台商中小企業在大陸的轉變：以寰虹實業股份有限公司為例 - 政大學術集成

全文

(1)國立政治大學商學院國際經營管理英語碩士學位學程 International MBA Program College of Commerce National Chengchi University 碩士論文. 治政 Master’s Thesis大立 ‧ 國. 學 ‧. 台商中小企業在大陸的轉變： Nat. er. io. sit. y. 以寰虹實業股份有限公司為例 Emerging transit aof small and medium-size enterprises. n. iv l C n h e n ginvestment) （SMEs）FDI (Foreign direct in China: The case chi U of New Solid International Corporations. Student: Debby I-Ching Fang Advisor: Professor Tse-Kang Leng. 中華民國九十九年六月 June 2010.

(2) 台商中小企業在大陸的轉變：以寰虹實業股份有限公司為例 Emerging transit of small and medium-size enterprises（SMEs）FDI (Foreign direct investment) in China: The case of New Solid International Corporations. 研究生：方怡靜. Student: Debby I-Ching Fang. 指導教授：冷則剛. Advisor: Tse-Kang Leng. 學. ‧ 國. 立. 政治大國立政治大學. ‧. 商學院國際經營管理碩士學程碩士論文. sit. y. Nat. er. io. A Thesis. n. Submitted a to International MBAvProgram. i. l. n C h Chengchi University National i U e ngch. in partial fulfillment of the Requirements for the degree of Master in Business Administration. 中華民國九十九年六月 June 2010. I.

(3) Acknowledgements. Firstly, I would like to thank my advisor Professor Tse-Kang Leng for his expertise, guidance, comments and encouragement throughout the process of this thesis.. Thanks to the. committee members Professor Jack Wu and Chester Ho for their valuable suggestions and advice.. 政治大. A special thanks to OIP staff Lichi Ho, for supporting me during those times in the. 立. IMBA program.. ‧. ‧ 國. 學. I would like to express my gratitude to all my interviewees in sharing their experiences and. y. Nat. al. Without their. er. io. sit. thoughts and for making me feel valued and proud to be part of the company.. n. assistance, it would be difficult and impossible to complete this case study.. Ch. engchi. i Un. v. And thanks to Betty Wu my sister in law and Danielle Farrugia, who spend their valuable time to proofread my thesis at such short notice. It has been a long process for this full time mother who has two young children and therefore would like to express my appreciation to my husband Ian Chang and my in-laws for their understanding, patience and support. completion of my thesis, I would like to dedicate this work to them.. II. In.

(4) Abstract. As China is still a highly political region and experiences rapid economic growth with full of opportunities it often means hidden crises.. Therefore, to avoid any future traps or disputes. Taiwanese Investment Company should take risk management into account.. By applying a. 政治大. fully automatic production line, would ease the tension of new labor laws and lower the wage. 立. expenses and recruitment resources for any company who is labour intensive.. Due to. ‧ 國. 學. environmental issues, the PLA material should become a future trend in the packaging. ‧. industry. Overall, companies should invest in PLA as it’s biodegradable and therefore it will. y. Nat. n. er. io. al. sit. become a long-term solution.. Ch. engchi. III. i Un. v.

(5) Contents. ACKNOWLEDGEMENTS .................................................................................................................. II TABLE OF EXHIBIT ........................................................................................................................... V CHAPTER 1: INTRODUCTION ......................................................................................................... 1 1.1 RESEARCH OBJECTIVE AND QUESTIONS ......................................................................................... 2 1.2 LIMITATIONS ................................................................................................................................... 4. 政治大. 1.3 RESEARCH PROCESS AND CHAPTER OUTLINE ................................................................................. 5 1.4 RESEARCH METHODOLOGY............................................................................................................. 6. 立. CHAPTER 2: LITERATURE REVIEW.............................................................................................. 8. ‧ 國. 學. 2.1 FOREIGN DIRECT INVESTMENT (FDI) IN CHINA .............................................................................. 8 2.2 WESTERN SHORE ECONOMIC ZONE .............................................................................................. 14. ‧. 2.3 LABOR CONTRACT LAW OF THE PEOPLE'S REPUBLIC OF CHINA ................................................... 23 2.4 RAW MATERIAL: POLYVINYL CHLORIDE MATERIALS ..................................................................... 25. y. Nat. sit. CHAPTER 3: CASE STUDY: NEW SOLID INTERNATIONAL CORPORATION .................... 27. al. er. io. 3.1 XIAMEN ........................................................................................................................................ 27. v. n. 3.2 COMPANY OVERVIEW ................................................................................................................... 35. Ch. i Un. 3.3 INVESTMENT LOCATION ................................................................................................................ 37. engchi. 3.4 PRODUCTS & ENVIRONMENT ........................................................................................................ 38 3.5 BARRIERS & OBSTACLES .............................................................................................................. 39 CHAPTER 4: RESEARCH FINDINGS & RECOMMENDATIONS ............................................. 45 4.1 NEW SOLID INVESTMENT IN CHINA .............................................................................................. 45 4.2 THE NEW LABOR LAW ................................................................................................................... 47 4.3 NEW MATERIALS TO REPLACE PVC............................................................................................... 50 4.4 ANALYSIS & COMMENTS .............................................................................................................. 57 4.5 FURTHER LOOKOUT ...................................................................................................................... 60 REFERENCE ....................................................................................................................................... 62 WEBSITE ............................................................................................................................................ 67. IV.

(6) Table of Exhibit. EXHIBIT 1-1 PRELIMINARY RESEARCH FRAMEWORK AND QUESTIONS ..................................................... 4 EXHIBIT 1-2 INTERVIEWEE ........................................................................................................................ 7 EXHIBIT 2-1 TOTAL AMOUNT OF FDI IN CHINA ........................................................................................ 9. 政治大. EXHIBIT 2-2 REGION OF FDI................................................................................................................... 10 EXHIBIT 2-3 TOP TEN NATIONS FDI IN CHINA ........................................................................................ 12. 立. EXHIBIT 2-4 TAIWAN FDI IN CHINA BY REGION ..................................................................................... 13. ‧ 國. 學. EXHIBIT 2-5 TAIWAN FDI IN CHINA BY AMOUNT .................................................................................. 14 EXHIBIT 2-6 WESTERN SHORE ECONOMIC ZONE MAP ............................................................................ 15 EXHIBIT 2-7 HOW TO ENJOY THE TAX FREE TRADING INTO ASEAN .................................................... 22. ‧. EXHIBIT 3-1 2007 XIAMEN ECONOMIC INDICATOR ................................................................................. 30 EXHIBIT 3-2 ENTERPRISE TREE MAP ....................................................................................................... 36. y. Nat. sit. EXHIBIT 3-3 WORKFLOW WITHIN THE GROUP ........................................................................................ 36. er. io. EXHIBIT 4-1 DISTRIBUTION OF EMPLOYEES............................................................................................ 48 EXHIBIT 4-2 EMPLOYEES DISTRIBUTION CHART ..................................................................................... 49. n. al. Ch. i Un. v. EXHIBIT 4-3 PLASTIC IDENTIFICATION CODE .......................................................................................... 51. engchi. EXHIBIT 4-4 LIFE CYCLE OF PET MATERIAL.......................................................................................... 53 EXHIBIT 4-5 LIFE CYCLE OF OPS MATERIAL ......................................................................................... 54 EXHIBIT 4-6 PLASTIC RECYCLE TABLE ................................................................................................... 55 EXHIBIT 4-7 SHRINKAGE TABLE .............................................................................................................. 56. V.

(7) Chapter 1: Introduction In this research we will look at the number of factors which will affect company’s operation and strategy especially when they invest in a new plant in a remote country. But first we will get to understand how this research was conducted by going through research methodology, then followed by some basic fundamental literature reviews on the background of China. In the. 政治大. third section we will take a close look into the case study itself and all the barriers and obstacles. 立. which need to be overcome. And last this paper will be concluded with research finding with. ‧ 國. 學. some suggestions and comments.. ‧ y. Nat. al. er. io. sit. An organization usually tackles a lot of difficulties from the environment, the government, its. n. employees, and the international awareness etc. And Taiwan is well known for its large. Ch. engchi. i Un. v. number of small to medium enterprises (SMEs), and what make the SMEs so unique from those top 500 companies. Within the current status of Taiwan, most companies are looking for foreign direct investment in order to save their overheads and expenses into other countries like such as Vietnam, Philippines or the famous BRIC.1. 1. Stands for Brazil, Russia, India and China. “一個截然不同的世界正在崛起--金磚四國”, Businesses Weekly, 28 February 2005, Volume no. 901, P10. 1.

(8) When companies expand business across national boundaries and operate in an international rather than a domestic arena, it also opens up new challenges in addressing different law in other countries.. This will drive the companies to come up with their new strategies and. operations.. 政治大. For years, Taiwan’s plastic companies have been known as the master of quality and highly. 立. efficient manufacturers, where they focus on production rather than solution.. As the. ‧ 國. 學. environmental issues around the globe have pressured the companies to think “GREEN” before. ‧. their production, it requires the managers and researchers to think about their product recycle. n. al. er. io. sit. y. Nat. options.. Ch. engchi. 1.1 Research Objective and Questions. i Un. v. Given the opportunity for an organization to invest aboard, there is still room for the understanding of how the outside environmental changes affecting organization changes, and their tactics to overcome all the obstacles. This research examines three dimensions: how Government Law, Green affect and cross-strait relations between China and Taiwan influence an organization’s strategy and tactic. Since these three factors may create additional barriers as a result, we focus this study on SMEs transit in breaking the barrier and how it can be done. 2.

(9) when the organization is migrated across international borders. To achieve the objective listed above, we will address the following three research questions: 1. How does the policy like Western Shore Economic Zone between China & Taiwan inspire the company? 2. How should a firm keep up with China Labor law changes?. 政治大. 3. How does the Green awareness affect the company?. 立. ‧ 國. 學. The research aims to study how the external factors affecting a FDI company in China and. ‧. identify important elements to maintain itself to stay within the business game. As most of the. y. Nat. al. er. io. sit. external factors are uncontrollable from happening but how to sustain the impact as a whole. n. will be an interesting finding.. Ch. engchi. i Un. v. The research questions can be illustrated within Exhibit 1-1, which elaborates the preliminary research framework and interprets the relationship between the framework and research questions. In order to address the above three key questions, we will examine the main cause of the issue and some external factors.. 3.

(10) Exhibit 1-1 Preliminary Research Framework And Questions. Research methodology. Literature Review. 立. ‧ 國. ‧. Global Green awareness. sit. y. Change of Labor Law. n. al. er. io What are the Location differences? How does the policy affect the company?. 學. External Factors. Nat. Western Shore Economic Zone Policy. 治政 Case study 大. C hto keep up with U n i How engchi the law and retain the human resource?. Finding and Comments. Future look out. 4. v. What are the replacement materials available in the market?.

(11) 1.2 Limitations We are focusing on overcoming some external obstacles for a company who is a FDI in China. Hence, their possible success factors might not be applicable for other firm, due to the uniqueness of each business and operation environment. Therefore the success recipes may not be transportable to a rigid scenario. Furthermore, the research is supported by detailed. 政治大. case studies of existing players in the enterprise. As such, there might be other significant. 立. critical success factors (CSFs) which are not addressed in this case.. ‧. ‧ 國. 學. 1.3 Research Process and Chapter Outline. y. Nat. al. er. io. The interviewees include CEO, General Manager, finance director and. n. secondary data.. sit. The method used in writing up this research paper would consist of case study and analysis of. Ch. engchi. i Un. v. operation manager. The primary information was gathered through interview and phone interviews. And the researcher’s previous involvement in the company proved to be of great help, particularly in contacting former colleagues and senior management staff to ensure the creditability of the information.. 5.

(12) 1.4 Research methodology This chapter describes the method applied in conducting the research.. The case study. approach with in-depth interviews is used to investigate important elements in overcoming the environment changes & law regulations in China.. 1.4.1 Research Framework. 立. 政治大. This case study was conducted with non-numerical data from the interviews and observations.. ‧ 國. 學. The research was aimed to find out how does the outer environment affecting the company’s. ‧. strategies. And literature review will provide some background understanding of the current. n. al. er. io. sit. y. Nat. status in China.. 1.4.2 Case Method. Ch. engchi. i Un. v. The researcher believes that case study will be a more appropriate method in collecting all relative information due to the fact that researcher’s prior involvement in the case company. Being a part of the management team in China, researcher had extensive interactions with management.. The good understanding of the firm’s vision, mission and strategy as well as. an interpersonal connection with stakeholders shall contribute to the sound and fair observations.. 6.

(13) 1.4.3 Data collection All the data are obtained through in-depth interview; information is collected from both primary and secondary data. Before conducting the interview, researcher has done some findings through a secondary source on the company background.. This secondary. information includes corporate introduction from a public source.. 立. Director. n. Corporate Finance. al. Ch. sit. er. io. Corporate Development. General Manager. y. CEO. Nat. Business Partner. Business Title. ‧. Business Partner. 學. Role. ‧ 國. Exhibit 1-2 Interviewee. 政治大. i Un. v. e n Finance g c h idirector. Corporate Operation. Operation manager.. The interview questions are based on research objectives and questions; open-ended question gives the interviewees a chance to respond based on individual experience and perspectives.. 7.

(14) Chapter 2: Literature Review The Literature review starts with looking at the most current figures on the foreign direct investment in China. This aims to first examine the literature and studies with facts as an example of how FDI’s affect China’s current states. The following session introduces the requirements of the China’s labor law and the critical elements for all the FDI companies. The. 政治大. third session focuses on how packaging materials affect our environment and the options. 立. available for the future. ‧. ‧ 國. 學. 2.1 Foreign Direct Investment (FDI) in China. y. Nat. al. n. which is 35% more than 2007.. er. io. sit. From the Exhibit 2-1 year 2008 the total amount of FDI in China has topped around 95 billion, And the total accumulated amount of FDI since 1979 till. Ch. engchi. i Un. v. 2007 was USD 760 billion2. Once China gains the foreign funds, it can utilize the funds to promote the service industry which becomes a key to attract more foreign investments.. But. even though China is the largest recipient of FDI among developing countries for the past 15 years, it still has rooms to make improvement on the quality and the quantity of its products and services.. 2. “Total amount of foreign direct investment (FDI) used in China”, Starmass International, http://www.starmass.com. 8.

(15) Below is the chart of total amount and trends of foreign direct investment (FDI) input into China from year 1986 - 2008:. Exhibit 2-1 Total Amount of FDI In China. 立. 政治大. ‧. ‧ 國. 學. n. al. er. io. sit. y. Nat Source: Starmass International. Ch. engchi. i Un. v. Between mid 1980s and early 1990s, FDI increased steadily and accounted for about one third of total foreign capital inflow. FDI inflow accelerated since 1992 and became the most important source of foreign capital inflow, after the famous “Tour to the South” by China’s then paramount leader Deng Xiaoping. China has also become the second largest FDI recipient country in the world and the largest recipient among developing countries. 3. 3. “改革開放 30 年：中國利用外資於 8 千億美元 5 大成就” , 5 December 2008, People's Daily Online,. 9.

(16) 2.1.1 FDI Utilized by East, Central and West Parts of China Another important feature of China’s FDI inflow is that they are most likely to be concentrated in the eastern costal regions.. Exhibit 2-2 Region Of FDI. 立. 政治大. ‧. ‧ 國. 學. n. al. er. io. sit. y. Nat. Source: Ministry of Foreign Trade and Economic Cooperation. Ch. i Un. v. Exhibit 2-2 shows about 85.81% of all FDI are located by the costal region.. engchi. popular southern costal provinces is Fujian.. One of the most. This is the place which has been favored by. people from Taiwan, due to its location, climate and their native language.. The Taiwanese. FDI were focused on the Pearl River Delta to the Yangtze River Delta, the southeast coastal. http://www.people.com.cn/. 10.

(17) areas.4. Other inland areas are in relatively small proportion, realized value share was only. 10% “but in recent years showing the growing trend”.5. 2.1.2 2009 Top Ten Nations FDI In China From January to September in year 2009 as shown in Exhibit 2-3 the top ten nations and. 政治大. regions with investment in China (as per the actual input of foreign capital) are as follow: Kong. Taiwan(USD5.077b),. U.S.A.(USD2.62b),. Japan(USD3.235b),. 學. (USD2.663b),. 立. (USD37.077b),. R.O.K.(USD1.981b),. Germany(USD0.944b), Canada(USD0.656b) and. Singapore. U.K.(USD0.951b),. ‧. ‧ 國. Hong. Macau(USD0.6b) 6 , total of which. y. Nat. n. al. er. io. sit. accounted for 87.5% of total actual use of foreign investment in the country.. Ch. engchi. 4. i Un. v. Wu Li-Sheng , “The effects on Taiwanese Investments in China ‘s Eastern Region – A study of development strategies and location factors”, National Sun Yat-sen University, , June 2001, p 140 5 “大陸政策轉軌內陸經濟「出頭天」”, 12 February 2010, HeraldToday, http://www.herald-today.com 6 Foreign Investment Department of the Ministry of Commerce. 11.

(18) Exhibit 2-3 Top Ten Nations FDI In China. From January to September 2009, top ten nations investment in China (Unit :US100 Million) Hong Kong Taiwan Japan Singapore U.S.A. R.O.K 政治 U.K. 大. 立. Germany Macau. 學. ‧ 國. Canada. ‧. Source: Foreign Investment Department of the Ministry of Commerce. y. Nat. al. er. io. sit. It can be seen that in the near future, China will channel its investment into research and. n. development (R&D) centers, new high-tech industries and advance manufacturing and. Ch. environmentally friendly sectors.. engchi. 12. i Un. v.

(19) Exhibit 2-4 Taiwan FDI In China By Region. Taiwan Investment in China by Region 2009 NORTH REGION NORTH EAST REGION EASTERN REGION SOUTH CENTRAL REGION. 立. WEST REGION 政治SOUTH大. NORTH WEST REGION. ‧ 國. 學. 7. Source: Department of Investment Services Ministry of Economic Affairs. ‧ y. Nat. al. er. io. sit. From Exhibit 2-4 and 2-5 we can see that Eastern region is the most popular place for. n. Taiwanese company to conduct their investment. It also has the highest investment amounts. Ch. i Un. v. e nTheg cities c h iwithin the eastern region are also located. compared with the rest of the regions.. along the sea coastal area. This explains its location advantage with easy access to not just the air transportation but also the sea transportation.. And with full development, regions. will provide enough resources and well setup regulation and facility for any newly invested company.. 7. North Region: Beijing, Tientsin, Hubei, Shanxi, NMG; Northeast Region: Liaoning, Chilin, Heilungkiang; Eastern Region: Shanghai, Kiangsu, Chekiang, Anhui, Fukien, Jiangxi, Shantuno; South central Region: Honan, Hupei, Hunan, Canton, Kwangsi, Hainan; Southwest Region: Chongqing, Szechuan, Guizhou, Yunnan, Tibet. 13.

(20) Exhibit 2-5 Taiwan FDI In China By Amount. 50 45 40 35 30 25 20 15 10 5 0. NORTH REGION NORTH EAST REGION EASTERN REGION SOUTH CENTRAL REGION. 立 Region. 政治大WESTERN SOUTH REGION WESTERN NORTH REGION. 學. ‧ 國. Amount (USD 1,000,00). Taiwan Investment in China 2009. Source: Department of Investment Services Ministry of Economic Affairs. ‧ y. Nat. n. al. er. io. 2.2.1 Geographical scope. sit. 2.2 Western Shore Economic Zone. Ch. engchi. i Un. v. Western Shore Economic Zone focuses on Fujian Province as the main geographical areas include Fujian, Fuzhou, Xiamen, Guangzhou, Zhengzhou, Putian, Ningde, Longyan, Sanming, Nanping, Zhejiang Wenzhou, Lishui, Quzhou, Jiangxi Shangrao, Yingtan, Fuzhou, Ganzhou, Guangdong Shantou, Meizhou, Chaozhou, Jieyang and other 20 municipalities and districts.. 14.

(21) Exhibit 2-6 Western Shore Economic Zone Map. 立. 政治大. ‧. ‧ 國. 學. n. al. er. io. sit. y. Nat. Source: 蔣偉志, 義守大學財金所, 海西經濟特區報告, 25/May/2009. 2.2.2 Significance. Ch. engchi. i Un. v. Western Shore Economic Zone located west of Taiwan is separated from the north bearing the Yangtze River Delta and south Pearl River Delta.. It acts as China's coastal economic belt. which is an important component and position for regional economic development strategy. The Western Shore Economic Zone in Fujian Province occupies a principal position. Since Fujian and Taiwan are geographically close to each other, plus the similarity in culture and business, therefore it serves a unique advantage when interacting with Taiwan.. 15. In recent.

(22) years, the Economic Zone in Fujian Province has made rapid improvement towards building of comprehensive strength, in order to lay a solid foundation for any further developments. With numerous changes in recent time in the cross-strait relations 8 development, the Economic Zone provides an important opportunity in carrying out regional cooperation with Taiwan.. The comparative advantage of Fujian Province has supported the Economic Zone. to speed up their construction in order to achieve rapid development of their urgent needs.. 政治大. The coastal economic layout and promotion of investment in the east regions have. 立. strengthened cross-strait exchanges and cooperation between Taiwan & China with great. ‧ 國. 學. economic and political significance.. ‧. n. al. er. io. sit. y. Nat 2.2.3 Strategic Positioning. Ch. engchi. i Un. v. Western Shore Economic Zone has acted as a pretest area in this cross-strait exchanges and cooperation.. By opening up an integrated channel with surrounding areas on the east cost, it. has also become an important base for hi-technology manufacturing.. 8. “連胡發布和平願景；國共新聞公報堅持九二共識，反對台獨”, 王銘義、羅如蘭、邱慧君, 中國時報, 30 April 2005. 16.

(23) 2.2.4 Development Strategy. Western Shore Economic Zone, based in Fujian Province as the main body, the North bearing the Yangtze River Delta, Pearl River Delta, south , East and Taiwan, the West and Guangxi, the surrounding cover Zhejiang, Guangdong, Jiangxi province has a total population of about 6,000 to 8,000 million9.. “According to the Chinese mainland authorities, the GDP. 政治大. output by the Western Shore Economic Zone in 2020 is predicted to be around 4 trillion yuan,. 立. and will be known as mainland China's economic growth "the new engine." The Chinese. ‧ 國. 學. official statistics show a GDP output by the Western Shore Economic Zone in 2008, of 1.89. ‧. trillion yuan, which has an annual growth rate of 12.6% and is much higher than the national. sit. y. Nat. average of 3.6%; Fujian Province alone, had a GDP output value of 1.08 trillion yuan in 2008,. n. al. er. io. a continuous two-digit growth in the past seven years.”10. Ch. engchi. i Un. v. Western Shore Economic Zone has been proposed for several years and finally 17 major Chinese Communist government work reports and the State Department reports support the west coast and the relative concentration of Taiwanese investment in other regional economic development in 2007. This has helped to clear the fog in the air and start to set policy objectives.. In year 2009 the Chinese mainland authorities have clarified the policy to. support all the construction in the Western Shore Economic Zone area. 9 10. “海西特區的商機有多大? “, Marbo weekly magzine, Issue No. 824, Page 2~4 “放眼海西市場尋找新利基”, Trade magazine, Issue No.. 220, 1 October 2009, Page 13~14. 17. In early May in.

(24) 2009 China State Council discussed and approved to support the Economic Zone in Fujian Province to accelerate the constructions of two brand new high-speed railways between Beijing to Fuzhou and Kunming to Xiamen.. This aims to connect the Western Shore. Economic Zone, Yangtze River Delta and Pearl River Delta Region.. And they even. proposed to build a water tunnel to link up Taiwan and Fujian in the near future.. 立. 政治大. Shortly followed by the "Straits Forum" which was held on May 16, China's Taiwan Affairs. ‧ 國. 學. Office Director Wang Yi announced "Eight benefits to Taiwan" 11 , including Chinese. ‧. Company FDI in Taiwan, Taiwan product procurement into China, to promote the. Nat. io. sit. y. establishment of cross-strait consultations and economic cooperation mechanism.. n. al. er. Shore Economic Zone has also been listed as a key development area.. Ch. i Un. Western. Director Wang also. v. pointed out that the objective is to create a Western Shore Economic Zone for the financial,. engchi. logistics and other industries base of cross-strait, which also acts as base with Taiwan economic hinterland.. Furthermore, in order to strengthen capital markets and cross-strait. interaction, Fujian Province has become a first Taiwan's counter trading mechanism, where it set up a "cross-strait Over-the-Counter equity markets".. This will focus on SMEs on both. sides with market capital flows. The China government has made Western Shore Economic Zone the cross-strait exchange where it also act as a testing platform for any new policies... 11. Ibid. 18.

(25) According to China's official policy there is no doubt that Western Shore Economic Zone has become the well known region with its rapid growth. According to a report12 which shows that Western Shore Economic Zone ranked No. 4 in overall strength competition, including the first eight cities in competitiveness rankings, for investment environment and degree of. 政治大 cross-strait trade, but also future 立 cross-strait common market on a trial basis points, for ECFA. "Western Shore Economic Zone is a starting point for the normalization of. 學. ‧ 國. investment risk.. or MOU treaty. Western Shore Economic Zone is an important last piece of puzzle on the. ‧. mainland coast follow by the Pearl River Delta Economic Zone, the Yangtze River Delta. n. al. er. io. sit. y. Nat. Economic Zone and the Bohai Economic Zone.”13. Ch. engchi. i Un. v. Western Shore Economic Zone currently maps out four key industries: infrastructure construction, science and technology, petrochemicals and finance. In infrastructure construction China is very keen in building an underground train system in Fuzhou which started in 2009 and the construction of an expressway between Fuzhou and Xiamen is currently being undertaken. industry will benefit greatly.. 12 13. Therefore Taiwanese firms especially those in the cement For example, Taiwan Cement Co., Ltd. has committed to. “中國大陸地區投資環境與風險調查”, 台灣區電機電子公會, 2009 Kim Ji-Yu, Franklin Templeton investment manager. 19.

(26) supply products for the Fuzhou to Xiamen highway so they are sourcing a location for expansion of a new plant in Fujian.. Taiwan Cement and Fujian Putian municipal. government has signed a letter of intent to invest 6,000 million US dollar to build up a new grinding plant which can produce 4 million tons annually within 2 years time.. 14. On the science and technology side of story, Taiwan's scientific and technological strength is. 政 And治with Hon 大 Hai. an interest for the Fujian Province.. 立. investment in the Xiamen. optoelectronic zone and its plan to link up with the Kaohsiung Software Park in the near. ‧ 國. 學. future, the group's investment funding in Xiamen will amount to 100 million U.S. dollars.. ‧ sit. y. Nat. io. n. al. er. Take a look at the petrochemical industry the Western Shore Economic Zone plans to setup a. i Un. v. petrochemical industrial park in Quangang with a total investment of about six billion U.S.. Ch. engchi. dollars (about NT 1,980 million)15, the output value of which is to be more than 2,000 billion yuan by 2020. ethylene.16. This translates to 2,400 million tons of refined oil and 300 million tons of. Even Formosa Petrochemical has shown their interest in this petrochemical. industrial park located in the Economic zone17.. 14 15 16 17. This means the hidden treasure of Western. “海西投資新路”, 新華商, Issue No. 4, 2009, Page 20 李志強, “海西經濟區對台灣產業的可能影響”, Foundation on Saia-pacific peace studies, http://www.faps.org.tw 江寶章, “臺灣石化整體“西進”大陸打造世界級石化基地”, 人民網, 18 May 2009, http://big5.am765.com “台資卡位海西特區瞄準下波新中概王”, 華夏經緯網, 16 September 2009, http://hk.huaxia.com. 20.

(27) Shore Economic Zone has finally reveal its shine under the sun.. In the financial industries as we all know that “cash flow” is an integral part of economic and trading. By the signing of the Economic Cooperation Framework Agreement (ECFA), the Western Shore Economic Zone will become a part of pilot areas.. Both Cathay Financial. 政治大 Fubon Financial holding has 立a branch in Xiamen. President Securities Corporation has. Holdings and Taiwan Life Insurance have set up a subsidiary office in Fujian Province.. ‧ 國. 學. representative offices in Fujian18.. These companies have become the stakeholders once the. ‧. financial Memorandum of Understanding (MOU). As for the insurance market, the level of. sit. y. Nat. competition is still relatively low in the Western Shore Economic Zone in comparison to. io. n. al. er. Beijing and Shanghai.. Ch. engchi. i Un. v. From the macro perspective, the Western Shore Economic Zone didn’t just benefit the Taiwanese companies.. It also means Taiwanese companies can participate in regional. economy. In the future, "Pingtan Island" will provide a special tariff to Taiwan; this means any product which is imported from Taiwan will be tax fee here.. 18. 葉慧心, “國泰、富邦、台壽海西搶建灘頭堡”, 經濟日報, 11 April 2010. 21. Meanwhile in 2010,.

(28) mainland China and ASEAN19 began to provide zero tariffs on trade between countries, if Taiwan export goods via the “Western Shore Economic Zone" zero-tariff commercial port first and then imported into the ASEAN countries.. This means Taiwan can also enjoy the. competitive advantage of an “ASEAN Member Status”, which opens a wider door for Taiwan.. 政治大. Exhibit 2-7 How To Enjoy The Tax Free Trading Into ASEAN. 立. ‧ 國. 學. Nat. n. al. er. io. sit. y. ‧. Taiwan. Goods ship to China via Pingtan Island with special tariff. i n CChina U hengchi. v. ASEAN. Once goods arrive into China then shipped to ASEAN with zero tariffs. 19. Association of Southeast Asian Nations. 22.

(29) Western Shore Economic Zone is keen to work together with Taiwan because of its competitiveness in the following three areas: financial (funds), human resource & talent (technical) and industry (machinery).. However, Western Shore Economic Zone fosters the. petrochemical industry and steel making. This result clearly will reward a lot of Taiwanese companies but at the same time how to balance the huge Western Shore Economic Zone magnet effect will be an issue.. 立. 政治大. ‧ 國. 學. 2.3 Labor Contract Law of the People's Republic of China. ‧. Since a series of staff-sacking scandals in many companies, a new labor contract law in the. sit. y. Nat. n. al. er. io. People's Republic of China was put in effective from 1 January, 2008. 20 This new. i Un. v. administration law is under the supervision of the Ministry of Human Resources and Social. Ch. engchi. Security of the People's Republic of China.. 2.3.1 Definition. According to the new 98-article-long "Labor Contract Law", employees who have been with the same employers for at least 10 years are entitled to contracts that protect them from being 20. “China's new labour law 中國新勞動法”, The Economist, 26 July 2007,. 23.

(30) dismissed without cause. The new law also requires employers to contribute to employees' social security accounts and sets wage standards for employees on probation and working overtime.21. Most of the foreign companies had a stronger track record of signing contracts with their employees while comparing with the local companies. This act of the foreign companies. 政治大. brings to China their global work rules and environmental, health and safety practices.. 立. ‧ 國. 學 ‧. 2.3.2 The Impact for Overseas investors. sit. y. Nat. io. n. al. er. The Chinese government has moved to protect employee abuse and stepped up to protect all. i Un. v. the Chinese workers. Right after the new labor law which has been announced to be effective. Ch. engchi. from 1 January, 2008, it has created a lot of hot air for the FDI companies.. Because it would. cause massive increase in costs22 and headaches for them as the Chinese law firms are eager to sue foreign investors for breach of contract on behalf of the Chinese employees.. Some. predictions were saying it might become the cause of the end of foreign investment into China.. 21. “China’s New Labor Contract Law Provides More Protection for Employees”, Cadwalader, Wickersham & Taft LLP, July 20, 2007 22 Hui Celia “The New Labor Contract Law of the People’s Republic of China Significantly Increases the Enterprises’ Cost”, PKF International, March 2008. 24.

(31) 2.4 Raw material: Polyvinyl chloride materials This material is used in our daily life in mainly packing material such as water bottle labels, security safety seals on pharmaceutical or food products, and special bundle promotion. With its affordable prices and easy access & use of the material, its demand and popularity have increased around the world.. 政治大. 立. 2.4.1 Definition. ‧ 國. 學. Polyvinyl chloride, commonly known as “PVC” or “vinyl,” is one of the most common. ‧. synthetic materials. PVC is a versatile resin and appears in thousands of different. y. Nat. n. er. io. al. sit. formulations and configurations.23. 2.4.2.Pros & Cons. Ch. engchi. i Un. v. PVC production began rising rapidly in the 1960s, particularity in Asia and Latin America. Today more than 30% of the world chlorine production is used to produce PVC.24. 23. “Alternatives to Toxics in Construction”, Center for Environmental Health and the San Francisco Department of the Environment, January 2000 24 “PVC – The poison plastic”, Greenpeace organization, http://www.greenpeace.org. 25.

(32) PVC has been used to replace a wide range of materials such as glass, metal, paper, ceramics, and wood. But at the same time PVC is one of the world largest sources of dioxin25, Due to the manufacturing process, the production wastes are likely to contain high levels of dioxins.. PVC resins are created from petroleum and as we know, the petroleum demand is increasing around the world.. 立. As a result, this put pressures on the plastic manufacturing companies, since. 學. ‧ 國. simultaneously.. 政治大. Therefore as the price of the petroleum goes up the resin will increase. they will need more cash flow to sustain their requirements to purchase large amounts of the. ‧. raw materials.. n. er. io. sit. y. Nat. al. 25. Ch. engchi. i Un. v. “Dioxins and their effects on human health “, World health organization, November 2007. 26.

(33) Chapter 3: Case study: New Solid International Corporation This chapter begins with the general introduction of the Xiamen and case company, New Solid International and then follows the research framework to observe where the plant been set up in Xiamen, the types of benefits granted by their investment and the barriers from China’s change of labor law and green awareness that the company is facing.. The in-depth interview. 政治大 The gap and issue from literature. results and secondary data are analyzed and examined.. 立. review are discussed in the research finding in the later chapter.. ‧. ‧ 國. 學. 3.1 Xiamen. y. Nat. al. er. io. sit. Xiamen is a beautiful scenic port city, it has won the "International Garden City", "National. n. Sanitary City", "National Garden City", "National Environmental Protection Model" and. C26 h. "National Excellent Tourism City". engchi. i Un. v. award. Xiamen has lots of beautiful scenery and pleasant. climate, and was awarded the "UN Habitat Award"27 by the United Nations in 2004 and became the world's number four “City Most Suitable for Human Habitation in the World”28. Xiamen is located on China's southeast coast, with a total area of 1573 square kilometers, a. 26 27. “Xiamen”, Xinhua News, http://www.huaxia.com Kenya Nairobi, “UN-HABITAT names 2004 Scroll of Honour winners “, Unhabitat organization, 4 October. 04 28. 中國經濟學教育科研網, 19 September 2005, http://www.cenet.org.cn. 27.

(34) population of 2.43 million29, and is one of China's five special economic zones and foreign trade port of China's leading international investment ports. After 20 years of reform and development, Xiamen Special Economic Zone has now formed within itself a special economic zone for Taiwanese investments.. 政治大. There are four major sightseeing areas in Xiamen City - Gulangyu, Nanputuo, Wan Shiyan,. 立. Jimei; and a water cruise line and other attractions. Gulangyu is a national key scenic spot, its. ‧ 國. 學. name came about from what sounds like the drumming beats when the high tidal waves. ‧. crashes against a cave on the island south-west,.. There is one famous temple which is located. y. Nat. al. er. io. sit. in the urban southeast - Wu Laofeng Nanputuo Temple, the temple worshiping the Goddess of. n. Mercy to the main Also south of Putuo Mountain in Zhejiang Province, hence the name.. Ch. engchi. i Un. v. The Xiamen port is one of China's top ten ports, to which it ships over 40 countries and over 60 ports in different regions. Xiamen is also a major aviation hub in East China, with a numbers of routes available for domestic and international purpose available.. Direct flights available. are to Singapore, Malaysia, Philippines, Thailand, Japan, South Korea, Hong Kong, Macao and. 29. “The Social and Economic Development in Xiamen”, Xiamen Municipal Government P.R. China, 2008, p3. 28.

(35) other places30. Xiamen also has all the modern communication facilities and convenient traffic options.. Xiamen City located in Fujian Province, south west side of Taiwan, and is only 165 sea miles31 from Kaohsiung, Taiwan. This beautiful coastal city is also a well-known hometown of. 政治大. overseas Chinese, Taiwanese, Hong Kong and Macao compatriots living abroad. Xiamen and. 立. Taiwan have a close blood relation, location convenience with the similarity of native language. ‧ 國. 學. which has become an important base for cross-strait economic and cultural exchanges.. ‧ y. Nat. al. er. io. sit. Xiamen industrial structure is shaped up focusing on the petrochemical sectors such as. n. polyester, Polyethylene Terephthalate (PET) and (PVC) products. Moreover electronics, and. Ch. engchi. i Un. v. electrical appliances equipment, machinery, and metallurgic products, new building materials, bio-pharmaceutical and other light industrial products industries here have a considerable scale.32. 30 31 32. “Port of Xiamen”, World Port Source, http://www.worldportsource.com “Indirect cross-Straits transport causes loss”, China Daily, 1 September 2007 “Doing business in Fujin”, Minstry of commerce of the peoeple’s republic of China, http://english.mofcom.gov.cn. 29.

(36) Exhibit 3-1 2007 Xiamen Economic Indicator Categories. Units. Year-on-year Growth. RMB 100 Million. 1375.3. 16.1. Total RMB 100 Million industrial-output value of Enterprises that Yields over 5RMB million Annually. 2736.1. 17.8. 政治 8117.2 大. 10 thousands tons. Container Throughout. 10 thousand TEUs. 462.7. 10 thousand. 845.7. Total Imports Values USD 100 million. 142.3. Total Export Values USD 100 million. 255.5. io. n. al. Number of newly approved foreigner projects. PCS. Ch. 21.3. y. 397.8. Nat. Total value of Export USD 100 million and Import. 15.9. sit. Airport Passenger Throughout. 15.3. ‧. ‧ 國. 立. 12.5. 學. Volume of Freight Handled at ports. er. Gross Domestic Product(GDP). 2007(Year). n engchi U 474. iv. 15.8 24.6 -16.4. Contractual Foreign USD 100 million Capital. 32.7. 41.6. Utilization of Foreign Capital. USD 100 million. 12.7. 33.2. Fiscal Revenue. RMB 100 Million. 348.6. 30.4. Local Fiscal Revenue RMB 100 Million. 186.6. 37. Total investment in RMB 100 Million fixed assets. 927.7. 40.1. Total retail sales of consumer goods. 362. 15.0. RMB 100 Million. 30.

(37) Per Capita Annual RMB Disposable Income of Urban Households. 21503. 16.2. Per Capita Net Income of Rural Residents. 7637. 11.2. RMB. Source: Xiamen Municipal Government,P.R.China. From Exhibit 3-1 we can see that Contractual Foreign Capital rank first place with growth of. 政治大. 41.6. While Total investment in fixed assets rank second with growth of 40.1 this means most. 立. of the FDI investment retained in Xiamen as fixed assets will assist with local development. ‧ 國. 學. instead of other assets. Local Fiscal Revenue also increases by RMB 3700 Million, which was. ‧. top three from all economic indicators.. er. io. sit. y. Nat. al. n. 3.1.1 Two FDI Cases in Xiamen Tsann Kuen & Fei peng. Ch. engchi. i Un. v. The following section will be examining two Taiwanese enterprise cases which invested in Xiamen as a bench mark to our case study.. 3.1.1.1 Tsann Kuen – Household appliances businesses Tsann Kuen(燦坤), a Taiwan funded enterprises, is one of the first few companies which have invested in mainland China.. Its success story has become one of Taiwanese legend.. 31.

(38) In June 1993, Tsann Kuen’s subsidiary in China, "Xiamen Tsann Kuen Industrial", was approved by the Beijing Ministry of Foreign Trade and Economic Cooperation, and became the first wholly foreign-owned B shares33 of listed companies.34. Like most of the manufacturing sector on the island in the 20th century, established since early 1980s, Tsann Kuen in Taiwan has experience in technical, financial, management, and. 政治大. marketing. But due to land, labor and other limitations in Taiwan, the enterprise has faced. 立. ‧ 國. 學. their bottleneck in company development. The founder Mr. Wu admitted that due to the rich resources and market, easy access to labor, low wages and cheap to set up production bases in. ‧. mainland China, he decided to setup the Xiamen Tsann Kuen in 1988. Mr. Wu said that the. sit. y. Nat. n. al. er. io. major key to success for Tsann Kuen is "A good decision to enter the mainland market with his family to give him a peace of mind”35. Ch. engchi. i Un. v. Tsann Kuen has created its own brand called "EUPA" and it has become a well kwon brand in the small household appliances market.. Tsann Kuen was planning to introduce its travel. agent named “Startravel” by the end of March 200936. First they will be set up office and store. 33. “Where company registered and listed both in the Chinese mainland, but investors were from abroad in Hong Kong, Macao and Taiwan.” Uni-infornet Tech. Co., Ltd., http://www.steelnet.com.tw 34 燦坤實業股份有限公司, http://www.tk3c.com.tw 35 “廈門燦坤：臺商在祖國大陸寫下的一部傳奇”, 新華網, 8 July 2002, http://big5.xinhuanet.com 36 燦星旅遊網旅行社股份有限公司, http://www.startravel.com.cn. 32.

(39) in Northeast, Shanghai and Fujian Province.. 3.1.1.2Fei peng - yachts businesses Pan Shi Jian(潘世建) the vice Mayor of Xiamen City said the yacht industry has unique advantages in Xiamen, therefore they are fully into promoting and developing the yacht. 政治大. industry by setting up a yacht manufacturing center on the west cost.37 A lot of companies in. 立. the Taiwan yacht manufacturing industry has begun to shift their manufacturing into the. ‧ 國. 學. Western shore economic zone region, including Tang long(唐榮), Han shing(瀚盛), Fei. ‧. peng(飛鵬), and other Taiwanese yacht related enterprises have also settled in Xiamen.. er. io. sit. y. Nat. al. n. In 2008, Xiamen City and its yacht manufacturing sector have experienced rapid export growth.. Ch. engchi. i Un. v. With eleven well known brands, the yacht manufacturing enterprises output more than 400 million yuan.38. Meanwhile export amounts of 3,600 million U.S. dollar39 were mainly to. Europe and the United States, Hong Kong and Southeast Asia. Xiamen Feipeng enterprise is an export-oriented foreign-owned enterprise which was. 37. “打造遊艇新基地台商進廈門海西遊艇製造中心唐榮、飛鵬已入駐“, 《旺報》工商財經數位股份有限公司, 王超群, 6 April 2010 38 “廈門將打造成新游艇王國＂, 財匯資訊, 中國船舶網 7 April 2010, http://www.chinaship.cn 39 Ibid. 33.

(40) established in September 1992. zone.. It’s located in the Jimei District Xiamen Taiwan investment. The Feipeng business consists of 7 companies located in two industrial areas (Xiamen. Sky Bird Industrial Park and Changtai Xingtai Industrial Zone) with a total investment of 89.6 million U.S. dollars and more than 6,000 employees40. largest-scaled enterprises in Xiamen. of the company's products.. 立. Feipeng is ranked as one of the. The inflatable boats, fishing boats, yachts are just some. 政治大. ‧ 國. 學. 95% of Feipeng’s products are exported to the United States, Canada, Europe, Japan and other. ‧. countries and regions41. The life jackets are used on most of the domestic airlines in China.. y. Nat. al. Granted the ISO9001 42. er. io. sit. The inflatable boats are compliant with international standard.. n. certification, in-house Research & Development center can also provide tailor made solutions to suit customers’ requirements.. Ch. engchi. i Un. v. From the above two cases we can see that their investment location was all chosen to be in Xiamen.. But currently none of them are in the petrochemical sectors; therefore it makes our. case study more unique and valuable.. 40. 飛鵬企業, http://www.xmfeipeng.com “廈門飛鵬工業有限公司＂, 中國制造網, http://www.made-in-china.com 42 It’s an quality management systems which matches with International Organization for Standardization, http://www.iso.org 41. 34.

(41) 3.2 Company Overview New Solid International Corporation (New Solid) was founded by Mr. G about 20 years ago. At first it was started as a simple trading company for PVC packaging materials. But as time goes by they found that it’s too hard for the local corporate plants to keep up with the high demand and requirements from their customers. Therefore they have decided to set up their after some extensive research they 政治 And 大. own factory to produce PVC materials themselves.. 立. have found out foreign direct investment will be a good option for them.. This is due to the. ‧ 國. 學. fact that the wages in Taiwan have risen a number of times around that period and also tighter. ‧. labor laws in place require the employers to provide employees with a certain amount of. y. Nat. io. sit. After comparing the pros and cons of investing in some countries in Asia. al. er. leaves annually.. n. like Vietnam, Indonesia and China, their final decision is to invest in China.. Ch. engchi. i Un. v. New Solid has a machinery factory in Taiwan which is located in Taoyuan and it focuses on producing packaging banding machinery and some in-house machinery.. Today they have. over 250 employees who are working for New Solid and its group of companies.. Their. Kaohsiung head office plays an important role as it is a center for contact with customers and liaison with its group of companies.. Exhibit 3-2 and 3-3 illustrate the company’s. organisational chart and the workflow with in the groups of companies.. 35.

(42) Exhibit 3-2 Enterprise Tree Map. Solid Groups of companies. New Solid International Corp.. Solid Packaging Machinery Inc.. 立. Kaohsiung, Taiwan. Xiamen Solid Plastic Technology Co.. 政治大. Taoyuan, Taiwan. Xiamen, China. Melbourne, Australia. ‧. ‧ 國. 學. Nat. Order placed. n. al. New Solid Corporations. Ch. er. io. sit. y. Exhibit 3-3 Workflow Within The Group. Customer. Solid Australia Pty. Ltd.. engchi U. v ni. Work order produced. Feedback on due date. Booking shipment. Xiamen Solid Plastic Shipping company Goods ready with in house QC. 36.

(43) 3.3 Investment Location In year 2003, New Solid has setup a factory in Xiamen, where it’s close to the coast and has easy access to the harbor for export and shipping purposes. Plus at that time “three mini link” has been in practice for sometime, this means business people can conduct business activities much easier because now they can go to Xiamen by boat via Kinman Island.. 立. 政治大. The plant is located in Torch (Xiang'an) Industrial Park.. The companies who domicile in this. ‧ 國. 學. part enjoy some excellent benefits given by the Xiamen Government such as low rental fees. ‧. on the land and special tax rates. In the year 2007 the government states that any enterprise. y. Nat. al. In. er. io. sit. located within the industrial park will be granted with a lower income tax rate of 15%.. n. addition, it will be tax free for the first and second year, and only need to pay 7.5% income. Ch. i Un. i e nIfgany c hraw. taxes from the third to the fifth year.. v. materials are purchased locally then. additional tax benefits will be taken into account accordingly.. The government also set up. branch offices inside the industrial park which provide all the enterprises with one stop service in a range of areas including banks, tax office, custom and bonded logistics center.43 There are also living areas inside the park where apartments, shops and cinema are located.. 43 “Xiamen Torch (Xiang'an) Bonded Logistics Center ready for trial run”, echinacities.com, Jan 16 2009, http://www.echinacities.com. 37.

(44) 3.4 Products & Environment The packing materials produced by New Solid are widely seen in today’s day to day life, such as the printed labels on drinking bottles, the clear plastic cover on the magazine, safety seals on medication bottles such as vitamin C, brand new DVDs with clear covers and cosmetic safety seals and more.. 立. 政治大. New Solid has intended to become the leader in the market of the packaging materials.. With. ‧ 國. 學. their annual output value of about 3,500 million yuan, of which 70% are sold overseas (such. ‧. as Unite Sate of America, Australia, Unite Kingdom and South east Asia), and 30% are. y. Nat. n. er. io. al. sit. domestic supplies to the mainland market.44. Ch. engchi. i Un. v. Since the plant is mainly making packing material for food & beverages, pharmaceuticals and medical industry, the clearness & the safe use of the raw materials have become an important issue.. They have therefore implemented high standard environmental clean rooms in the. same grade as a semiconductor plant.. That is all ground are coated with green epoxy touch; all the three main entrances are. 44. “方國雄：大陸是對我最具親和力的地方”, XinHuanet, 1 September 2006 http://news.xinhuanet.com. 38.

(45) equipped with air shower. Any person entering the plant must put on plant-specific shoes, and dusted through the air shower to maintain a spotless working environment which is dust free throughout the whole plant.. This has helped the plant to acquire the Unite state of. America FDA 45 grade to meet their customers’ special requirements.. With this high. standard of cleanness, New Solid is able to receive orders from well know companies such as. 政治大. Unilever, Kraft, Ovaltine and Coke-Cola.. 立. ‧ 國. 學. 3.5 Barriers & Obstacles. ‧. In the following paragraphs we will be seeing obstacles that New Solid had faced after setting. y. Nat. n. al. er. io. sit. up a factory in China and examine further on the cause of those barriers.. Ch. engchi. 3.5.1 Significant impact on labor law. i Un. v. Before the day that China’s new labor law became effective, New Solid started to take various actions to ensure its compliance with the law and at the same time try to avoid any possible legal actions.. The fact is the new labor law will apply to all employees, it doesn’t matter. how few employees a company has even if it only had one. significant penalty if they failed to comply with it.. 45. Abbreviation for Food and Drug Administration. 39. New Solid would face a. As the laws say that employees would be.

(46) able to claim up to double of their current salary for months worked up to a maximum of 12 months if they have not signed a contract.. In the past most of the employee signed short-term contracts, which means New Solid can terminate the contract at any time for a valid reason.. But now with the new labor law in. 政治大. place, it is no longer possible as it forces New Solid to sign a maximum of two years contract. 立. with their employee, as if their employees continue to work for New Solid till expiration of. ‧ 國. 學. their second term contract. New Solid can demand to sign an “open term contract”46 with. ‧. the employees and the company can only terminate the contract under certain circumstances. y. Nat. al. er. io. sit. such as incompetence, serious violations of internal rules, gross negligence and fraud, this. n. means that once the open term contracts are signed then it becomes employment for life.. Ch. engchi. i Un. v. Also the law has set some restrictions on the probation periods of the new comers.. During. the probation period their wages must be no less than 80% of the contract wage. Furthermore, a single probation period of 6 months maximum is allowed for a single employer.. 46 The employee is employed until he chooses to terminate the contract or reaches retirement age. Harris Dan “China's New Labor Law -- It's A Huge Deal. Huge I Tell You”, China law for businesses, November 11 2007. 40.

(47) The new law also clarifies that only senior management and other employees with access to critical trade secrets can be requested to enter into non-competition agreements.. This. agreement also limits a duration of two years and by a geographic scope to a reasonable area and that New Solid must pay their employees a compensation for the non-compete provision to remain effective.. 政治大. 立. As the law has shifted this power from employer to employee, which allows employee to sue. ‧ 國. 學. and seek damages from New Solid if the terms of the contract are violated. “Chinese. ‧. er. io. al. New Solid will require more then just extra costs to. sit. Nat. law to vigorously enforce them.”47. y. workers are increasingly aware of their rights, and they’re likely to take full advantage of this. n. ensure its compliance with the new labor law but also additional human resource to deal with any possible future disputes.. Ch. engchi. i Un. v. 3.5.2 Banning of Polyvinyl chloride (PVC) materials PVC causes an environmental issue as it’s not easy to recycle or reprocess and it poses a concern for human health risk.. PVC packaging often contains lead and cadmium, which are. known to cause health issues.. Therefore many countries like European Union and Japan. 47. Echer Keith, “Empowering the People”, Summit Business Media, 1 October 2007.. 41.

(48) have banned the use of PVC for packaging materials in their countries. During the past year, within the European Union the use of the PVC in the packaging industry has declined dramatically.. Also there's the environmental damage caused by PVC through both its production and disposal.. 政治大. PVC leaches dioxin, which is known as carcinogen48 and it contains phthalates49,. 立. both will pollute the environment.. According to Californians against Waste it will pose a. ‧ 國. 學. serious human health hazard.. ‧ y. Nat. al. er. io. sit. But the chemical industry states the consumers are in love with the PVC materials because it’s. n. cost-effective, versatile and if compared with other types of packaging it requires less energy to produce.. Ch. engchi. i Un. v. "Suggestions that PVC is a toxic material are not supported by credible. scientific information"50. 48. “Carcinogens are agents that can cause cancer. In industry, there are many potential exposures to carcinogens. Generally, workplace exposures are considered to be at higher levels than for public exposures. Material safety data sheets (MSDSs) should always contain an indication of carcinogenic potential.” United states department of labor, http://www.osha.gov 49 Substances added to plastics to increase their flexibility, transparency, durability, and longevity. “Plastic can be dangerous (due to leaching of BPA & Phthalates)”, 7 December 2009 50 “Bill would ban PVC packaging”, Shestek Tim, American Chemistry Council, 12 July 2008, http://www.vcstar.com. 42.

(49) Many people argue that PVC is very costly because it cannot be mixed with other plastics in the recycling process. "It's often confused with plastic No. 151 because of the similar uses and gets mixed in with those batches," said Edgar Rojas of the California Integrated Waste Management Board. huge problem.. And if they get mixed up in the recycling process this will causes a. "One bottle cap made of PVC is enough to ruin a batch of 10,000 PETE. 政治大. (No. 1) bottles, which may lead to further environmental damage, since that ruined batch must. 立. then go to the landfill" said Bryan Early, spokesman for Californians Against Waste.. ‧. ‧ 國. 學. Many major European supermarket chains such as SPAR, BILLA, ADEG (Austria), IRMA. y. Nat. have totally eliminated PVC food packaging.52. n. al. Ch. engchi. er. io. sit. (Denmark), TENGELMANN (Germany), Ica, Konsum and other Swedish supermarket chains, This will affect New Solid’s exporting. i Un. v. business into the Europe Union as they have limited use of any PVC packaging products.. Others are in the process of phasing out PVC in the packaging industry. For example: Waitrose (Unite Kingdom), Migros and Co-op (Switzerland), Ito-Yokade Co (Japan) and many other supermarkets and convenience stores are eliminating PVC wrapping. Many big water bottling companies, such as all of the Nestlé owned brands, have phased out PVC water 51 52. Common recyclable plastic but PVC is labeled No. 3. And mixing them up in the recycling process causes problems “PVC free solutions”, Green peace organization, http://www.greenpeace.org/. 43.

(50) bottles and labels. Also non-food retailers such as The Body Shop (cosmetics) and IKEA (furniture) have long ago eliminated PVC packaging53. “In 2009, legislation was introduced in the state of California to ban PVC packaging.”54. As more and more countries are banning PVC due to the environmental, recycle and health. 政治大. issues, this has put New Solid into an unstable ground as only limited countries allow the use. 立New Solid will need to seek an alternative packaging material. of PVC packaging material.. ‧ 國. 學. to replace its current market and bring itself back to the solid ground.. ‧. n. er. io. sit. y. Nat. al. 53 54. Ch. engchi. i Un. Ibid “PVC Policies Across the World”, Center for Health, Environment & Justice. 44. v.

(51) Chapter 4: Research Findings & Recommendations This research examines how SMEs adjust their strategies and regulation according to the outside external factors from either the law or their customer requirements.. The first session. of this chapter will cover research findings such as why the company chose Xiamen as an investment location, how the change of labor law affected and the side effect of the global banning of PVC on the company.. 立. Finally,治 suggestions for future research addresses the 政大. possible observation blind spots and prospective direction for further study will be made.. ‧. ‧ 國. 學. 4.1 New Solid investment in China. y. Nat. er. al. n. 1.. io. follow:. sit. New Solid has chosen China as a place of investment and it can be considered as a pull force as. Ch. engchi. i Un. v. Largest growing domestic market in the world: China has over 1.3 billion population and with its economic hinterland, China has great potential and advantage to provide New solid with lower labor costs, better investment environment, large market demand and raw material availability. Although some Southeast Asian countries might have the similar market structure or investment policy and labor costs as China, but the size of its economy and development ability or their domestic market are still too small in comparison to. 45.

(52) China. New Solid are looking to enhance its scale of enterprises and to maximise their profits by exercising in a huge domestic market, economic strength and investment in China 2.. Large scale infrastructure: Infrastructure plays an important role in a country or provinces’ economic development. With highway road network connecting Xiamen and. 政治大. other provinces, and water tunnels being built from the industrial zone to the downtown. 立. Xiamen city which make commuting very convenience. ‧ 國. 學. 3.. Attraction to China’s labour force: If we compare with Taiwan the labour cost in. ‧. Xiamen is considerably cheap.. Especially for New Solid who is in a labour intensive. y. Nat. al. er. io. sit. industry, they can save more than half the costs hence the finish products can be more. n. price competitive in the market. 4.. Ch. engchi. i Un. v. China offers preferential tax to Taiwanese foreign investment:. Due to the fact that. China has been striving to attract more foreign investment among local governments, Xiamen government is keen to offer any Taiwanese investment project with lower income taxes and rental land costs. 5.. Similar background between China and Taiwan: The religion, people, historical tradition and ethical culture and language plus local dialect are the same. So New Solid invested in China as there is almost no language gap. And in Xiamen they can receive cable. 46.

(53) signals from Taiwan, this actually makes New Solid feel like being at home.. Even though New Solid invested in China for the reasons of the cheaper land, labour and other cost advantages, but with recent changes of labour law, property law and a series of law refinement, all the benefits might change accordingly. We can foresee that by the near future. 政治大. China’s legal regulation will soon catch up with Europe and the United States. New Solid needs. 立. to see the bigger picture that China won’t be so eager for foreign investments or require. ‧ 國. 學. foreign exchange cash flow, but realise the fact that New Solid needs to adjust itself to. n. al. er. io. sit. y. Nat 4.2 The new labor law. ‧. China’s changes, by changing their state of mind and concepts.. Ch. engchi. i Un. v. Before Jan 2008, New Solid has reviewed all the existing employment contracts to assess liabilities, including new employment contracts to be offered to future staff.. New Solid has. some leeway for dismissal of or terminating staff, however these have be correctly identified and signed off by both New Solid and its employee.. An example can be constant late. attendance of an employee; this can result in a dismissal offense if this rule has been identified with definitions and disciplinary procedures contained in the New Solid employment handbook.. 47.

(54) Most of the machineries in their Xiamen plants are semi or fully automated expect for the preform department.. In this department the machinery are mainly conveyers and heat. tunnels for preforming purpose and the rest of the job are all done by hand.. This means they. will require a great number of workers in order to get the job done. In Exhibit 4-1 shows the distribution of employees in the plant.. 立. 政治大. 學. ‧ 國. Exhibit 4-1 Distribution Of Employees Engineering. Extrusion. Cutting. Preform. Admin55. Number of. 6. 25. 10. 50. 10. al. er. io. sit. y. Nat. Employees. n. Source: New Solid International Corporation. 55 56. ‧. Department. Ch. engchi. Abbreviation of Administration Abbreviation of Quality Control. 48. i Un. v. QC 10. 56. Shipping. Total. 10. 121.

(55) Exhibit 4-2 Employees Distribution Chart No. of employee require in each department. Engineering Extrusion Cutting Preform Admin QC. 立. 治政Shipping 大. ‧. ‧ 國. 學. Source: New Solid International Corporation. n. al. If they can lower the number by adding a fully automatic. er. io. in their preform department.. sit. y. Nat. As we can see from the above table and pie chart, nearly 50% of the employees are working. Ch. i Un. v. production line, which means by purchasing a few automatic banding and preform machines. engchi. from their machinery plant in Taoyuan, this will help the company to first lower the wages expenses and resources in recruitment, then secondly the company can release the tension of the new labor law since the number of employee can be reduced significantly.. "The failure to maintain an employee handbook means that an employer will effectively be unable to discharge employees for cause, since “cause” must be determined with reference to. 49.

(56) the employee handbook."57.. Therefore we would highly recommend New Solid to maintain. their employee handbook and keep it up to date. It will set up the basic rule and regulations for all the employees. And without an employee handbook employer will be unable to fire any employee who breaches the rules and regulations.. 4.3 New materials to replace PVC. 立. 政治大. About 60% of New Solid’s products are exported in to United states, while 30% to Australia. ‧ 國. 學. and 10% to other countries.. As more and more customers in United States start to request. ‧. sit. io. al. At the moment New Solid offers their customer PET58. n. products, but they are not made in house.. Ch. er. Nat. both market and customer demand.. y. for more environmental packing materials, New Solid sees the urgent needs to comply with. After the R&D team’s evaluation, it will require a. engchi. i Un. v. brand new machinery to produce PET and normally it’s triple of the costs of the currently machinery.. Therefore extruding materials have been purchased from Japan then imported. into China. This has actually increased more cash flow and man power requirements for New Solid.. 57. Ching Mia Kuang, “CFO guide to doing business in China”, Page 110 A thermoplastic polymer resin of the polyester family and is used in synthetic fibers; beverage, food and other liquid containers; thermoforming applications; and engineering resins often in combination with glass fiber., Ashley Skinner, Kelly Cree, Hye-yeon Cho, Borami Kang, “Sustainable Packaging Research”, P14. 58. 50.

(57) During their R&D process they have found that PET’s characteristics are not as friendly as PVC, it requires higher temperature during packaging process, special ink during printing and an unique glue for sealing.. So they call PET a “Noble environmental material” since it. requires a lot of special treatments. As a result New Solid is searching for a material which is not just environmental friendly but also has similar characteristics as PVC and can be. 政治大. produced in-house with only few machinery adjustments.. 立. ‧ 國. 學. PET, OPS59 and PLA60 are the three materials to replace PVC in the food and packaging. ‧. industry after the ongoing public and scientific PVC debate.. er. io. sit. y. Nat. al. n. Exhibit 4-3 Plastic Identification Code Type of plastic. Ch. engchi. Properties. i Un. v. Common Packaging Applications. polymer. Polyethylene. Clarity, strength, Soft drink, water and salad dressing. Terephthalate (PET,. toughness, barrier to gas bottles; peanut butter and jam jars. PETE). and moisture.. 59. Abbreviation for Oriented polystyrene A biodegradable, thermoplastic, aliphatic polyester derived from renewable resources, “Biodegradable Plastics from Renewable Resources “, A. Demirbas, Energy Sources, Part A: Recovery, Utilization, and Environmental Effects, Volume 29, Issue 5 January 2007, pages 419 - 424 60. 51.

(58) Versatility, clarity, ease of Polyvinyl Chloride blending, strength,. Juice bottles; cling films; PVC piping. (PVC) toughness.. Egg cartons; packing peanuts; disposable Versatility, clarity, easily Polystyrene (PS). cups, plates, trays and cutlery; disposable formed. 立. 政治take-away 大 containers. Source: Wikimedia Foundation, Inc.. ‧. ‧ 國. 學. “PET itself is biologically inert if ingested, is safe during handling and is not a hazard if. sit. y. Nat. io. n. al. er. inhaled. No evidence of toxicity has been detected in feeding studies using animals. Negative. i Un. v. results from Ames tests and studies into unscheduled DNA synthesis indicate that PET is not. Ch. engchi. genotoxic. Similar studies conducted with monomers and typical PET intermediates also indicate that these materials are essentially nontoxic and pose no threats to human health.. It is important to stress that the chemistry of compounds that are used to manufacture PET shows no evidence of oestrogenic activity. There is a significant body of evidence that demonstrates that the use of PET is not a concern and is perfectly safe in this respect.”61. 61 Packaging Materials: 1. Polyethylene Terephthalate (PET) for Food Packaging Applications. International Life Sciences Institute; 2000, Washington, DC, p. 11.. 52.

(59) PET has become a demanded secondary resource, since it can be fully recycled and remade in to new products in many industries such as high-quality carpets, oils, care spare, packaging for detergents.. Its versatility has become one of the main strengths which is difficult to be. replaced by any other materials.. 政治大. Exhibit 4-4 Life Cycle Of PET Material. 立. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v. Source: Life Cycle Assessment of PET (Polyethylene Terephthalate) bottles and other packaging alternatives. 53.

(60) Exhibit 4-5 Life Cycle Of OPS Material. Source: SUNDIC Incorporated. 立. 政治大. ‧ 國. 學. “Like other plastic containers, containers made from OPS can be recycled and reused for. ‧. n. al. er. io. sit. y. Nat. reprocessed resins and recycle plastic fuel.”62. Ch. i Un. v. PLA is an environmental friendly biodegradable material which is made from corn starch (in. engchi. the U.S.) or sugarcanes (rest of world).. This created a great amount of the attention in the. past few years in the food packaging materials.. Since PLA has the advantage to be produced. from the renewable resources, it provide significant savings in energy and its recycling ability. Until 2009 PLA is still the most advanced type of packaging application for dairy and soft drink products.. 62 63. Since PLA is made of corn starch, it’s therefore an eco-friendly63 alternative. “What is OPS”, SUNDIC Incorporated, http://www.sundic.co.jp Stands for Environmentally friendly, nature friendly, and green. 54.

(61) if we compare it with a petroleum based plastic film such as PET, OPS and PVC.. Unlike. those films, PLA is naturally biodegradable; it can be expected to create a new trend in the packaging materials.. Exhibit 4-6 Plastic Recycle Table. 政治大. Recycling. 立. Abbreviation. number. ‧ 國. Polyethylene. Polyester fibres, thermoformed sheet, strapping, and soft. terephthalate. drink bottles. Polyvinyl chloride. Pipe, fencing, and non-food bottles. y. n. al. PS. Ch. sit. PVC. io. 6. ‧. PET. Nat. 3. Uses once recycled. 學. 1. Polymer name. er. Image. i Un. v. i accessories, cafeteria trays, plastic utensils, toys, e n g c hDesk. Polystyrene. video cassettes and cases, and insulation board and other. expanded polystyrene products. Other plastics,. 7. OTHER or O. including polylactic. acid. Source: Wikimedia Foundation, Inc.. 55. Biodegradable.