

He acknowledged that the progress of China's

forty years of opening reform has to be chalked

up to our Taiwan compatriots and Taiwan companies,

but he also required Taiwan's industrial and

commercial sector to express support for the

Taishang have a twofold effect on China.

Taiwanese

investors and managers have helped make China

the factory of the world, but they have also

been charged with a political mission.

In

fact, Taishang has some influence on Taiwan's

national elections over the last twenty years.

For a long time, scholars have studied why

China was able to achieve its economic rise

in such a short time.

Six years ago, the American

political scientist John Mearsheimer published

an article, "Say Goodbye to Taiwan."

He predicted

that a rising China would ultimately achieve

hegemony in East Asia, and then it would proceed

to annex Taiwan.

Mearsheimer went on, "By

trading with China and helping it grow into

an economic powerhouse, Taiwan has helped

create a burgeoning Goliath with revisionist

goals that include ending Taiwan's independence

and making it an integral part of China.

In

sum, a powerful China isn't just a problem

for Taiwan.

It is a nightmare."

Of course

Xi Jinping and Mearsheimer hold very different

political views on Taiwan, but they reach

similar conclusions.

That is, both feel that

Taiwan has played a role in China's economic

rise.

Next please.

Today Taiwan is at a critical juncture and

the Taishang are likewise, but the prospect

of the rivalry between China and the U.S.

is still uncertain.

For decades, the interaction

between China and the U.S. has profoundly

shaped Taiwan's place on the world map politically

or economically.

Some say the world is stumbling

into a new Cold War.

Others say the relationship

is more like a long-term strategic competition.

In any case, Chinese leaders have asserted

that China should seek economic self-sufficiency.

Under these circumstances what direction should

Taiwan take and how should Taishang cope with

the great uncertainties?

In this study I used Taishang as a main actor

in my development narrative.

Next please.

In this figure I provide a simplified broad

map of the events over the last 40 years.

In this narrative, Taishang together with

Hong Kong businesspeople were key agents in

introducing the global value chains into China

from the start.

The upper left box shows that

since the 1980s global value chains began

to shift in the East Asian region from the

Four Tigers to China and Southeast Asia.

The

first wave of GVC shift was mostly in labor-intensive

traditional industries such as shoes, bicycles,

garments, toys, and mainly went to Guangdong.

Next in the initial stage Taishang were significant

drivers in this global capital shift.

The

second wave of "Mainland Fever", so to speak,

came about in the late 90s and is centered

on ICT assembly factories.

Taishang serve

as a bridge between China and global capitalism

and China seizes this opportunity to merge

into GVC and make itself into the factory

of the world.

At this stage local growth alliance

is all formed across coastal China.

The core

members of this local coalition was Taishang

and other foreign capital and the local governments,

and the GVC lead firms and the central government

of China were invisible members.

Foreign investment therefore transformed the

Chinese economic structure.

The export processing

sector in the coastal area became an engine

of growth.

In the process, the Chinese government

gained an enormous amount of foreign exchange

which laid a foundation for China's economic

life.

In the meantime rent-seeking activity

has been pervasive, but curiously it hasn't

hampered economic growth.

Actually it's a

kind of rent-seeking that differs from the

typical situation of rent-seeking.

I define

it as institutional rent-seeking or institutionalized

rent-seeking.

In this model, local officials

organize themselves into a cartel or syndicate

to sponsor enterprises and in turn they collect

fees from the foreign companies.

Next please.

Back in 1994, a Taiwanese manager vividly

describes local officials as rent-seeker and

also as protector.

He said, "They had units

as numerous as buffalo hair, and they wanted

money for everything!

The number of times

they came extorting payments was unbearable.

It made it impossible for me to manage the

factory...

What could I do?

I telephoned our

official sponsor and asked them to handle

it.

They were almost always

able to take care of things very quickly.

You know, we gave them a lot of money.

If

we didn't ask for their help, what were

we paying them for?”

Can you go back to

the last slide?

The last one, yes, thank you.

It sounds so far so good, but there's a dark

side to this local coalition.

It excludes

migrant workers.

The workers that have produced

the largest economic surplus in this labor-intensive

model, but the workers have been deprived

of most of the economic rewards.

Building

on empirical findings and theoretical reflection,

I have devised a term to analyze China's experience.

That is "rent-seeking developmental state."

For the sake of brevity, I don't expand on

this topic for now.

Since China's rise, the

government has constantly called for rapid

upgrading.

For example, Guangdong has been

carrying out a strategy called tenglong huaniao,

that is to empty the birds and that is to

empty the cage and uh usher in new birds since

the aughts, since the late aughts.

This together

with a sudden shock of the global financial

crisis during 2007 and 8 put tremendous pressure

on Taishang and other foreign companies and

eventually resulted in the reorganization

of local alliance during this period the central

government pushed for the "red supply chain"

and "Made in China 2025" its ultimate intention

is to challenge the technological hegemony

of the West and bypass a global value chains

by creating China's own supply chain system

in this new economic process that made China

assertive and even aggressive in its international

behavior, the U.S initially opened its market

to China and invited China into this EOI developmental

model.

But, 30 years later the U.S. is finding

it its interest threatened by China and

has begun to change its long-term engagement

policy, and the U.S. has imposed sanctions

on

Chinese firms such as Huawei and the SMIC.

And we are still in this historical process.

Finally what should Taiwanese enterprise be

doing in this new situation?

I will come back

to that question in the last section.

Next

please.

For now let's first look at how Taishang helped

introduce GVCs into China.

Next please.

Taiwanese

processing factories have been following the

global value chains to find their niche.

Once

the GVCs arrived, China followed the same

logic.

In essence the latecomers are climbing

the GVC power ladder.

At the pinnacle of the

GVC are the lead firms.

They control either

the brands and end markets or they control

the crucial technologies.

That means that Taishang

had to go where the brand firms want them

to go.

Take the footwear industry as an example.

Yue Yuen which which is called Paochen in

Taiwan, its a

parent company in Taiwan.

Yue Yuen is one of the largest shoe manufacturers

in the world.

Yue Yuen followed its buyers into China in

the late

please.

Yue Yuen had employed 30,000 migrant workers

in a single factory complex in Guangdong,

as

early as in 1990s.

At its peak capacity

around the mid 00s, it employed around 100

thousand workers in China.

So how can we conceive

of this size?

In 1994 when I went to Dongguan

A manager described the situation

to me.

Quote "the factory provides room and board

and there are so many workers that they eat

to support a local medium-sized pig farm"

unquote.

This helps us visualize the spillover effect

of Yue Yuen's massive employment.

Basically Yue Yuen could

sustain the livelihood of the entire town

where

it's located.

Another manufacturing Giant, Foxconn which

specializes in Apple products,

at one point it hired 300,000 workers in

Shenzhen and at its peak it employed 1 million

workers throughout China.

Next please.

From a macro perspective, China's urban industries

employed a total of 84 million workers in

Among them 21 million were employed by foreign

companies and more than one third were employed

in Guangdong.

Next please

Taking a closer look

Taiwan and Hong Kong companies employed almost

half of the workers in the foreign-invested

sector as you can see it's 48.7%

And this is for 2006 and then the table is

for 2011 and we look at we look at the

structure, they are similar.

It's 46.8%

and in Guangdong only it's 61.8% in the year

of 2011.

Next slide please.

Now back to Yue Yuen.

Yue Yuen was listed on Hong Kong

exchange stock exchange.

Lower labor cost made

a significant contribution to Yue Yuen's profits,

but believe it or not in the government's

registration system, Yue Yuen's production

arm remained a lailiao jiagong chang

that is a processing factory until the early

local governments to collect an enormous amount

of processing fees and other types of economic

rent.

In Guangdong, foreign companies had to

remit foreign exchange into China in order

to pay their processing fees.

As a rule the Chinese sponsoring unit took

percent of the processing fees as its service

charge.

Next

This table give you a sense of how important

the processing fees were to local governments

in the first stage of Guangdong's development.

The table shows that in Dongguan alone throughout

the 1990s throughout the 1990s the estimated

income from processing fee remittance was

more than the formal tax revenue.

This column

is the fiscal revenue the formal tax income,

and this is the estimation of 30%

of processing fees.

So you can see from the

red ink is more than the formal

revenues.

Here the amount more than this column.

So up until 2003 this year, two years that's

two years after China had entered the WTO

the processing fees remained a main source

of local government income.

Next please.

Since the mid 00's the Chinese

government has faced a serious challenge of

upgrading.

Taishang have also faced some difficulties.

In the traditional industries they have faced

a double challenge from international competition

and from mailand-owned companies excuse me,

and also

from the mailand-owned companies nipping at

their heels.

This has forced Taishang to

transform they have to transform they have

to upgrade.

And apart from closing down or

skip town you know, they have three options:

the first one is to transform or upgrade on

the site, the second is to move inland areas,

and the last one is to move overseas.

Here we

are seeing a new shift in the global value

chains.

Next please.

Again the case of Yue Yuen is illuminating.

Under pressure from the government, the company

changed its registration from a processing

factory

that is from a lailiao jiagong chang into

a single-venture foreign corporation.

Into a (inaudible)

so now its a legal entity and it

has to pay tax.

Since the new century, Yue Yuen has

moved most of its production lines to the

inland regions.

But its most important movement

has been to take production lines overseas

mainly to Vietnam and Indonesia.

Next please.

As you can see from this figure, Yue Yuen's

production volume in China declined from 38%

in

year.

By by way of contrast, Vietnam now takes up

about

production in the late 00's, the Chinese government

began enacting new labor laws and improving

working conditions for the migrant workers.

These new state policies gave labor and local

government governments an incentive to demand

better pay from foreign companies.

They also

contributed a wave of strikes in Guangdong.

Not surprisingly, Yue Yuen's experiences strike

in 2014.

The workers demands what, they demands

back payment of social insurance fees,

and also the housing provident funds.

As a result, Yue Yuen paid a total of 400

million yen RMB. 400 million

RMB in the back payments.

The company

estimated that this would add about 1.50 cents

to the cost of each pair of name-brand shoes

from then on.

Next please.

After strikes and paying the costs Yue Yuen

try to ask for a

higher price from the orders from the firms.

The following response was reported by a manager

he said "The result was that the clients,

that is,

brand firms, say sorry and just ran off, because

because it's still producing Adidas, and

yet if only Yue Yuen says I want to raise

prices

then you either don't think it's worth the

trouble, or you don't continue.

Usually with

a sales unit to negotiate price and get an

extra 2 only 2 or 3 cents is already a miracle.

So the major brands like Nike and Adidas actually

won't pay the whole amount.

They said you want

perspective of the brand buyer, I'm going

to

buy where the prices are cheaper.

I'm good

Next please.

Chasing low labor costs is the

fate of labor-intensive industries.

In our

Taishang story, Yue Yuen is a mega factory

but it's still painstakingly climbing the

power ladder of the GVC.

Moreover Taishang

are facing the situation of mainland factories,

or luzichang, catching up from behind.

Local suppliers have production skills directly

from international buyers.

A manager in Dongguan

Dong Guangdong, anticipated that Yue Yuen

would move

all of its production lines out of Guangdong

within

before we jump to this conclusion there's

twist in the story.

The fact is that Taishang

themselves have been cultivating these mainland

suppliers over the years over the 20, 30 years.

Many of Chinese suppliers that have cut into

supply chain, and gain their working experience

in Taiwanese factories.

They started out

as apprentices under Taiwanese bosses and

learn production and management skills from

their Taiwanese mentors.

In Taiwan this is a

process we call oo-tshiu

pian thau-ke.

Or in English it's translated as "apprentice-turned-boss".

What's happening now in mainland

China is very not much like what happened

in Taiwan during the 1960s through the 90s

Next please.

For this reason, fellow sociologists

Cheng Chih-peng, I'm sure Chih-peng is also

at this

conference and uh, Chih-peng is there right?

Chih-peng coined the term "Taizixi qiye"

and that is an enterprise under Taiwanese

system.

I slightly rephrased it as "Taizixi luzichang"

which means mainland owned factory

under the Taiwanese system or "Taiwanese-acculturated

mainland-owned factories".

Next please.

The localization process has been accompanied

by technical emulation and cultural diffusion.

As they run up the GVC ladder, mainland factors

also strive to catch up with Taishang.

In this

transformation many Taishang survive the

throes of upgrading.

They have evolved from

a contract manufacturer in the GVC to a "quasi

international buyer" or "supply chain integrator".

Taishang that remained in the Pearl River

Delta

were those who survived new state policy changes

and the labor strikes and also achieved at

least a level of upgrading.

Next

please.

The transformation of Yue Yuen and other companies

testifies

to the survival ability of this category of

Taishang even so as long as Taishang seek

their survival in the hegemonic logic

of the GVC.

Today we are continuing to face

the pressure of being overtaken by mainland

factories.

The game rules for climbing the GVC power

ladder were established by the lead firms

and the Taishang only cling to their number

two position by following the lead firms so

the Taishang all almost always chasing, you

know, trying to catch up in the power ladder

of GVC.

Next please.

More recently Apple began

sending iPhone assembly orders to a mainland

factory, its large Luxshare ICT.

This was the first iPhone order given to a

mainland factory.

The founder of Luxshare, Grace Wang, was a

line worker at Foxconn before she started

establishing

her own company in 2004.

In this reorganizing

of Apple GVC in China, Luxshare merged naturally

merged with two Taiwanese factories and that

assembled Apple cell phones.

This company also

employs many companies, technicians, and managers,

and has several Taiwanese suppliers among

its

investors.

So, Luxshare is called "an enterprise

with Taiwanese bones draped in mainland skin".

Next please.

Apple is dividing its global market into a

"China market" and a "non-China" market.

Next

please.

In all conceptualization, the story

of Grace Wang is another example of "oo-tshiu

pian thau-ke".

This time it occurred in ICT

sector which signals China is moving up the

GVC ladder.

Next.

Since the early 2010s, China began promoting

a big-push industrial upgrading strategy.

Next please.

In fact, this is a grand roadmap for developing

national power and it includes the following

steps: The Belt and Road initiative in 2013,

Asian

Infrastructure Investment Bank (AAIP), A "Big

Fund" for the semiconductor supply chain and

Made in China 2025, with its first item the

semiconductor supply chain.

These plans are

very a bit ambitious, unlike the trajectory

of "following the GVC to forge the factory

of the world", like the Taiwanese or like

the

traditional industry in the mainland.

The new

state policies seek to bypass the West-dominated

GVCs, and try to create China's own "red supply

chains".

Based on my research two years ago,

the two year period between 2018 and 2020.

projects, but by the mid-2020 that is this

year and this summer, many such plants had

already failed.

By contrast, two companies have

made substantial progress.

That is Huawei and

SMIC.

Huawei's subsidiaries

HiSilicon has developed a high-grade chip

design

capability.

Likewise SMIC has been able to

produce 40 nanometer chips, yet the U.S. government

has put Huawei on the Entity list since

last year due to national security concerns.

SMIC was also put on the designation in, put

on the designation list this year.

China cannot

make a breakthrough without technology from

the U.S. and other western countries is evident.

Next please.

Why is China's ambition being

challenged by the U.S.?

Most of you are probably

aware of the reasons, so for the sake of time

I will just skip this slide, next please.

The U.S. began waging its technology war against

China since 2018.

The target was high-grade

semi-conductor chips.

China has now been almost

completely reliant on U.S. for its supply

of high-grade chips.

The "chip's shortage pain" so to speak, cannot

be

cured overnight.

Next.

So what are the prospects

for the U.S-China rivalry?

The Trump Administration

has attempted a policy of "decoupling" with

China.

Yet 40 years of globalization have integrated

China's economy with the whole world.

The U.S.

recovering from China would be a long process

if not impossible.

The Biden administration may

engage a China policy that differs from Trump's.

The whole world is watching what the Biden

team will do on China.

And besides the world

market China continued china continues to

attract Wall Street tycoons.

As you can see

the IPO of Ants Group uh just uh a week ago

fresh and

tycoons.

So China continues to attract Wall Street

tycoons and the German automobile industry,

just to

mention a few.

Now.

Next please.

Now my concluding

section.

Next please.

As I have tried to make clear,

numerous Taishang have contributed to China's

rights especially during its first phase of

opening reform.

China's economic development

is facing a critical turning point right now.

Based on the current Chinese blueprint it

appears that China no longer sees Taiwan as

an essential partner for its further development.

But, let us first look at the trend of in

Taiwan's

economic relations with China at the macro

level over the last 20 years.

As you can see from this figure, this figure

with

China.

Taiwan's trade dependence with China

lingers up until now it still lingers around

concentration with China remains a high 40%.

To a great extent the trade volume reflects

triangular trade relations, therefore Taiwan

is

not dependent on China, on China's domestic

market, as the numbers might suggest it was

at first

glance.

And yet, the complex economic interdependence

between both sides is undeniable.

Next please.

Figure 4 shows the trend in Taiwan's

direct investment in China as a share of its

global investment.

Up up to the early 2010s,

around this area, it's a peak, it's the peak.

China took the largest chunk at more than

is more than 80% here in 2010 to

So you can see how how much is the attraction

of of China to to Taiwan to Taishang, but

since around 2011, Taiwanese money has largely

been reoriented, reorienting elsewhere so

it's going down dropping, there's a trend

until now.

More recently funds has been re-shored to

Taiwan.

This capital movement began however

before the U.S. trade war.

U.S-China trade war.

But the trade war has accelerated the process

Next please.

Right now China is facing double pressure

from within and without.

The Chinese economy has

actually has slowed down, and there's a big

uncertainty in the U.S-China rivalry.

The Xi Jinping government has iterated a

new slogan of "double circulation"

within which with emphasis on "internal

circulation".

Xi Jinping has recently

talked about forming China standards, he said

"We had to make major breakthrough in critical

core technologies, making a breakthrough in

a block

of core components, putting forward a block

of high-grade products, and forming a block

of China standards...During the 30 years from

now until the mid-century until the mid 21st

century, China will construct a modernized

strong socialist nation."

Xi says 30 years

from now, this tone appears to be more realistic

than that announced in the ambitious "Made

in

China 2025".

China is still keen to acquire

advanced technologies from abroad to boost

its people's strategy.

Next please.

We can identify two models emerging.

The first

model is the birth of a new ecosystem with

Chinese capital as its foundation.

Take the

telecommunications industry for example, the

state and state-owned capital are cooperating

with private capital to create a value chain

system controlled by the Chinese themselves.

This emerging sector is gradually putting

pressure on international capital and even

U.S. companies.

The second model is led by the

mainland supply chains in the traditional

industry.

It's in large part generated by the

spillover effect from the Taishang production

networks.

Here Taishang plays an intermediary

role as GVC integrators and that Taishng continue

participating in the value capture game.

Both

models involve Taishang in different ways.

As

as long as China needs to connect with the

outside world in terms of market, in terms

of foreign exchange acquisition and advanced

technologies, China still needs Taishang

as an agent.

In turn many Taishang want

to benefit from fuller cooperation with China.

And the global capital needs China too.

Next

slide please.

For example in the footwear industry, buyers

at the top of the GVCs still need to tai song

to serve as supply chain integrators globally

and on the mainland.

As we have seen Yue Yuen

has reduced its China capacity to a very tiny

proportion but brand firms the Yue Yuen still

need

Guangdong as an R&D center and some inland

areas some inland Chinese areas has high-end

production centers.

In the semiconductor industry

China has tried to construct its own supply

chain but has met a series of challenges made

of sanctions from the U.S. government.

U.S. sanctions

has prevented TSMC from Taiwan.

U.S. sanctions

uh have just just told TSMC that they cannot

produce chips from Huawei since this past

september.

For the same reason, for same reason,

Huawei cannot acquire high-grade chips from

major companies such as Qualcomm.

So you can

see the sanctions against Chinese companies

are not only from the American companies themselves

but also including uh the high-tech companies

around the world.

You know why because the

foreign companies using the U.S. technology

content so the U.S. government have this leverage

to to uh to to exert uh to use against China.

However, many Taiwanese engineers I mean now

still many Taiwanese engineers work in Chinese

chip fabricators and the design houses

for higher pay for higher pay.

Taiwanese companies

such as Mediatek also been providing chips

to major Chinese cell phone brands other than

Huawei.

Next slide please.

In the wake of U.S. sanctions, the Chinese

government

is putting more funds to the construction

of an indigenous semiconductor supply chain.

A top Taiwanese manager, Charles Kau,

who has helped Tsinghua Unigroup produce advanced

memory

chips.

He recently commented "China's development

in high-grade semiconductors will be contained

by harsh U.S. measures.

But in the area of low-grade

consumer goods, China can help the world and

the doesn't pose a threat, and there's good

chance

that China can continue to grow.

In next 10

to 15 years, China will achieve a low-grade

semiconductor supply chain.

It's an opportunity for that.

I think this

nation of Chinese civic development

and he spent years working for Chinese chip

maker

Next slide please.

But economics can never

be isolated from politics and geopolitics.

For Taiwan, dealing with the mainland involves

a deep-rooted problem of security.

Does Taiwan

have to choose between security and prosperity?

And in the case of some high-tech Taiwanese

companies can they continue to sit on the

fence, or do they have to pick a side?

Those

who understand the volatility of the world

order will not accuse the founder of TSMC

Morris Chang, of being an alarmist when

he says: "In this time, TSMC just quietly

plays

its part in the supply chain.

But when the

world gets restless, which is now, TSMC becomes

a battleground for geo-strategies."

Morrison

accurately diagnosed a problem of our time,

but the battleground, defined as such, is

not merely applied to TSMC but to the entirety

of Taishang and Taiwan, just to say the least.

Thank you, thank you for your patience.

Thank you very much Dr. Wu.

Thank you so much

for your informative, insightful and provoking

talk and I have learned so much from it.