A history of Taiwan-China economic ties, by Shelley Rigger

Society & Culture

Taiwan was the engine that powered China’s transformation into a global economic superpower, the scholar Shelley Rigger writes in her new book, "The Tiger Leading the Dragon: How Taiwan Propelled China's Economic Rise." She appeared on the Sinica Podcast to discuss the history of cross-Taiwan Strait economic ties.

taiwan tiger china dragon
Illustration by Derek Zheng

[Editor’s Note: Below is a complete transcript of the Sinica Podcast episode with Shelley Rigger, Brown Professor of Political Science at Davidson College in North Carolina.]

Kaiser Kuo: Welcome to the Sinica Podcast, a weekly discussion of current affairs in China produced in partnership with SupChina. Subscribe to SupChina’s daily Access newsletter to keep up with all the latest news from China from hundreds of different news sources, or check out all of the original writing on our site at supchina.com. We’ve got reported stories, editorials, regular columns, as well as a growing library of videos and, of course, our podcasts. We cover everything from China’s fraught foreign relations to its ingenious entrepreneurs, from the ongoing repression of Uyghurs and other Muslim people in China’s Xinjiang region to China’s ambitious effort to eliminate poverty. It’s a feast of business, political, and cultural news about a nation that is reshaping the world. We cover China with neither fear nor favor.

I am Kaiser Kuo, and I am coming to you from my home in Chapel Hill, North Carolina. In this time of heightened tensions between the P.R.C. and Taiwan, and, by extension, the United States, it’s perhaps a good time to reminisce about better days across the Taiwan Strait and remind people of Taiwan’s critical role in the story of China’s post-Mao modernization — a rise that I think Chinese people are rightfully proud of, but that was, I think, accelerated dramatically by Taiwan in a way that often goes unremarked upon. When we tell the story of reform and opening in China, it is very important, therefore, to give due credit to Taiwan.

For most of the 20 years I lived in China, from the mid-’90s until 2016, I often heard that there were, in any given year — it was always the same number, always — a million Taiwanese, Taiwan Tongbao, as they were called, living on the mainland, and why that number never actually changed and why the notion that we’ve what, 4 or 5 percent of the entire population of Taiwan actually living in the P.R.C., why that number wouldn’t be greeted with a little bit of skepticism, I don’t know, but the actual source of that number was ever mysterious to me. But whatever the case, there’s no doubting that there was a considerable influence. It was a massive influence. And whether we’re talking about the culture, the way that fashionable people talked, all this stuff — Taiwan was punching way above its weight and it was obvious anywhere you looked. In business. You name it. Taiwanese investment, though it was pretty hard to measure, was clearly of enormous significance.

But perhaps even more important was how Taiwanese entrepreneurs in China, those famous Taishang, helped China to become the factory to the world to integrate into the global supply chain, and then to ascend the value chain with increasingly higher-value-added businesses. So today on Sinica, we are going to be talking about Taiwan’s substantial indeed, probably decisive contribution to China’s meteoric economic rise. And to tell us all about that, I am just absolutely delighted to welcome Shelley Rigger. Shelley is Brown professor of political science at Davidson College, just outside of Charlotte, North Carolina, a couple of hours from me down I-85. Shelley is a leading… hell, she is the leading scholar on modern China, though that of course is not her only focus. She teaches and has written extensively on the P.R.C. as well. She puts all of this to really good use in a new book called The Tiger Leading the Dragon: How Taiwan Propelled China’s Economic Rise, which we will of course focus on today. Shelley Rigger, welcome to Sinica.

Shelley Rigger: Well, thanks so much for having me. I’m a huge fan, big listener, and just really excited to be with you.

Kaiser: Oh, fantastic. Well, you’ve been with us before, I should probably remind people, although we didn’t actually get to talk. Listeners of the show will recall that Sinica actually ran a two-parter with Shelley that had originally run on my very good friend, Neysun Mahboubi’s, excellent podcast for the University of Pennsylvania Center for the Study of Contemporary China. That podcast, in spite of its length, offers, I still think, one of the most succinct, factual, and frankly, enjoyable histories of Taiwan really from pre-17th century through early 2019 when it was recorded. So, anyone who is interested in getting a refresher on Taiwan that is refreshingly free of ideological spin, but also just peppered with all sorts of fun turns of phrase and memorable metaphors, which Shelley is… that’s her stock in trade, as you’ll see. You should go back and listen to that one. It’s from March of 2019.

So Shelley, it’s just so great to have you. You opened the book with a preface that, I think, really captures a lot of the story that the book tells, and it captures it in microcosm. It’s the story of the Futai Umbrella Group, which was started by a Taiwanese man named Chen Tian-fu. I think it just sets the stage so nicely for the book, and I thought maybe the story of Futai would serve the same function on this podcast. So tell us about this guy, Chen Tian-fu, and how he came to truly be the umbrella king.

Shelley: Right. So at the end of World War II, he was, like many other young Taiwanese, desperate for employment, looking for something to do, and he went into the fruit business. He was a banana guy, and he actually worked for the banana king of Taiwan. And so he was helping to export fruit from Taiwan to Japan. And unlike a lot of other entrepreneurs in Taiwan and everywhere, he had some vision and imagination. And he thought, just trying to get these bananas to their destination before they turn brown and cheap is not my destiny as a businessman, and I want to try something else. And so, he went into the umbrella business.

Kaiser: As one does, yeah.

Shelley: As one does, especially in Taiwan which a lot of places are really rainy. So there’s a big market for umbrellas. This was also a moment when technology was improving really rapidly, so there were these umbrella companies in Japan that were making advanced umbrellas for the time and he said, “I’m going to bring this to Taiwan.” And so he started out manufacturing for others and then he, little by little, mastered the processes of manufacturing. So first putting together a frame that is imported from Japan and assembling it to the nylon cover, and then learning how to do the frame, and then learning how to pull the metal to make the frame. And so little by little, he became a full manufacturer of umbrellas. And the umbrella industry moved from Japan: Japan’s marching up the value chain to higher and higher value-added products, and some of that lower-end stuff like umbrella making, is moving to other places and the umbrellas moved to Taiwan. So he gets better and better at that, then he branches out into a bunch of other things.

Kaiser: Bicycle spokes.

Shelley: Yeah. Parts for bicycles, parts for all kinds of stuff, aluminum capacitor covers, I’m not even sure I know what that is, but it’s this pretty diversified business. And then he started making umbrellas for export under other brands. So he got contracts with American companies to make umbrellas for sale in the U.S. So his business begins small in Taiwan, grows to be sort of import substitution industrialization in Taiwan, and then through the contract manufacturing process becomes an export-oriented business. And grew and grew and grew, he becomes the owner of many, many patents. So the first self-folding umbrella and then the first four-way self-folding umbrella, all of these patents are held by Futai Umbrella Company. So it’s also doing R&D. It’s not just a factory, it is a genuine innovator in the umbrella space.

And then the next thing that happened was in the late 1980s when costs of production in Taiwan were getting really high, like many other industries, the umbrella industry looked to Mainland China as a manufacturing base with a much lower cost structure that would allow them to continue to do the same thing for the same international clients at a much lower price. So, that is the story in a nutshell of the Futai Umbrella group that, there’s probably one in your closet.

Kaiser: Right. There are several, including the four-way folding umbrella. It’s not just in a nutshell the Futai Umbrella group, but it’s also in a nutshell… It’s almost too on the nose to be believable, but it’s a perfect metaphor. And listeners, as we go through the story, you’ll see every element of it is already there, present in the story of the Futai Umbrella Group. But before we plunge into the broader story of the rise of the Taishang, I wanted to bring up some insightful points about China and Taiwan, and what you call the sort of “psychological distance” between them. So Chen Tian-fu, he was born in, I think it was 1926. This is when Japan still occupied China, of course, after the Treaty of Shimonoseki in 1895, China ceded, the Qing dynasty ceded Taiwan to Japan. And for the next 50 years, they occupied Taiwan and operated it as a colony. Now the war didn’t end until he was, what, 18 or 19, so he would have learned Japanese in school along with his native Minnan Chinese. And what I think was fascinating was… and this is something that, again, I think a lot of mainlanders don’t grasp, is that for that entire period, for the entire… I mean, look, think of the events between 1895 and 1945 that they missed out on. Right? We’re talking about the Scramble for Concessions, the Hundred Days Reforms, the boxer uprising, the early Qing reforms or the late Qing reforms. They miss out on the 1911 Xinhai Revolution, and the Second Revolution, and the Third Revolution and Yuan Shikai, Yuan Shikai’s death, the Warlord Period. The whole thing. I really liked that phrase psychological distance, that you call it.

Shelley: Yeah. Modern Chinese nationalism was forged almost precisely between 1895 and 1945. Taiwanese were just not there for it. They were in an entirely different social, economic, linguistic, cultural, and political space. There was an awareness, I’m not saying that people in Taiwan were clueless or not paying any attention, but this was not their experience.

Kaiser: The way you put it in your book was, “it’s hard for mainland Chinese to understand how the Taiwanese can be unmoved by this history.” That’s true. I think that this is a point of resentment. I think that if people understood that, if they understood more about the Taiwan experience, I think they would extend a little bit of damned empathy.

Shelley: Yeah. Well, it’s particularly inflammatory when it’s people like Lee Teng-hui, who was Taiwan’s president from 1988 to 2000. Lee Teng-hui was a member of the KMT, the Kuomintang, the Nationalist Party, and he paid lip service to unification, but I don’t think China was… I think China was an abstraction for him. He never went there in his entire life. He was born a Japanese citizen, he spent time in Japan, he was involved in World War II on the Japanese side. He became Chinese as a fully-fledged adult, he became a citizen of the Republic of China. I just really think that, for him and for people of his generation, China was this abstraction. It was a thing they had to pay lip service to in order for Taiwan to survive and thrive, but that consciousness is so inflammatory to Chinese nationalists both in Taiwan and in the PRC, because they just say, “How dare you? How could you?” But of course, you and I look at this history and we think about it from the perspective of people like Lee Teng-hui and think, how could he not?

Kaiser: Yeah. It’s not his fault. It’s just not his fault.

Shelley, the book, I have to say, is also really refreshingly free of methodology and quantitative analysis. I’ve just gone through a period where I’ve read many, many books that are excellent. They’re excellent books, but they are really chock full of that stuff. So you deploy the stats that you need, when they help to tell the story better, but this is, at its heart, just a good old narrative account of a fascinating and not well-understood phenomenon. But I think some people will be understandably frustrated by the lack of some of the basic numbers around this phenomenon. I mean, how many of these Taiwanese business owners were there? What about the total amount of their investment and how that tracked over time, or the number of employees working for Taiwan-invested enterprises. What are the reasons why none of this seemingly basic data is available at all?

Shelley: Yeah. That is a great question. And first of all, I just want to say, it is such a privilege to work at a place like Davidson College where our… The expectation of teacher-scholars here is that we stay engaged with the world, and we know a lot of stuff, and we care about learning, and that we do great teaching, but not necessarily that we are slaves to a particular methodological approach. So as a tenured professor at Davidson College, I can actually write something that I can happily give my father to read. My previous book, Why Taiwan Matters, was written totally with my mother in mind.

Kaiser: Wow.

Shelley: As I was writing, I’m thinking, if Mom’s getting bored right now, I need to pick up the pace. So thank you for that. But with this book, it’s really essential that I write in that way because so much of this information is just not available. So both sides of the Strait kept records and keep records on the amount of approved investment, actual investment from all of the investment sources that exist. And none of it is really reliable. The actual and approved on the Taiwan side don’t match the actual and approved on the PRC side. There’s just an enormous amount of inconsistency, and that’s because this entire process, really until after 2008, was carried out in an environment of zero government-to-government coordination.

So the Taiwanese businesspeople, the Taishang, they just went. And they knew that when they cross that water, they were leaving behind the legal protection that they could take for granted in Taiwan, but that they also could have taken for granted in a lot of other investment destinations. They were walking into a kind of wild, wild west. And they chose to do it. But what that meant was no one could really keep track of what they were doing and no one could control what they were doing. So, one of the more interesting things to note is that among China’s top 10 sources of foreign direct investment are the British Virgin Islands, the Cayman Islands and Panama. None of which is actually originating anything close to the amount of money that’s coming through. So we know that these are pass-throughs for Taiwanese money, they’re also pass-throughs for Hong Kong money, they’re pass-throughs for PRC money, round-tripping.

Kaiser: That’s right.

Shelley: And so, it’s just impossible to know how much of those figures should be attributed to whom. Then the other one that we don’t know is, your comment at the beginning that everybody always tells you there’s a million Taiwanese in the PRC, yeah. That’s such a nice round number, isn’t it?

Kaiser: Yeah. It’s convenient.

Shelley: I remember when it was like 500,000, and then the next year was 600,000, and then it was 700,000, and now it’s been holding steady at a million. Again, nobody knows. Because we can look at how many trips are taken, how many people actually stamp an identity document on each side, but we don’t know how long they’re staying. So many of these Taishang go back and forth regularly, then some of them go to the mainland and they stay for years on end without ever returning to Taiwan. I’ve asked PRC officials, I’ve asked Party people or Taiban officials in Shanghai in particular, “How many Taishang are there really in Shanghai?” And they have to admit… I haven’t asked in the last two years, but let’s say within the last five years, I have posed this question to people who were in a position to know and they gave me a weaselly answer because they don’t know either.

Kaiser: Yeah. That’s so funny. So this was true back then, all that deliberate ambiguity about investments and headcount and all that, but it’s gotten so much more by the books now. Shouldn’t we know something more better now? And maybe the Pandora Papers will help us sort through all that — separate the round trip PRC money, from the Hong Kong money, from the Taiwan money, and figure it out.

Shelley: Yeah. We’ll see. By the time I got this book in press, I still didn’t feel at all confident putting forward some super hard numbers. I just think it’s more honest to say, “I don’t know. I just know it’s a lot,” than to give you a number and have you hang your hat on that.

Kaiser: Yeah. That’s totally fair. So just as our boy, Chen Tian-fu, had to get big in Taiwan first before it made sense for him to move all the way to the mainland, let’s talk about the conditions that came together — I think we can go all the way back to Taiwan’s land reform here — to make possible this boom in manufacturing that happened in Taiwan beginning really in the 1950s and 1960s because I think there are a lot of pieces to this and I think you draw them all out really nicely in the book. What had to happen — what were the different sort of streams that converged to make the Taiwan boom happen?

Shelley: Yeah. So the Taiwan contribution to the PRC’s economic takeoff or economic miracle starts with the Taiwan economic miracle.

Kaiser: That’s right.

Shelley: And Taiwan’s economic miracle has roots in the Japanese colonial period. The Japanese attitude toward Taiwan was, we’re going to make this a model colony. It’s part of that whole Meiji Restoration idea of we’re going to show the Westerners that we are every bit as civilized as they are. We are not colonizable because we are colonizers, and we’re going to show what kind of great colonizers we are in Taiwan. So they put a lot of infrastructure, actually, into Taiwan in the early 20th century. So there’s already railroads, telegraphs, there’s potable water in Taipei in 1908, which is incredible.

Kaiser: Wow.

Shelley: And there’s a certain amount of industry. It’s all oriented towards supplying the Japanese market, so it’s kind of food processing things. So Taiwan was kind of set up, literacy was high, the Japanese educated the Taiwanese pretty well. So when the nationalist arrived in the middle of the 1940s, after the whole kind of conflagration of imposing control in ’45, ’46, ’47, the place is ripe for development. However, you can take possession of a place, a territory, and people who are ripe for development and blow it anyway. The KMT government did not blow it in Taiwan. They made a series of good moves that enabled Taiwan to become this manufacturing powerhouse that then facilitated the things that I’m really focused on in the book.

So they begin with land reform. And unlike in the mainland where the KMT could not separate the landlords from their property in Taiwan, in part because of the conflagration in the mid ’40s, they were able to separate the landlords from their property. And they did this land to the tiller reform similar to the Household Responsibility System in the late ’70s in the mainland. And as with the household responsibility system, it produces this rapid increase in agricultural productivity and output. So suddenly there’s capital accumulation happening in Taiwan, but it’s not being sucked away by the state. The capital that’s accumulated in Taiwan stays in households. And so households look for higher return investments and they very quickly start doing household manufacturing, so beginning with kind of handicrafts.

But immediately, the government sees the conditions being ripe for industrialization and starts that process at the same time that they are doing the sort of macro-level things that you need to do for industrialization, like making sure people have raw materials for manufacturing, logistics, that they have sales networks. They’re doing all of that at the national level, but they’re supplying it to small and medium-sized and, in a lot of cases, really super micro businesses. So everybody in Taiwan — not everybody, but many, many, many rural families by the 1960s were farming during the parts of the year where farming requires a lot of attention. And then when the stuff is just out there growing, they are in the factory doing injection molded plastics manufacturing.

Kaiser: That’s the standard go-to for Taiwan — it’s injection plastic molding, or whatever.

Shelley: Yes. And the thing is that that’s great because petrochemical is, that’s ginormous. So that’s a state-owned enterprise. Eventually, Formosa Plastics, which is a private company, comes in, but the state ensure that people had cement for building, rebar, logistics, so shipping, they set up these trade fairs where the injection molding guys could go and meet their American clients and get them molds that they needed to make. But certainly, the steady stream of plastic coming down from those big petrochemical plants enabled these small and medium-sized enterprises to be actually a really big force in the consumer economy in places like the U.S.

Kaiser: You mentioned the U.S. America isn’t always historically so tolerant of mercantilist countries, slapping tariffs, I mean, but Taiwan was definitely the exception. I think maybe we can talk about how the geopolitical environment especially after the Korean War really just transformed things for them.

Shelley: Yes. Absolutely. So at the end of the Chinese Civil War, the U.S. government officials were kind of like, well, Chiang Kai-shek is a failed leader and he’s not going to last long out there on that island. And then when the Korean War started, the whole thing changed. Oh, my gosh. Communism is on the move in East Asia and we can not allow it to expand any further. And Taiwan became a protectorate of the U.S. And that extended to economics. So a lot of agricultural progress that Taiwan made in those early years in the 1950s was also sponsored by various American aid programs. The Joint Commission on Rural Reconstruction was a really high-impact Taiwan U.S. program for building up Taiwan’s economy.

And the U.S. was willing, at that time. It’s actually quite interesting: the American economic policymakers didn’t look at Taiwan’s exports as a threat to U.S. manufacturing because the US didn’t want to be making that kind of stuff. Plastic toys is low-end and high-pollution. So in the U.S., we wanted to be making cars, we wanted to be doing more valuable manufacturing. It was a kind of discipline for the American economy to have the competition at the lower end. Shoes, apparel, bedding, toys. I think American policymakers were fine to have those industries taken over by other countries because they helped our industrial upgrading.

Kaiser: So this is why Buzz Lightyear discovers that he’s made in Taiwan, and it rocks his whole world in Toy Story.

Shelley: Poor guy. Yeah.

Kaiser: Poor guy. I love that touch in your book. This is the kind of thing you can do as a tenured professor is introduce old Buzz. I don’t want to suggest that it was just the sort of friendly geopolitical environment that made this possible, because there were some brilliant people who were really, really prescient. You talk about a tag team, one after the other, of these super technocrats Yin Chung-jung 尹仲容 (Yǐn Zhongróng) and Li Kwoh-ting 李国鼎 (Lǐ Guódǐng), who really steered Taiwan’s economic direction really well during the ’60s, all the way through the ’80s.

Shelley: One of the things that’s happened in a lot of developing countries is they get stuck in import substitution industrialization, because import substitution creates this group of vested interests that don’t want to allow competition, so they just want to keep doing that. And so Taiwan’s super technocrats, when they saw Taiwan’s sort of momentum of growth starting to slow, like the space that you’ve created is now filling up, instead of what we now call that involution, we just keep trying to find another corner in that ever more crowded space. They forced the next phase of development. So they really pushed export-oriented industrialization so that Taiwan would not get trapped in import substitution, but would move on. They weren’t trying to build giant mega-corporations, so this is something very different from the other two places that we think of as having gone through the same process.

Kaiser: Japan and South Korea, yeah.

Shelley: Yeah. The Japanese government wanted national champions, it wanted big companies, it wanted global brands, and the Korean government did too. And so they put a lot of resources into picking winners and driving consolidation. Whereas, K.T. Li in particular —

Kaiser: Li Kwoh-ting.

Shelley: — was much more comfortable with the kind of very nimble and very chaotic small scale SME economy that Taiwan had kind of generated organically. And so they didn’t really put a lot of emphasis on figuring out what was going to be successful and where they should push companies to go. They let companies go wherever and if it didn’t work out, it didn’t work out.

Kaiser: Right. No picking national champions.

Shelley: It’s only 15 people who are experiencing this bankruptcy.

Kaiser: Exactly.

Shelley: And they are going to pick it up and try something else tomorrow.

Kaiser: Yeah. So let’s talk about this because this is just one of the most amazing things. In your book, you cite this statistic that says that in the mid-’50s, 99% of Taiwan’s companies employed less than 100 people. That’s amazing. But 50 years later, in the mid-aughts, we’re talking about, it was 98%. That is just astonishing. What are the forces — Is it culture, is it the sociology of Taiwan, is it something economic, is it that kind of Confucian smallholder mentality? What is it that combines to create this real preference for family-owned small SMEs?

Shelley: So I think it’s largely path-dependent, honestly, that this is where Taiwan started. The small and medium-sized enterprises are sort of born out of family agriculture. And those two modes of production are, for a long time, coexisting in the same kind of units. So part of it is that’s where they started and there was nothing that happened that got in the way of SMEs continuing to flourish. But I do think there is a kind of a cultural component in that many of these are family businesses. And the kind of approach that Taiwanese families have taken in business is for the patriarch to remain in charge as long as he is compos mentis, and sometimes beyond that point, honestly. But the sons are not sort of lined up behind the dad. They are spread out into different activities. So if our business is bending metal, then one of my sons will go into bicycle tubes and another one will go into tailpipes, whatever it is. And that way, if something goes wrong in the bicycle industry, we can all go over here and work with Mr. Tailpipe.

Kaiser: You’re diversified.

Shelley: Right. We’re diversified, but we’re within the same family so we’re sharing finance all the time. We can move resources laterally across this diversified range of lines of business. If the sons can’t get along anymore, they want to break it up, I’m not tearing apart my core business, I’m just hiving off the tailpipes and off they go. But then, bottom line, Kaiser, I hate cultural explanations. I’m enough of a social scientist to hate cultural explanations. But there is this saying in Chinese, my favorite four-character, it’s actually not four, but my favorite chengyu is, “It’s better to be a chicken’s head than a cow’s ass.” Better to be in charge of something small than to be just a flunky in some giant corporation. I do think that’s a big part of it. Maybe just because that’s how we’re living, so we decide that we like it, but a lot of people in Taiwan will say, everybody wants to be a boss. Nobody wants to work for anybody else. That’s how you end up with this kind of incredible proliferation of very small businesses.

Kaiser: So to summarize, yeah, path dependency and also primogeniture, schmimogeniture. But also, chicken’s head better than cow’s ass.

Shelley: Yes.

Kaiser: Fantastic. I love it. So 1987 was clearly an inflection point where it suddenly did become possible to travel to China. Prior to that, you just didn’t have those… It was still that the era of the Three Nos. You couldn’t mail a letter, make a direct phone call, or travel. So this happened, though, at a particularly lucky moment for Taiwan too, because this is just at the moment when made in Taiwan was coming to an end. Suddenly, you had this enormous new potential labor pool open up right across the Strait. So I was wondering, as I was reading your book, did Taiwan just get lucky, and it just happened that at the moment that made in Taiwan was coming to an end, that suddenly this mainland opportunity opens up, or was it that Taiwan’s policy on overseas travel and investment on the mainland was in response to the closing of the window of opportunity for domestic manufacturing?

Shelley: Well, Kaiser, you’re asking me a question that I think is really interesting, and I can not answer.

Kaiser: Right. It’s one of those causality things.

Shelley: Well, but also because I never thought about it. The narrative that has always, always, always been given to me is it was a lucky coincidence. Chiang Ching-kuo’s stated reason… So Chiang Ching-kuo was the president of Taiwan in 1987, the son of Chiang Kai-shek, who never in a million years would have allowed this. I don’t care how badly Taiwan needed it or how good it would have been. But Chiang Ching-kuo was a different kind of leader. And the story that I have always heard is that he genuinely was looking at 40 years, they’re approaching 40 years after the end of the Chinese Civil War. And the division between so-called Nationalist China and the People’s Republic of China. There’s a couple million people in Taiwan who came over… Well, less than two million, but a lot of people came over in the midst of the Civil War thinking they were returning to China and got stuck there. They got cut off by the Civil War.

Kaiser: These are my people, the ’49ers, right?

Shelley: Yes. Exactly. You, outside-the-province people, got stuck in Taiwan. You were never going to see your ancestors’ graves, you were never going to see the wives and children that you left behind. The way the story is always told is that Chiang Ching-kuo wanted those, for the most part, elderly men, former soldiers, to have one more chance to see the mainland before it was too late. And so he opened humanitarian visits. And certainly, I think he was also seeing that China was no longer Mao’s China and that the possibility of rapprochement, of some kind, might be possible. He was not interested in allowing the Republic of China to be swallowed up by the PRC. He was still an anti-communist. But I think he also saw the potential to bridge the huge divide, the huge gulf that had opened between the two sides over the 40 years, and that’s even leaving aside the previous 50 years that were not part of Chiang Ching-kuo was consciousness, but certainly matter a lot to Taiwan.

So anyway, he said, “You guys can go.” I’ve seen little video snippets and photographs of men going to the mainland and they’re walking down the steps of the plane, and there’s always some young guy behind them with the suitcases. It’s the son-in-law or the son who is… So grandpa may be looking for the graves of his ancestors, but the son-in-law is looking at the unbelievable opportunities that mainland China, PRC in 1987, ’88 is presenting for investment because there’s this huge totally underemployed labor force that is very docile and super cheap. Local officials are falling over themselves to get investment because they’re already, by the late 1980s, being rewarded for attracting GDP and economic activity to their localities. They are in control of all of the resources that you need to start a business including the labor force. So what is not to love about that? That’s how I tell the story, although I really am going to now start asking myself and my sources, and some of these biographies of Chiang Ching-kuo whether he also may have had a little bit of an economic vision.

Kaiser: He saw the writing on the wall, maybe. So is this son-in-law-cum-factotum-cum-amanuensis or whatever, the guy with the dollar signs in his eyes behind him on the steps, is that guy Taiwanese or is he another waishengren? Was this first waishengren led because of the elderly patriarch who wanted to go see the hometown in Jiangsu before he died, or was this a Taiwanese phenomenon?

Shelley: Yeah. The very early visitors were Waishengren. But very, very quickly, the benshengren are going in behind, because they’re the ones who have the businesses.

Kaiser: Yeah. That’s what I figured.

Shelley: One of the other things about Taiwan that’s really interesting is the KMT elevated waishengren to the preferred positions in society. So all these reserved seats in the bureaucracy for people from every mainland province, and so Taiwan gets exactly as many seats in the MOFA or whatever as Hunan. So Taiwanese were really excluded from government employment, lots of the kinds of things that were sort of high status. So they went into business. They didn’t really have other options. And so a lot of Waishengren were not in business. They were in other professions.

Kaiser: Story of my family.

Shelley: So they didn’t really have the-

Kaiser: Money.

Shelley: Yeah. The money. They weren’t situated to go over and move a factory to Dongguan or Kunshan and grow a business.

Kaiser: You mentioned Dongguan and Kunshan. So yeah, they clustered in the Pearl River Delta and the Yangtze River Delta, neither of which are the most logical when you look at just sort of cultural and linguistic affinity because, as you say, a lot of these are Benshengren and they speak something so close to the Minnan you spoke in [inaudible 00:40:48] or whatever, that you’d think that that’s where they’d go. But instead they set up shop in cities like Dongguan in the Pearl River Delta. Why is that?

Shelley: Because Dongguan is close to Hong Kong, and Hong Kong is how you get into China.

Kaiser: Back then, yeah.

Shelley: In those days, you couldn’t just go directly to the mainland. You had to travel through… Really, Hong Kong was the, by far, the preferred point of entry. So it’s interesting, there is this narrative that the reason this happened was that Taiwanese and mainland Chinese are so similar. And it was easy for them to do business together because they speak the same language and they have the same culture. And it’s like, not really.

Kaiser: No. Not so much.

Shelley: The reason that it happened is because the PRC was begging for investment. And Taiwanese were looking for a place to go, because the cost structure in Taiwan was becoming prohibitive. So it just was not efficient to make a Barbie in Taiwan anymore. If the cost of making that Barbie was 80 cents in Taiwan, you could drop that to 10 cents. I’m making up the numbers. But the cost savings of going to the mainland was just massive. So that’s why they went. It was easier to do business there than, say, in Vietnam, or Sri Lanka, or Madagascar, or some of the other places that they might have gone to find lower wages, because there was a certain amount of cultural… They know how to do dinner, they know how to drink the Chinese way.

Kaiser: Exactly. And hand over that business card and how to…

Shelley: Right, all that stuff. And they did speak Mandarin, so they could communicate with their business contacts and the local cadres in Mandarin. But I think it’s really important not to overstate the degree to which this was just all about the sort of cultural affinity between the two sides. It was really about money and opportunity.

Kaiser: You mentioned Barbie dolls. And there’s a chapter in your book where you talk about this town outside of Taipei called Taishan, I think it is, where all the Barbie dolls were made. But, this whole ecosystem — the whole contract manufacturing ecosystem around Barbies — presumably it’s the ones that make the dresses and the ones who make Barbie shoes, the ones who make the Malibu Barbie camper van or whatever. They pick up that whole ecosystem and just move it to China. So how was this done? Was this coordinated, was it just sort of ad-hoc? Did the guy who was making the Barbie heads, was he the boss and said, “Okay, everyone, we’re going to this town in eastern Guangdong Province now.”

Shelley: Yeah, so Barbies are not the best example just because you have the foreign contractor also, Mattel, I guess, also playing a role in how things go.

Kaiser: Okay, right. Yeah, Mattel.

Shelley: But cluster manufacturing was a long-standing feature of Taiwan’s SME ecosystem. I remember back in 1991, I went to this village, I have no idea where it was, it must have been either in Tainan County or Kaohsiung County. But anyway, they’re making Christmas lights. And the house on the left, they’re doing the wire. They’re feeding the wire up into this little plastic thingy and then squeezing it on the wire, that’s what they do. And then they send that to the next door place where they are molding the tubes, so they get tubes of colored glass, and they cut them into sections, and then they mold them into a Christmas bulb shape. Then they pass it along to the people who are making the little metal screw cap that goes on the bottom. So each household has a different little teeny part of this process. And they’re all located right next door to each other.

Kaiser: So they’re joined at the hip, they can’t live without one another.

Shelley: Right. So when the decision is made, it’s no longer cost-effective to be doing this here, we could do this a whole lot cheaper on the other side, the whole thing has to go together and the bosses have to move to the mainland. That’s another thing about Taiwanese investment in the mainland that people don’t always really appreciate. We’re not talking about portfolio investment. These are not shareholders paying into… These are flesh and blood human beings.

Kaiser: Black hands.

Shelley: The black hand bosses, these guys who have gotten their hands dirty on the factory floor, moving their equipment to the mainland, and doing the exact same thing, with the exact same management, with the exact same process, with the exact same customers, but they’re using PRC labor instead.

Kaiser: Labor. That is just completely fascinating. So you mentioned 1987 as this is really important watershed where suddenly it becomes possible to just cross the straits pretty easily from Taiwan to the mainland. But it might surprise some of our listeners, or some of the readers of your book, that the brutal and bloody denouement of the Tiananmen demonstrations that just happened two years later, actually proved really useful to the Taishang in China. Can you explain why that was, why didn’t they… I mean, you would think that if anyone, people from,” Free China” would object and take their business elsewhere?

Shelley: Yeah, the wild, wild west has its downside, which is there’s no protection, there’s no tax treaty, there’s no consulate. You get into trouble, you’re at their mercy.

Kaiser: You’re vulnerable. Yeah, absolutely.

Shelley: Yeah. And that’s why another big theme in my book are these Taiwanese businessmen’s associations that form as a kind of mutual aid society for that. But the upside of the wild, wild west is that no one is in charge of you. And you don’t have to do sanctions if your government is doing sanctions on China after Tiananmen. They have no control. So what happened in 1989 was a lot of foreign countries really backed away from China for political reasons. And they were slow to return, in part because it wasn’t clear the direction of the Chinese economic policy for the first couple of years until 1992.

So that further — that just expanded the space for the Taiwanese businesses to fill because they were not competing, there was nobody else there. So, they just kept coming, and I think they got an even bigger foothold. But one thing that’s really interesting about that is, at least at that time, a lot of PRC officials knew about that, and they were, maybe grateful is the wrong word, because it’s hard to be grateful, but I worked with a co-author on a previous project that was very similar to this, and he had a PRC official tell him, “Our economy would never have recovered from the Tiananmen crisis if it were not for the Taishang.”

Kaiser: Oh, that’s fascinating. You talked about their vulnerability. Was it common for Taishang to cross the wrong local official and suffer for it? I’ve heard a few stories, so I wanted to get a sense of how they endured despite the vulnerable condition they found themselves in.

Shelley: Yeah, a lot of people had a lot of very hard times.

Kaiser: Yeah, I can imagine.

Shelley: Crossing the wrong local official, or your guy gets promoted and you don’t know the new guy, or your guy gets in trouble and you go down with them. Because the Taiwanese were not locals, they were vulnerable, in some ways less vulnerable than local Chinese because they had money, but in some ways more vulnerable because they could be sacrificed without really damaging the fabric of the locality. So there are just a vast number of business advice books in Taiwan on how to survive in the mainland.

And some of them will even say, “You shouldn’t go.” I use this one book as a source for my book. And all of the chapters are like, “there’s no such thing as a win-win situation in China.” And, “the law is your last line of defense.” It was definitely pretty chaotic and you were pretty much on your own. The Taiwanese businesses tended to create… Well, first of all, it was helpful that they had that cluster thing going. So they didn’t come totally alone. So they had others who are working with them. And they tried as much as possible not to have to depend on the locality. So Chen Ming-ch’i and T’ao Yi-feng who are two sociologists in Taiwan, have crafted this expression kōngzhōng baǒléi 空中堡垒, it means the fortresses in the air.

Kaiser: Mm-hmm (affirmative). Castles in the sky.

Shelley: Yeah. Floating fortresses or floating castles. So everything is pretty well self-contained within the fortress, and you try to minimize the sort of ladders that people can climb up to get in. They were definitely protecting themselves as best they could. The Taiwanese business associations became a really important advocate where some of the leaders of the TBAs were just incredibly astute politicians, and they knew how to give local governments exactly what they needed in order to keep the Taiwanese on the right side of whatever political thing was going on. But they were on their own.

Kaiser: Yeah, but when they encounter people, when that really intrepid official would scale the ladder, and then demand an audience with a TBA or with a factory boss, would he say, you have to be in an awkward joint venture with a partner that’s not deserving, probably, but you also have to transfer technology to that partner. That’s the common complaint you always hear from European and American businesses over there.

Shelley: Yeah, there is where I think maybe the cultural affinity really served the Taiwanese. Well. They seem to have been much better than foreign businesses at fending off that kind of pressure.

Kaiser: That doesn’t surprise me.

Shelley: So they had their wholly owned factories from day one, and hey have not been dragged into joint venture. So the way you hear about Taiwanese companies losing their technology is usually, we hired this local guy as a manager and he learned our business, and then he went and set up across the street and his costs were lower because he’s a local guy.

Kaiser: That happened to my dad all the time, a couple of times. It’s just unbelievable. That trusted lieutenant who decides to just skedaddle with all your plans.

Shelley: Yeah. Well that’s why my friend in Shanghai who was a sourcing guy in the apparel industry… I walked into his office, and he said, “Oh, you shop at Eddie Bauer, don’t you?” That’s why he said, “Trust is a cost. We do business with other Taiwanese as much as possible, because we trust them. And we don’t trust the mainlanders.”

Kaiser: So let’s move beyond the world of contract manufacturing and injection-molded plastic toys, which was sort of the Taishang story 20 years ago. But we see this dramatic shift, climbing the old value chain to way more sophisticated products. There were a lot of these companies that did this. But let’s focus on two that are probably the best-known and probably one of the ones that you talked about the most in your book. And one is, of course, Hon Hai Precision. Hon Hai is what it’s called, instrument. It’s better known, of course, as Foxconn, and it makes every damn thing, right? All the things that matter, all my Apple devices. And then, of course, there’s TSMC. Before we look at each of these companies, maybe we can talk about what had been this small business, family-owned operations kind of dominated milieu, suddenly transformed. How did it decide to go big like that?

Shelley: Yeah. So in even as early as maybe the mid-’90s, there was already a big scare that Taiwan’s economy was hollowing out. All of our manufacturing is going to the mainland, what will be left? Well, manufacturing economies can hollow out and just get not replaced by anything.

Kaiser: Kind of like America.

Shelley: Yeah, kind of like in America. But Taiwan still had these smart technocrats. They weren’t the sort of famous brand name ones like K.T. Li, but they were still there. And they still had the old playbook which said, if we want to regenerate the industrial energy, we need to help people figure out what’s going to sell and what they can make and how they can make it. And so they created… And they were consciously thinking, at that point, we want to get out of making Buzz Lightyear and Barbie and into making your iPhone, I don’t think there was an iPhone back then. But whatever the precursor to your iPhone was going to be, Video game, stuff like that. So they set up this thing called the ITRI. Industrial Trade and Research Institute, maybe.

Kaiser: But it was doing things like licensing whole patent portfolios and sharing that with ITRI remembers. And it had sort of taken everything that Japan had done and everything that South Korea had done, and then just sort of ramped it up and then did even more, right?

Shelley: Yeah. And the whole idea from the beginning was that it was an incubator that was going to spin-off companies. One of the very first executives there was Morris Chang, who ended up spinning off TSMC. So, on the one hand, you have the state kind of creating the incubator and the opportunity, but you also have to have people with good ideas. And Morris Chang’s idea was the fabless foundry. So we will just make the chips that someone else designs. And we will take a really difficult technical burden away from other technology companies and just be super-specialized in this critical component that is itself so hard to make that it needs to be one company that’s making it, or it needs to be made in a specialized facility. So, he came out of ITRI, but then you also got Acer and Asus, thinking more in terms of actually creating a brand in the PC sector.

Kaiser: Brands, yeah. Acer is like the number three and number four, right? In the world.

Shelley: Yeah, people in the U.S. don’t really appreciate how big Acer and Asus both are, but they’re especially big outside the U.S. We’re so addicted to our Apple and Microsoft that we’re unaware of the existence of alternatives. Although every year, I look at my students. My students pop their laptops up on their desks, and there’s usually somebody with a Taiwanese brand laptop.

Kaiser: Yeah, yeah. But before we get too — I want to go back to TSMC, but let’s go back and talk a little bit about Foxconn, just because they’re so iconic and they represent… Just in terms of their sheer scale. First, maybe, Shelley, you can dazzle us with some “Foxconn facts.” How big is Foxconn?

Shelley: Oh, well, so Foxconn is the largest private employer in China and has been for many years. It is responsible for maybe 15 million jobs in China.

Kaiser: Wow.

Shelley: They make something like 40% of all of the electronic devices in the world. Yeah, so Foxconn is really big. But one thing about Foxconn that’s worth noting is its profit margin is tiny. So Apple still making all the money. So Foxconn’s genius, the genius of Terry Gou, and what he’s created with Foxconn, is figuring out how to scale that electronic assembly process up to where you can actually squeeze enough profit out of it to continue to make process improvements and to actually improve the technology.

Kaiser: So even with those razor thin margins, they still invest significantly in R&D. It’s like 1% or even more of revenues, right?

Shelley: Yeah. That’s because the revenues are so huge. So the margin is small, but because the company is ginormous, it adds up. But the company is always thinking about how to move forward, how to avoid being overtaken and replaced, so they continue to invest. And right now, as the price of labor in China is going up, Foxconn’s response has been not so much to move out of China, because there are not a lot of other places where you can assemble 300,000 people to come to work at the same complex of factories. In this whole world, there are not many places where you can do that. But, they don’t want to pay that rising wage bill. So they’re going for automation.

Kaiser: Yeah, it’s unbelievable.

Shelley: So they’ll probably leave the factories in China but they’ll just automate them more and more.

Kaiser: I’ve seen videos, it’s astonishing, what you see, of the number of robotic arms that are at work there.

Shelley: It’s like a Japanese auto factory, only tiny.

Kaiser: Yeah, exactly. It’s insane. They’re just, of course, one of several major EMSs, electronics manufacturing services, that are in China. They really pioneered that whole model. And lest people think that they only are snapping the other parts according to specifications that Apple sends them, Shelley, they are also an ODM, they’ve become a significant ODM. What is preventing them from doing their own brands? Is it just something they feel they don’t have the skill to do because? Because, hire 10,000 smart marketers and you’re on your way.

Shelley: I think part of it is that transition was very difficult because Apple does not want that competition.

Kaiser: I guess that’s their secret, though. They’ve always kind of been, we will never be competition. That’s been their big selling point. Yeah?

Shelley: Yeah. That is not a principle only for Foxconn. A lot of Taiwanese contract manufacturers sort of fly below the radar and are able to sustain their contracting relationships because, honestly, unlike some indigenous PRC firms that will compete with you, that will make their own brand and get in your way, the Taiwanese have a sort of relationship of trust with their customers that they will… If they are going to make a brand, it will be adjacent to, for example, another company is in… They produce goods for hard goods for babies, and all of its contract manufacturing, and then they thought about doing their own brand, but it was going to be super high-end. So hard goods for Hollywood babies. So they would not even be in Toys R Us, or Target, or the places where they’re their customers are selling.

Kaiser: Toys R No Longer Us. It’s gone.

Shelley: I know.

Kaiser: So just to get back to your main thesis, it seems to me that a company like Huawei, their success was made possible because there were companies like Foxconn and TSMC. I feel like they created… Well, they didn’t just create this EMS system and all the whole ecosystem of fabs and everything like that, but also they created this whole value chain, what you describe in your book is a red value chain. It seems to me to be the thing that they leave behind that really propels and will continue to propel for many, many years, China’s economic development and their growth.

Shelley: Yeah, absolutely. Huawei is an interesting example because one of the things that I really emphasize in my book is that without the Taiwanese firms which already had these contracting relationships with global brands, China just couldn’t be selling to those global brands. Because Nike tried a little bit, buying shoes from indigenous PRC companies, and they couldn’t get the quality right, they were worried about the schedules and the IPR. So they went back to their Taiwanese contractors. So the Taiwanese have the relationship and then they start manufacturing for that same customer in the PRC, and this opens the PRC to the world of contract manufacturing and export-oriented manufacturing.

But Huawei is an example of a PRC company that is largely focused on the domestic market in China. And so they’ve sort of taken it a step beyond. So they learn how to do the manufacturing process, in part, from these Taiwanese examples. But then they don’t focus on primarily export-oriented manufacturing, they’re focusing on the domestic market. So it’s kind of like, I’d say, that the Chinese economy itself has matured to the point where that is what is needed, and these companies are capable of filling that spot.

Kaiser: So you’ve said that the heyday of the Taishang is basically past now. Is this a matter of both of these economies having grown out of the respective developmental phases that made that whole Taishang phenomenon possible? Or what is it?

Shelley: Yeah, I think it’s mainly the rising cost and indigenous capacity of the PRC economy. The PRC is no longer a cheap place to make stuff. So a lot of the traditional manufacturing in apparel, shoes, toys, stuff like that, the doodads of this world, the widgets have moved on, and they’re getting pressed out somewhere else.

Kaiser: You can always figure out where the next boom is just by where are they currently manufacturing Christmas ornaments, right?

Shelley: Right, yes.

Kaiser: So right now it’s Indonesia and it could be somewhere else.

Shelley: I look at those and I just think the person who worked on the factory line and made this must have been thinking, “what the hell is this for?”

Kaiser: What the hell is this?

Shelley: What is this fat man in a red suit on skis? I just don’t get it.

Kaiser: There’s a great documentary that we talked to the maker of. He looked at Yiwu. Yiwu this crazy town in Zhejiang province where everything is, and where they sell all that stuff that’s made in Dongguan, wholesale. It’s just people sitting there amidst piles of plushy toys are making these things that become momentarily fashionable for one Christmas season, some “ugly babies” or whatever the hell. It’s really funny. It’s a great documentary.

Shelley: Have you seen the one about the Mardi Gras beads?

Kaiser: No, no.

Shelley: I show that one to my students. It’s about factories, sweaty Hong Kong guy who, he’s trying to be a good boss but he’s actually really just a Simon Legree, and he’s got this factory full of young women making Mardi Gras beads, and then they go to Mardi Gras and they take footage of what people do at Mardi Gras and they show them to the girls in this factory. I show it to my students as, these young women have more pride and dignity standing in this filthy, hot, dangerous gross chemical plant than those women on the streets of New Orleans showing their tits to get the beads.

Kaiser: God, yeah. That’s so funny.

So I have all these questions for you about all the non-business impact, the music industry, religious life, culture, fashion, I’ve got an eye on the time here so…. one thing one person we can not fail to talk about, though, and this goes back to before the ’87 surge is Teresa Teng, Teng Li-chun, who I think just more than Morris Chang or Terry Gou, had a bigger impact on China. What’s that expression they used to say? It’s like báitiān tīng Laǒ Deng, wánshàng tīng Xiaǒ Dèng 白天听老邓,晚上听小邓 where the word ting which means “to listen to”, can also mean “to obey.” So “In the daytime, we obey Old Deng, Dèng Xiaǒpíng 邓小平, and in the evening we listen to Xiaǒ Dèng, Teresa Teng. Of course, I think Teresa Teng was probably a head taller than Old Deng, but whatever. Who was Teresa Teng, for anyone who happens not to know?

Shelley: Yeah, Teresa Teng was a singer, Taiwanese, actually waisheng musical performer and hugely popular, really all over East Asia. She sang Japanese style, she sang Hokkien-style. She sang Mandarin-style, she could sing in English. The closest thing, and it’s not even close, is Karen Carpenter. And Taiwanese people also love Karen Carpenter, by the way.

Kaiser: So do mainlanders.

Shelley: Yeah, so she had that soft, beautiful voice. But it was just what, after the Cultural Revolution, where love, beauty, romance, sex were not allowed in the PRC.

Kaiser: It was all bourgeois, right?

Shelley: Teresa Teng’s music just kind of wafts across on the airwaves from Taiwan. And oh, isn’t that gorgeous, isn’t that wonderful? Isn’t that just pregnant with the possibilities of a more joyful life? It aligns, actually, with Old Deng’s policies because he is inviting Chinese people to enjoy their life to buy consumer goods, and stimulate the economy. So even though there was a certain amount of ambivalence, I think, among mainland leaders about the spiritual pollution that was coming over, she was unstoppable in the PRC.

Kaiser: Yeah, absolutely.

Shelley: And so were then a kind of parade of Taiwanese entertainers. There were also a lot of Hong Kong entertainers. But the Canto-pop audience is a little bit limited by their language.

Kaiser: Yeah, by geography.

Shelley: A lot of the Taiwanese performers who have been really popular in the mainland sing in Mandarin.

Kaiser: For sure. When I was there, I started playing music in China in ’88, I guess, yeah. It was ’88. And then it was like Qí Qín 齊秦, everyone just loved Qi Qin and his sister Qí Yù. And then Wú Bái 伍佰 and a Zhào Chuán 趙傳 and all these guys. Their songs are fantastic. I can still remember all those songs. It’s crazy.

Shelley: Well, Hóu Déjiàn 侯德健 was a Taiwanese singer who gave us the whole idea that all of China can be represented by the dragon.

Kaiser: Yeah, Hou Dejian, Lóng de chuánrén 龍的傳人. And then that was reupped a few years later by a certain Williams graduate who went north of China and made it big as a pop star [editor: a reference to Leehom Wong]. It was crazy how impactful it was. We should give a shout-out to Tom Gold from UC Berkeley, he wrote a really great paper on all this stuff way back in ’93. It was called “Go With Your Feelings,” which is the translation of a song called Genzhe ganjue zou 跟着感觉走. I remember that was one of those pop songs from back then. Anyway, it was called Go With Your Feelings Hong Kong and Taiwan Popular Culture in Greater China. It was in China Quarterly in ’93. That’s just one of those classic papers, and you referenced it in your book.

Unfortunately, I have to go pick up my kids in 10 minutes, but I’m going to quickly… A penultimate question for you, and I just don’t think it’s widely-known, but it certainly was the case that during the decade of the ’80s, there was a lot of borrowing from Taiwan in terms of institutions along with Singapore, maybe, Taiwan was seen as kind of a template for how soft authoritarianism could work, how even a democratic transition would work. During the ’80s, that wasn’t off the table. You could talk about that still. So this was, of course, before martial law was lifted in Taiwan, and so it was still an authoritarian state, and well before the first presidential elections. Shelley, what were the areas in which China borrowed most heavily from Taiwan, institutionally?

Shelley: Yeah, that was one of the most interesting to me and also one of the hardest things to research, because nobody wants to talk about it, really. The people who were receiving this kind of expertise in the mainland don’t want to tell you now that they got their legal system, their commercial law, from Taiwan.

Kaiser: But they did.

Shelley: Actually, a lot of people in Taiwan who participated don’t necessarily want to brag about the fact that they designed the PRC Commercial Code either. But basically, the PRC, they emerged from the Cultural Revolution with no laws. Certainly no business law, no contract law, no labor law, because they didn’t have property, and they didn’t have business. So they spent a lot of time in the ’80s, trying to figure out how to get Soviet-trained legal specialists to invent modern commercial law. Then they just kind of gave up on that after a couple of false starts. And in the ’90s and in the 2000s, they relied heavily on Taiwanese consultants to help them construct a commercial code that would work for China, and that was more aligned with the kind of Japanese and German approach to law than Anglo-American.

Kaiser: Okay, Shelley, and that’s fascinating and I know that it’s difficult to do research in that. But I remember in the late ’80s and in the 90s, as a graduate student, plunging into that and the whole discourse on neo-authoritarianism and finding a surprising amount of direct reference to work being done in Taiwan, and to actually exchanges with legal scholars in Taiwan. And so yeah, absolutely. You’re not imagining things.

So the last question, and this is not an easy one, so how, if you had to sum this up, how has the entanglement with China represented by the Taishang and their successors in these bigger companies, how has this complicated politics in Taiwan?

Shelley: A lot of Taiwanese have been very sensitive to the increasing interdependence between Taiwan and the PRC on the economic front, but it has felt very distant. So that water to the west of Taiwan was, for a long time, a one-way street. People from Taiwan went to the mainland, and they made a lot of money. Not all of them made a lot of money, some of them went bust, but some of them made a lot of money, way more than they ever could have made in Taiwan, because it’s such a larger platform. Your company can get a lot bigger when you can hire 300,000 people to work in one complex. So that money coming back to Taiwan, and that is another problem because it’s not easy necessarily to get your funds out of the PRC, but they can.

And that increased inequality within Taiwan and created some political backlash, just by virtue of a society that had been relatively egalitarian and kind of small scale, suddenly recognizing that there were some businesses and entrepreneurs that had gotten crazy, rich, Asian-level famous and wealthy. The limos lined up at the airport on Friday night, a lot of Taiwanese do not feel good about that. But what really changed, I think, what finally broke through the feeling that, well, it’s risky, but it’s also an opportunity. And there’s a downside, but there’s also a lot of upside, what broke through that was when the straight started being a two-way street. And this is during the Mǎ Yīng-jeǒu 马英九 administration.

Kaiser: Yeah, 2008.

Shelley: After 2008 when they began making economic agreements between Beijing and Taipei, that allowed money and especially that allowed people to come back the other way. And so suddenly, this thing that was relatively abstract, and you didn’t have to be involved in it if you didn’t want to, and maybe it was an opportunity for your kid to go and get a good job for a while, all of a sudden, it’s in your backyard. All of a sudden, you’re worried that PRC investors are going to come and they’re going to take your business or they’re going to be in your sector. When it became a two-way street, then it became much more intimidating. I think that’s where you see the Sunflower Movement coming from is just the realization that we can send a lot of economic activity over there and we will not hollow out our economy. But if they start coming this way, we will just be swallowed in no time because we’re only 23 million people and…

Kaiser: And a million of them live in the mainland already.

Shelley: Or so they tell me. Yeah, yeah. So I think that’s what really tipped the balance in Taiwan away from engagement is probably on balance an okay thing to, we need to get control of this.

Kaiser: Well Shelley, we’re going to have you back on in, it probably won’t be very long at all, given all that’s happening right now in the States and the premium on your expertise right now, and I just enjoyed talking to you so much. Let me remind people, again, that the book is called The Tiger Leading The Dragon: How Taiwan Propelled China’s Economic Rise. It’s just such a great read, and of course we will have you back on. Let’s move on to… Well first of all, thanks. Thanks for your time.

Shelley: You’re welcome. It’s been a delight.

Kaiser: Absolutely. And we’re not done yet. So let me quickly just remind people that the Sinica Podcast is powered by SupChina and if you like the work that we’re doing with this podcast and with the rest of the shows in the network, or with anything else we’re doing at SupChina, the best way you can help us out is if you subscribe to SupChina access, our daily newsletter which is just a fantastic read. There are other newsletters out there, but one thing I can say about SupChina’s is it’s just a better-written newsletter. It’s all chock full of stuff. Jeremy is a very interesting stylist. I love the way he puts a personal touch on the newsletter, so check it out. And if you guys are in an organization of some kind, an NGO, a diplomatic mission somewhere, an embassy or whatever, a university program or a think tank or what have you, just contact us. Alex is the man you want to talk to. Alex@ SupChina.com, he could set you up with a great group discount. All right, let’s move on to recommendations. Shelley what you got for us?

Shelley: I’ve been watching a show on Netflix called Giri/Haji which translates to Duty/Shame. I love a truly bilingual TV show that’s a popular TV show. I love that show several years ago called Cane with Jimmy Smits. I got a thing for Jimmy Smits.

Kaiser: Oh, yeah. I love Jimmy Smits.

Shelley: But it was legit bilingual. They spoke Spanish when they should speak Spanish and they spoke English when they should speak English. I love some of the Welsh series on the BBC, where they use subtitles for the Welsh portions. And this show is like that.

Kaiser: Oh, cool.

Shelley: So it’s a Japanese BBC co-production. It’s about this Japanese detective who is sent to London to investigate a Yakuza-linked murder.

Kaiser: You already have me. I’m there. Oh, my god. That sounds so great.

Shelley: It’s pretty violent and it’s full of gangsters. It’s got English gangsters, Japanese gangsters, Albanian gangsters, but it’s just very creatively done. I love that it’s, as I said, truly bilingual. Every once in a while, it lapses into anime for a lot of flashback scenes and stuff.

Kaiser: What?

Shelley: Yeah, so all of a sudden, the guy turns into a cartoon.

Kaiser: Oh my God.

Shelley: I love it. It’s so creative.

Kaiser: Sounds like something I want to watch with my daughter who’s totally fluent in Japanese, so…


Yeah, well watch out, because like I said, it’s really violent.


All right Giri/Haji. Okay, so my recommendation is, I’m actually only about 20% or so the way done with it [Ed: now finished! It gets even better!], but it’s quite a doorstop. It’s the new Jonathan Franzen novel, Crossroads, which is great. It’s another family story, kind of like The Corrections. But it’s mainly set in the ’70s, though there’s a lot of sort of backstory that goes all the way back to the early part of the century. It centers on the Hildebrandt family. The father’s a Presbyterian minister in a Chicago suburb. The wife who has a dark past, lots of secrets. Their four children, one of whom is young enough at this point where he hasn’t really been fleshed out, but the others are drawn in tremendous depth. This is actually the first book in a planned trilogy, which is called A Key To All Mythologies. And if you’re a fan of George Eliot’s Middlemarch, you’ll recognize that title, which was the name of the fictional book that the protagonist of Middlemarch, who’s one of my favorite literary characters of all time, Dorothea, she marries this pompous guy, this Reverend Casaubon. And he’s writing this really silly book, he’s very, very serious about it, but it’s completely out of date already, called A Key to All Mythologies. So it’s kind of a humblebrag, but it’s meant to kind of signal, I think Franzen meant it to signal, yeah, this is kind of inspired by Middlemarch. And it kind of is because there’s a lot of comedy of manners stuff, but it’s also Middlemarch-y in that it is a really canny psychological plumbing the depths of characters kind of a book, right? It’s really good, deep kind of exploration of human motives and things like that. So what he does with this book, and it sounds like it would be terrible, because it’s this unembarrassed exploration of morality. It’s like what makes people good or bad, what, if anything, actually constitutes altruism? It’s amazing, though. I can not put it down. In fact, I have been making excuses to go out driving just so I can listen to the show more without having to be interrupted. But it’s great.

Shelley: If it gets too heavy for you, you can just tune into Giri/Haji and watch the Albanian gangsters gun down the Japanese guys.

Kaiser: That’s right. All right, Shelley. Thank you, once again. The book is called The Tiger Leading The Dragon: How Taiwan Propelled China’s Economic Rise. Just can’t recommend it highly enough. It’s just such a piece of history that hasn’t been thoroughly explored until now. So thanks so much. What a great time. I can’t wait to see you again.

Shelley: Thanks for the opportunity. It’s great to be with you.

Kaiser: We’ll see you again real soon.

Shelley: Okay, good.

Kaiser: The Sinica Podcast is powered by SupChina and is a proud part of the Sinica Network. Our show is produced and edited by me, Kaiser Kuo. We would be delighted if you would drop us an email at sinica@supchina.com, just tell us how we’re doing. Or, just as good, you can give us a rating or a review on Apple Podcasts. This helps people to discover the show. Meanwhile, follow us on Twitter or Facebook at @SupChina News, and make sure to check out all shows in the Sinica Network. We’ve got a new one. It should be out by the time you hear this podcast. It’s called The China Sports Insider Podcast. Thanks for listening and we will see you next week. Take care.