With the sharp increase of labor disputes, labor–capital relations in China have gained greater public attentions. While China’s private entrepreneurs have begun to participate in various political activities, workers have been defenseless in a market economy. Faced with this situation, the Hu–Wen regime introduced the controversial Labor Contract Law of the People’s Republic of China in 2008, with a view to constructing a “harmonious society”. This paper focuses on the trend for business associations to become interest groups, and, at the same time, investigates whether or not trade unions can expand their role to serve as enterprise-level interest groups. The discussion is based on a survey of private entrepreneurs in Wenzhou, Zhejiang Province undertaken in fall 2008. The survey was conducted at three districts (Lu Cheng, Long Wan and Ou Hai), two county-level cities (Le Qing and Rui An), and two counties (Tai Shun and Cang Nan). These samples were selected based on clusters such as the size and variety of industry. The survey included 393 random samples, and the response rate was 64.1%. To address the debate on the relationship between the size of business associations and political participation, this paper set the size of enterprise as an independent variable. The paper found that a much higher proportion of large-scale private entrepreneurs, compared to small-scale entrepreneurs, take part in the Chinese Communist Party (CCP), the local level of the People’s Congress (PC) and the People’s Political Consultative Conference (PPCC), and also business associations. They are beginning to expand their channels and to express their voices. However, strategically, business associations offer some selected incentives for small-scale entrepreneurs. As a result, business associations are beginning to become interest groups in order to articulate their interest. On the other hand, trade unions in large-scale enterprises tend to be associational in nature with direct election of cadres, but are dependent on the enterprise especially on financial issues. Generally speaking, trade unions at the enterprise level have to get permission from the management to manage their own affairs. Most of them lack autonomy and subsequently cannot be considered as interest groups. However, the large-scale private enterprises began to discuss with workers after 2008 Labor Contract Law. In fact, this disproportionate development of strong capital and weak labor cannot be deviated from the Chinese state corporatism. It’s a on going process which is leading the CCP to maintain sustainable economic growth.
This paper examines financing approaches employed by Taiwanese thin film transistor liquid crystal display (TFT-LCD) manufacturers using the case of AU Optronics Corp (AUO). First, AUO’s cumulative capital expenditure was estimated at about NT$520 billion, based on its financial statements and the number of production lines. Then it was confirmed that AUO resorted mainly to banks and equity markets for such funds, with corporate bonds playing only a limited role in its funding strategy. AUO’s approach contrasts sharply with many other Taiwanese businesses, which depend more on the domestic corporate bond market. Next, the paper analyzes AUO’s strategy and its external environment, which were the main factors in strengthening the company’s ability to raise funds. The analysis produced the following findings. In its initial phase of business, AUO (then Acer Display) used the guarantee of its parent BenQ to draw out huge bank borrowings. This is one type of inter-firm credit within a business group, which helped reduce credit risk on the part of the banks. By limiting group credit to collateralized bank borrowings, the parent and the subsidiary aimed to make the TFT-LCD division financially self-dependent. Meanwhile, AUO turned to the equity market for further funds, while retaining bank borrowings. The company went public on the Taiwanese equity market mainly to finance the fourth-generation production line it desperately needed. By being listed on the equity market, AUO became able to recruit excellent human resources through a stock option program. The company got listed on the New York Stock Exchange apparently to fund the fifth- and sixth-generation television-panel facilities. To list itself on the New York market, AUO needed to make its accounting practice conform to US standards and give preliminary briefing sessions to global investors. These opportunities helped the company to accelerate its restructuring and strengthen its visibility on the international markets. AUO’s strategy was partly sustained by a variety of external factors. The potential of Taiwan’s TFT-LCD market, the development of the equity market, and fierce competition among banks and securities companies due to financial liberalization helped strengthen the status of AUO and other businesses seeking to finance capital investment. AUO’s listing in 2000 on the Taiwan stock market was realized by the government’s easing of the listing regulations on hi-tech businesses. AUO has successfully raised as much as NT$520 billion by strengthening its money-raising ability through skilfully balancing direct financing with indirect financing, while using the credit strength of its parent and taking advantage of the government’s business incentive and the external environment, including intense competition in the domestic financial market. AUO’s spectacular growth cannot be described without taking these factors into account, in addition to its aggressive capital investment policy and diversification of its line of application products.
Under the reform and opening-up policy, reform of the banking system began in earnest in China in the mid-1990s with the growth of the economy. By converting to joint-stock corporations and listings, commercial banks in China underwent rapid change in their ownership structures. Nowadays, not only do state-owned banks exist, but private-owned and foreign-investor-owned banks have also appeared. In these turbulent days, some issues are becoming increasingly important to China, due to the country having a bank-centered financial system: what are the statuses of the banks’ owners and borrowers? What is the relationship between them? Obviously, many studies of China’s banking system have been undertaken. However, nobody has so far performed an empirical analysis on microdata such as the equity shareholders or banks’ borrowers because of insufficient data. During the process of converting to joint-stock corporations and listings, commercial banks in China have in recent years finally started to publish their information. This paper selects 67 commercial banks that published annual reports in 2006 in China, compiles the top 10 owners, top 10 borrowers and other related data for each bank, and empirically analyzes these data in detail. From the analysis, the following conclusions are drawn. China’s system of infrastructure investment is unique, compared with those of other countries. It partly results from the ownership of commercial banks in China, which is mostly by central government, local governments or state-owned enterprises. Chinese central government authorizes local governments to make investment decisions concerning infrastructure; local governments fulfill this investment themselves or call on state-owned enterprises. However, infrastructure funds mainly come from bank loans rather than government treasury. Hence, we can say that the economic growth model of China has two aspects. Firstly, China is a central-government-controlled economy, as conventionally understood based on the role of central government in the macro-economy, such as interest and exchange regulation, planned economy, etc. On the other hand, according to the analysis presented above, China’s economic growth is actually led by local government investment.
Although it is generally considered that the decision to adopt China’s reform and opening-up policy was taken in December 1978, and started substantially from 1979, I contend that the beginning of the opening up-policy in the insurance industry was as early as 1972. The People’s Insurance Company of China (PICC) began to establish contact with several US insurance companies in the same year, and at that time, the Chinese government had decided to carry out business exchange with several sympathetic US insurance companies. Japanese insurance companies also revived business contact with China, and sealed a mutual claim agency agreement with PICC. In 1980, PICC set up a joint venture with an US insurance company abroad and the US insurance company planned to start an insurance business in China to exploit this vehicle, though at that time the Chinese government had no plans to admit it. It was only after Japanese and US insurance companies had set up their representative offices in Beijing that the Chinese government granted a business license to an US insurance company in Shanghai in 1992. In the early 1990s, the Chinese government firmly recognized that the domestic insurance industry had a short history and weak foundations; therefore, the government had no plans to open its own insurance market. This was because the domestic insurance business, which comprised the core of the Chinese insurance market, had been suspended for twenty years from 1959 to 1979, and therefore totally lacked a business base. The priorities of the Chinese government were, first, to restart the business of PICC, and, second, to diversify domestic insurance companies. The Tian’anmen incident of 1989 and the subsequent feud between China and the USA influenced the opening of the Chinese insurance market. The Chinese government gave a business license to the US American International Group in 1992 on a trial basis. This was a signal that the Chinese government would continue the opening-up policy and conduct the opening-up of the financial sector. China hoped this occasion would stimulate normalization of Sino-US relations. When China opened its insurance market to foreigners, one characteristic was that the government promoted the participation of domestic insurers in the market in order to allow them to prepare fully before opening-up occurred. This characteristic can be observed both before the first opening in 1992, and before the second opening in 1995. Secondly, when the Chinese government granted licenses, countries of diplomatic importance to China received favorable treatment. On this latter point, it was particularly obvious that China adopted a pro-US foreign policy. After China entered the World Trade Organization in 2001, the Chinese government changed its insurance policy from one which placed emphasis on respecting the diplomatic balance, to a policy of granting licenses in order to secure the profits of domestic insurers.