Taiwan Special Section - Oct 10, 2014

Covering The Multicultural Asian American Community in Georgia

www.gasiantimes.com

October 10, 2014

TAIWAN

Special Report The Double Tenth Day is also known as the National Day of Taiwan.

In conjunction with the celebration, Georgia Asian Times present a special report on the island republic economic and bilateral relationship with the state of Georgia, the Taiwanese diaspora in metro Atlanta, an insight of its tea industry, and an overview of Taiwan’s bicycle industry.

Page 2

October 10, 2014 Georgia Asian Times

Georgia Asian Times October 10, 2014

Page 3

TAIWAN SPECIAL REPORT

Taiwan and Georgia Economic and bilateral ties Over the past decade, Taiwan has evolved from an island dominated by farmers and fishermen to a nation where heavy industry and manufacturing has started to give way to high-tech businesses and services.

Exports have grown even faster and since World War II, have provided the primary impetus for industrialization.

Inflation and unemployment are low; the trade surplus is substantial; and foreign reserves are the world’s fourth largest.

Agriculture contributes 3% to GDP, down from 35% in 1952, and the service sector makes up 73% of the economy.

Traditional labor-intensive industries are steadily being moved off-shore and replaced with more capital and technology-intensive industries.

Taiwanese investors and businesses have become major investors in mainland China, Vietnam, Thailand, Indonesia, the Philippines, and Malaysia.

The tightening of labor markets has led to an influx of foreign workers, both legal and illegal.

Taiwanese companies are still the source of many of the world’s high-tech products, but these days the emphasis is on innovative design and R&D. The island’s export orders are led by electronics, machinery, and petrochemicals have provided the primary impetus for economic development.

This heavy dependence on exports exposes the economy to fluctuations in world demand.

It’s tech manufacturers design and churn out many of the parts and products found in smartphones, game boxes and personal computers.

The latest iPhone is packed with parts made by Taiwanese tech component makers and assembled by major contractors including Hon Hai Precision Industry Co Ltd. in China.

Taiwan’s economy charted a better-than-expected 3.14 percent on the year in the first quarter 2014, based on official numbers. The improved growth reflected increased exports, improved retail sales, tourism spending, and domestic consumption.

Since coming into office in 2008, the administration of President Ma Ying-

jeou has put much of its emphasis on fostering better cross-strait relations, looking to closer ties with the booming Chinese market to help spur economic growth in Taiwan.

The result has been most evident in the tourism sector. For years, Taiwanese travelers flocked to China for business and sightseeing, but barriers on both sides blocked traffic in the other direction.

Now Chinese visitors – mainly in tour groups but recently individual travelers as well – are helping to balance the tourism flow, bringing welcome business to Taiwan’s hotels, restaurants, shops, and tour-bus operators. Of the 7.3 million foreign visitors to Taiwan last year, 2.5 million were mainland Chinese.

Inbound tourism in general, long neglected in favor of manufacturing, is now being promoted more heavily as a non-polluting industry that contributes to easing the over-reliance on exporting.

Although Chinese tourists are the most numerous at popular sights such as Sun Moon Lake, Taroko Gorge, and the Taipei 101 skyscraper, Taiwan is

also attracting increasing numbers of visitors from Japan, Korea, Hong Kong, and Southeast Asia.

The driving force behind Taiwan’s rapid growth has been foreign trade, and Taiwan’s economy remains export-oriented.

In 2005, China overtook both Japan and the United States to become Taiwan’s largest trading partner. Crossstrait trade expanded 16.7% year on year in 2013 to US$197.2 billion.

According to Taiwan’s Bureau of Foreign Trade, in 2013 Taiwan exports to the U.S. totaled US$32.56 billion, while Taiwan imports from the U.S. totaled US$25.20 billion.

The U.S. is currently Taiwan’s third largest trading partner, and Taiwan is ranked as the U.S. 12th largest trading partner.

Imports consist mostly of agricultural and industrial raw materials and energy, while exports include electronics, consumer goods, high-end textiles and fibers, chemicals, and machinery equipment.

Trade between Taiwan and Georgia

Page 4

October 10, 2014 Georgia Asian Times

TAIWAN SPECIAL REPORT totaled $1.7 billion in 2013. Georgia exports to Taiwan improved by 5 percent. Taiwan is currently Georgia’s 16th largest export market.

“Georgia has also become a destination for Taiwanese companies involved in machinery, plastics, food manufacturing, auto parts, and tires manufacturing clusters,” said Steven Tai, Director General of Taipei Economic and Cultural Office in Atlanta.

Taiwanese companies are attracted to Georgia for its dependable transportation logistics, interstate network, and warehousing infrastructure.

Some of the manufactured goods in Georgia are being shipped back to the Asia Pacific market. There are currently nine cargo flights weekly departing from Atlanta to Taipei.

Work on Atlanta’s airport aerotropolis, a mixed use development designed for offices, retail, and entertainment, is gaining momentum. The project has caught the attention of international companies including German automaker Porsche to locate its North American headquarters at the site.

Taiwan is also developing its aerotropolis complex - Taoyuan Aerotropolis is planned as a major transport hub and industry center for Asia with infrastructure for corporate research and development,logistics, conference centers and other facilities.

There have been discussion for mutual cooperation between the two projects and a senior delegation from Taoyuan Aerotropolis is expected to visit the Atlanta site by 2015, according to David Wang, Economic Director at Taipei Economic and Cultural Office in Atlanta.

In late November 2013, Taiwan was admitted to the U.S. visa waiver program which allows Taiwanese visitors to U.S. without visa for ninety days.

“With the visa waiver program, there has been a 32.5 percent increase in outbound travel from Taiwan to U.S. Over 400,000 visits the U.S. last year,” adds the Director General.

Influx of Taiwanese visitors to U.S. meant positive news to Georgia’s economy as it is trying to promote its tourism to the Asian Pacific market.

“There has been an increased effort to promote academic and cultural exchange between Taiwan and Georgia,” said Director General Tai.

Students are able to take advantage of alternative studies and earn double diploma thru the cooperation.

Taiwan is also actively promoting its cultural presence at several major Georgia cultural festivals such as Cherry Blossom Festival in Macon, Atlanta Dogwood Festival, and Winter Wonderland Exhibit at the Fernbank Museum of Natural History.

“We are confident these effort will put Taiwan on the minds of mainstream Georgians. It will likely evolved to positive understanding and mutual benefits,” adds Director General Tai with a broad smile.

A memorandum of understanding was recently signed between Georgia State University and Feng Chia University to promote academic cooperation.

Taiwanese community and diaspora in metro Atlanta In the 1970s to 1980s, Georgia was a haven for Taiwanese immigrants and college students. Taiwanese immigrants relocated to Georgia for fresh opportunities as many have started small business in restaurants, real estate and insurance agencies, and retail business. College students were attracted to value education provided

by Georgia Institute of Technology and Georgia State University. At its peak the Taiwanese diaspora was approaching 70,000 individuals living in Georgia.

Georgia is presently home to about 30,000 Taiwanese immigrants, making them among the fourth largest Asian immigrant group in the metro Atlanta area. Although they share some of the same characteristics as the Chinese and Hong Kong born, Taiwanese immigrants are counted separately from them. Also, the group is likely undercounted as some Taiwanese born have identified themselves as “Chinese” in the race category of census forms.

Many Taiwanese left home as students in the 1960s and 1970s. A large number stayed because the United States offered opportunities that Tai-

wan did not, as well as democracy and freedom at a time when their homeland was still under political repression.

By the late 1970s, those who had settled in the United States had brought their families over. The Taiwanese American community has since developed a strong diaspora identity, keeping both political and business ties between the United States and Taiwan.

Fast forward to today’s demographic breakdown, the latest Census from 2010 data shows the Taiwanese diaspora has shrunk in numbers.

“Many have retired and have moved back to Taiwan and the young students have stopped coming to university here,” said Dr. Ray Wang, a long time resident and a senior researcher at Georgia Institute of Technology’s School of Earth and Atmospheric Science.

Over the past decade, reverse immigration was the trend due to Taiwan’s quality and affordable healthcare. Fewer Taiwanese students are attending overseas universities due to cost and

alternative options available locally. “Students in Taiwan have better choices in terms of graduate schools locally. Young people prefers to stay closer to home and their friends,” adds Dr. Wang.

The main challenge facing the Taiwanese diaspora in Georgia is to bridge the cultural “gap” facing the young Taiwanese Americans who were born in this country.

“Taiwanese parents are hoping their kids will be able to speak and read the Chinese language. Also, they would like their kids to be understand their own cultural heritage and identity,” said Dr. Wang.

Six privately-funded schools are operating in metro Atlanta on the weekends offering language and cultural classes to young students. Four of these schools are non-religion affiliated and the rest are Christians, Buddhist, or Taoist based.

These schools have received subsidized support from the Ministry of Education in Taiwan in the forms of textbooks and instructional trainings.

Teachers are sent to the U.S. from the Ministry for assignments.

Community leaders are encouraging high school and college students to be involved with community related activities.

Local Taiwanese diaspora are active in various traditional celebrations such as Chinese New Year, Mid-Autumn Mooncake Festival, and Dragon Boat Festival.

These celebrations are designed to promote cultural celebration and heritage understanding especially to the younger generation.

Business and trade associations such as Monte Jade Science and Technology Association and local Taiwanese Chambers of Commerce are promoting young leaders under 40-years category to encourage younger participation.

A new chapter of Taiwanese Chamber of Commerce was established recently in Gainesville, Georgia to serve business membership located in Gwinnett and northern Georgia counties.

Georgia Asian Times October 10, 2014

Page 5

TAIWAN SPECIAL REPORT Global sales and branding

Taiwan’s bicycle world

Growing demand for low-price bikes with retail prices under 100 dollars caused a marked shift of such contract production for overseas brands to China. Many Taiwanese bicycle makers and suppliers also moved production to China. As a result, Taiwan’s bicycle exports plummeted to about 3.9 million units in 2003 -- down from about 10 million units in 1991.

Instead of engaging in a race to the bottom, Taiwan’s largest bicycle makers instead ceded the low end of the market to China and began shifting their focus to mid and high-end bikes.

The specter of the industry’s imminent hollowing-out prompted executives at Giant to come up with a crisis

The ministry said Taiwanese manufacturers’ efforts to focus on mid and high-end bicycles have paid off, with the average selling price of products rising steadily since 2004. The prices also increase after many manufacturers have turned to use lighter materials, such as carbon fiber, titanium, magnesium and aluminum, rather than steel in their bikes.

During the first seven months of the year, the average selling prices of Taiwan-made bicycles for overseas sales rose 7.4 percent from a year earlier to US$442 per bike, the data showed.

By Andrian Putra

Taiwan’s history with bicycles goes back to the early 1970s, when the island earned the nickname the “Bicycle Kingdom” after its exports increased sharply thanks to original equipment manufacturer deals with companies such as Schwinn. The label held true in the 1980s when Taiwanese production overtook Japan’s, although production flagged in the 1990s amid a strengthening of the New Taiwanese Dollar and the onset of competition from mainland China.

Statistics compiled by the Taiwan Bicycle Exporters’ Association indicate the US, the Netherlands and the UK were the top three export markets for Taiwan’s bicycles by value last year, followed by Australia, Germany and Japan.

plan. They called on arch rival Merida along with parts makers to create a consortium of 11 companies called “A-Team.” Together, they studied Toyota’s manufacturing system intensively, incorporated key points and doubled efforts to improve product quality and production efficiency. Giant actively provided its manufacturing know-how with member companies -- who benefited largely from this partnership. The partnership efforts helped uplift the overall level of the bicycle industry.

In addition, a large number of bicycle companies and component makers — totaling 658 companies, upstream (raw materials/components and parts), middle stream (assembler) as well as downstream firms (distributors and retailers) — have clustered in the Greater Taichung and Changhua areas, according to the Taiwan External Trade Development Council.

Such clusters typically occur in industries marked by rapid product and technological change, often seasonal, such as textiles or computer parts. The firms in them are small and highly specialized, performing only the manufacture of one part, or one step in the product manufacturing process.

Typically the industry is export-oriented. Clustering has been demonstrated repeatedly to have all sorts of positive effects, speeding technology development and dissemination, lowering search and information costs, and so on.

Taiwan abounds in such clusters. In the north, there is the massive computer industry cluster. In Taichung, there is a sporting goods cluster. In San Chung outside Taipei, there is a cluster of mold and die and machine tool firms. Central Taiwan is also home to Giant, the largest bike maker on earth.

While most Original Equipment Manufacturer (OEM) orders were transferred to bicycle manufacturers in China, Taiwan’s bicycle manufacturers and bicycle component manufacturers took advantage of their technical expertise and manufacturing technology to build their own brands.

For example, Maxxis is the largest bicycle tire manufacturer in the world;

“We decided to leave the low-end bicycles to mainland (Chinese) makers and instead focus our energies on products sold for more than $200,” a senior A-Team official said. This strategy of selection and concentration increased per-unit prices and drove up export value sharply. Export per bicycle for 2013 totaled $451, roughly triple the figure for 2003.

The number of Taiwanese companies in A-Team has now increased to 20.

The team continues to make efforts to improve production efficiency and technology by taking turns to share manufacturing sites and processes to other members every month.

A technician inspecting the quality of bicycle at Giant manufacturing facility.

Page 6

October 10, 2014 Georgia Asian Times

the roller chain made by KMC accounts for 70% of world market share; bicycles made by FSA are highly favored in Europe; and the bicycle brakes made by PROMAX, particularly its mechanical disc brakes, account for 90% of world market share.

Over the years concerns have arisen that China and other low-wage nations would start to hollow out Taiwan’s bicycle industry¬—that high-value production would shift elsewhere, trimming costs and boosting manufacturing margins.

Ironically, Chinese consumers—who account for 30 percent of global bicycle demand—are some of Taiwan’s biggest customers. Sales of high-end bikes in China tripled from 1 million units in 2008 to 3 million in 2013 as the population grew wealthier and sought high quality bikes for commuting and recreation.

“Taiwan will continue to be a hub for bicycles, components and accessory manufacturing,” Stan Day, SRAM’s president and CEO. SRAM is also a member of Taiwan’s A-Team, a consortium of key manufacturers that control a significant portion of the industry’s production in Taiwan and China.

SRAM whose factory in Taichung churns out much of the company’s highest-value products ranging from RockShox forks to drivetrains.

Going forward In general, the industry—including U.S. retailers—face new challenges as global demand for bicycles, components and accessories undergoes what could be a generational shift. Nonetheless Taiwan, with its intense cluster of factories, highly skilled workers and logistical know-how, will remain a dominant player in the global industry.

“They have this natural advantage with a compact manufacturing center and vendor base in such a small radius,” he said. As for key production shifting away from Taiwan, it’s unlikely given Taiwan’s advantages.”

Georgia Asian Times October 10, 2014

TAIWAN SPECIAL REPORT Insight to Taiwanese tea industry

By Andrian Putra The Taiwanese tea industry originated on the Chinese mainland. Settlers from Fujian and Guangdong provinces brought tea seed across the straits to the island and established the first tea gardens.

The earliest official records of a tea “industry” appear at the end of the 17th Century. In many respects, tea cultivation was a frontier activity: as tea grows best on cool, misty hillsides, aboriginal forests were cleared for its cultivation. Small peasant families sharecropped on the edge of the Han civilization and were often involved in fighting with the indigenous people.

Tea growing was but a minor adjunct to the subsistence rain-fed farming in parts of the north of the island. By the mid 19th Century, there was little hint that this would become a boom export industry by the end of the century.

As in so many other countries, the British had a significant impact on the development of tea as a commercial enterprise in Taiwan. A key date was 1865, when John Dodd, a British merchant who had based himself on the island the previous year, started taking a serious interest in the tea trade. He imported plant cuttings from Fujian and distributed them to farmers in Tamsui district.

Dodd set up a tea factory to produce a more carefully processed finished product. The chosen type of tea was Wulong (Oolong) which is a semi-fermented tea with a slightly astringent flavor but a quite remarkable sweet aroma. The tea was very well received and, in 1869, Dodd used the trademark “Formosa Tea” for the first direct shipment to New York. Exports of this tea increased rapidly both to the U.S. and Europe where it had the reputation of being the “champagne” among teas.

Between 1880 and 1910, overseas shipments of Formosa oolong tea accounted for more than one-half of Taiwan’s export-driven economy.

Formosa premium tea also won several awards in France, Italy, Java Island, Panama and the U.S. from 1900 to 1939.

Taiwanese tea can be divided into non-fermented (green tea); partially fermented (oolong tea, Paochung tea and Pomfong tea); and fully fermented (black tea). These varieties had been exported all over the world, thereby helping Taiwan earn considerable foreign exchange.

Taiwan is the world’s only producer of Pomfong tea, also known as the Baihao Oolong Tea grown in Hsinchu and Miaoli counties. This high-quality, fruity brew was very popular in Western markets. It is said that this tea was called champagne oolong by French people and dubbed “Oriental Beauty Tea” by Queen Elizabeth II of England because she loved the special aroma and taste after just one sip.

During its 50-year rule of Taiwan, the Japanese government aggressively expanded tea farming areas, established an evaluation system which determined export-quality products, founded a tea testing body, and helped tea farmers upgrade their processing equipment. These measures laid the foundations for the development of the tea industry.

The government, however, suppressed the export of Taiwan green tea for the benefit of Japanese green tea.

This policy encouraged tea farmers to grow black tea instead of green tea.

Tea has been considered the national drink in Taiwan for centuries and Taiwanese tea farmers have been proud

Page 7

Page 8

TAIWAN SPECIAL REPORT

of their tea-producing skills. Since the nineties, they have been offering eco-tourism, home-stays, tea arts and cultural activities on their farms in order to help boost the industry.

Mainland China was subject to trade embargoes during the 1950s and 1960s, and during this period Taiwanese tea growers and marketers focused an existing, well-known varieties. After the mainland’s products became more widely available and the market for teas became more competitive, the Taiwanese tea industry successfully shifted its focus to producing specialty versions, especially of Oolongs.

A government Tea Inspection Office grades teas into 18 categories ranging from Standard to Choice. 17,384 tonnes of tea were produced in 2008.

The government-supported Tea Research and Extension Station, established to promote Taiwanese tea in 1903, conducts research and experimentation.

Major tea growing areas in Taiwan: Northern Taiwan: Includes Hsindian, Pinglin, Mucha, Shenkeng, Shidian, Sanhsia, Nangang, and Yilan.

Mid-central Area: Includes Miaoli, and Hsinchu.

Eastern Taiwan: Includes Taitung, and Hualian.

South-central Taiwan: Includes Nantou, Pingtung, Chiayi, Taichung, and Yunlin.

High Mountain Regions: Includes Alishan, Yu Shan, Hsueh Shan, and Taitung mountain ranges.

High quality of Taiwan teas is due with several factors. Perhaps, the most important of these is the unique climate of Taiwan. Taiwan’s climate is subtropics zone, and the mountainous terrain provides ideal conditions for the growth of tea.

High mountains, the cool, moist air slows its growth, and this in combination with fertile soil gives the unique properties of tea leaf, here it is - one of the best in the world. Taiwan has its own well-established traditions of tea processing, adapted to local conditions.

In the 1980s, the tea-drinking population and tea consumption rose sharply in Taiwan as its economy advanced. Coupled with the active promotion of tea culture, consumers began to place more emphasis on the art of tea and became selective about its quality. Consequently, the tea industry in Taiwan shifted its focus from export to internal consumption.

No wonder, the Taiwanese people say: “There are friends and tea - so you’re rich.”

October 10, 2014 Georgia Asian Times