"When Shanghai was basking in its fame as the 'Pearl of the Orient,' Hong Kong was just a fishing village, and who cared about your Taiwan?!" It's not unusual to hear similar sentiments expressed all up and down the east and southeast coast of mainland China.
Still, after 40 years of stagnation, when the PRC opened up to the outside world, it was Taiwanese businessmen, with superior capital, technology, and marketing channels, who jumped ahead of the leaders of those days of old in the mainland's domestic market.
Victoria Success Investment Limited (selling mainly shoes) was a classic export-oriented enterprise, with no opportunity for selling in the Taiwan domestic market. Three years ago they entered the mainland domestic market selling women's shoes under the "Daphne" label and men's shoes under the "Jayhawk" label. From 50,000 pairs in their first year they have grown to sales of 2 million today. They even won the "1992 Golden Bridge Award for a Best-Selling Domestically Produced Product" and other awards.
The Three Rifles Brand of underwear, produced in a joint venture with Chunghsing Textiles of Taiwan is so popular that supply can't keep with demand. The photo shows Taiwan's Hsu Ming-sheng （left）, the general manager, and Vice-General Manager Jiang Liuying （right）, who represents the mainland partner.
Knocking over three rifles
As the PRC's domestic market has gradually opened up, many Taiwan businesses have extended their battle for sales there, chipping away at the former monopolization of that market by old-line state-run firms. In other words, in this new battlefield, Taiwan firms have become a threat and a competitor to mainland enterprises.
Shanghai has long been a center of high-grade shoe production for mainland China, and its master shoemakers are famous across the country. Nevertheless, "we can sell our polyurethane shoes for even a higher price than the lambskin shoes made by the old Shanghai firms, a fact which has really made people sit up and take notice!" proudly declares Lu Teng-feng, general manager of the Shanghai sales department for Victoria Success.
Another Taiwanese product making waves in the mainland market is the "Three Rifles Brand" undergarments, manufactured by Chunghsing Textiles.
When Chunghsing first invested in the PRC, it did so in a joint venture with the original makers of the Three Rifles Brand, now known as the Number Nine Textile Factory of Shanghai, with Chunghsing controlling the stock and the management of the enterprise. Next they got the jump on registering the joint venture under the name "Shanghai Three Rifles Clothing Manufacturing Company." Using this clever strategy, today the reputation of the old Three Rifles of Shanghai has already been surpassed by that of the new Taiwan Three Rifles brand, with its better design and superior material.
Now supply of Chunghsing's Three Rifles underwear can't keep up with demand. Outside the factory, hawkers are selling them right on the street. And there is a new plant under construction. "In the mainland, you can only really begin talking about market share at 60 million dozen per year. Right now Chunghsing has limited production, and only sells about one million dozen domestically per year, so there is still a lot of room for growth," says an ambitious- and determined-sounding Hsu Ming-sheng, general manager of Shanghai Three Rifles.
Cloisonne handicraft gifts, which were popular in Taiwan for a time, are following the same cycle forward in the mainland. "Cloisonne was actually learned from the mainland early on, and they have many masters of the art there, " says Mr. Lin, head of the Tsan Chi Handicraft Gift Company. It's just that the materials that Taiwan imports from Japan--such as enamel and brass--are less adulterated than the materials on the mainland, and are therefore more brilliant and fresh-looking, and they are quite well-received in the mainland market. Tsan Chi, which never did domestic sales in Taiwan, is exploring an all new territory.
The successful advance of Taiwan companies in the mainland is being played out in every traditional industry. Both President and Wei Chuan, which produce food products, hope to take advantage of the mainland market to build the largest food empires in the world. Indeed, a good many enterprises have similar ambitions, though they are not eager to play them up in public: "Quiet, but very, very ravenous," is how one Taiwanese entrepreneur describes himself.
A path lined with cash
In this new commercial battleground, the problem for Taiwanese business goes beyond merely how much more money they can make. Success there is also key to the upgrading of each industry. Taiwanese companies are trying to establish their own brand names, but the limited size of the domestic market has prevented them from reaching economies of scale, so that they cannot amass the resources necessary to absorb the costs and risks of taking their brands into the international market. One could only dream of selling one million pairs of this or 10 million dozen of that in Taiwan. Yet the mainland has made these dreams come true.
After reaching a certain scale, talk of industrial transformation, upgrading, and internationalization is no longer just a parlor game. Victoria Success has succeeded in establishing its own brand name in the PRC, and has figured out how to "use money to build up domestic sales pathways." Now they are ready to go the next step. They wish to open their own chain of shops and to expand to manufacturing a full line of products including clothing, hats, and so on.
Chung Chin, a researcher at the Chung Hua Institution for Economic Research, points out that in the future the mainland market will inevitably become fought over by companies from around the world. Based on a common language and cultural background, Taiwanese companies have an enormous advantage over most other outside firms.
However, Chung Chin argues, it would only be reasonable for firms in the mainland to control most of the market for products for daily use, since the technology required is not high-level, little capital is involved, and monopolization is nearly impossible. It is unlikely mainland firms will allow outsiders to control the market for long.
"After a several year transitional period, those companies that no longer wish to renew their investment there can just take their profits and go home happy. Though the number of Taiwanese firms remaining will decline, they will continually increase in scale," says Chung as she gives an outline of one possible future.
Whether the mainland's firms reclaim their market or Taiwan enterprises continue to hold the upper hand is a question that must be left to the future.
[Picture Caption]
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The Victoria Success Company has penetrated the mainland market with its own "Daphne" and "Jayhawk" brand names.
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The Three Rifles Brand of underwear, produced in a joint venture with Chunghsing Textiles of Taiwan is so popular that supply can't keep with demand. The photo shows Taiwan's Hsu Ming-sheng (left), the general manager, and Vice-General Manager Jiang Liuying (right), who represents the mainland partner.
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