Chinese authorities have once again shaken the confidence of foreign companies in China with a series of arrests and investigations into Foxconn Technology Group, Apple’s most important partner and one of the country’s largest employers.
Over the weekend, state media explain Regulators are conducting tax audits and reviewing land use at Foxconn, a Taiwanese company that makes the vast majority of iPhones at factories in mainland China. Foxconn’s public arm, Hon Hai Precision Industry Co., said it would cooperate with authorities.
Meanwhile, an executive and two former employees of WPP Plc, one of the world’s largest advertising agencies, have been arrested In custody People familiar with the matter said that in China. WPP said on Monday it had fired administrative staff It has launched an internal investigation into the incident and has severed ties with an unnamed business group that is also part of the police investigation.
government In custody In March, local employees of a Japanese metal trading company, Nikkei reported on Sunday. This month, a court formally charged an Astellas Pharma Inc. executive with espionage.
Hon Hai Group is Foxconn’s main listed company. The one who fell the most Monday, more than three months later. The share price of Shanghai-listed subsidiary Foxconn Industrial Internet plunged 10%, the largest drop on record. Foxconn’s Chinese rival Luxshare Precision Industry Co. rose 4.9%.
China typically does not publicly explain actions taken by its regulators, leaving companies doing business in the country to guess at the government’s ultimate goals. Given the Communist Party’s immense power, this opaque approach to economic regulation is unsettling to foreign senior executives. The Japanese trading company employee was detained in March and has yet to publicly admit or clarify the specific charges.
“My sense is that there is a real concern at the core of the leadership about foreign influence because dissent among elites is growing,” said Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis. “This is It’s not a signal to foreigners. It’s a signal to the elites: Don’t go that way.”
with China struggle Through the housing crisis, Xi Jinping and his government have been trying to signal support for the private sector, seeking to help stabilize the world’s second-largest economy. Perceptions of the party’s ability to manage the economy have been affected by years of coronavirus lockdowns and a brutal crackdown on the tech industry, which includes Alibaba Group Holding Ltd and its co-founder Jack Ma.
Foxconn is an equally surprising and huge target. The company has been fundamental to China’s development as a high-tech manufacturing base and, with its Apple halo, symbolizes opportunities for other companies in China. For example, Tesla has now turned to China as an important base for electric vehicle production.
Apple CEO Cook visited China last week and met with Commerce Minister Wang Wentao to express his support for China. “Win-win” cooperation. Apple CEO’s rare visit follows Beijing’s actions For security reasons, some staff in government agencies and state-owned enterprises are prohibited from using Apple’s big-name iPhone. After Huawei Technologies Co., Ltd., the latest iPhone 15 also had a disappointing start in China. stunned The Mate 60 phone with 5G capabilities is launched.
“The part of the leadership that deals with the economy and attracting foreign investment is not in a dominant position,” García Herrero said. “So they can only wait and see and hope to minimize the damage by announcing the opening of certain sectors.”
Tax authorities are inspecting Foxconn’s subsidiaries in Guangdong and Jiangsu provinces as part of the ongoing investigation, state-run Global Times newspaper said on Sunday, citing unnamed people familiar with the matter. The report also said natural resource officials were investigating the company’s land use in Henan and Hubei provinces.
The Global Times report did not provide further details about the investigation and tax inspection. But the newspaper quoted Zhang Wensheng, deputy dean of the Taiwan Research Institute at Xiamen University, as saying that while benefiting from development opportunities, Taiwanese companies including Foxconn should “make positive contributions and play an active role in promoting peace across the Taiwan Strait” in mainland China.
Hon Hai also gave no specific details in its filing to the Taiwan Stock Exchange.Foxconn Zhengzhou plantHenan is known as the iPhone City.
“The action against Foxconn has all the hallmarks of a political crackdown. Such a coordinated multi-province effort would almost certainly require the party’s top leadership,” said Gabriel Wildau, managing director of New York-based consultancy Teneo Holdings LLC. of approval.
Foxconn billionaire founder Terry Gou resigns from company board last month as he Activity Became President of Taiwan. The campaign referred questions to Foxconn.He previously fired Claiming he would be vulnerable to pressure from China if he wins January’s election.
“I will not give in to China’s threats,” Gou said at a press conference in August when he announced his candidacy for president. Listing the names of major customers such as Apple, Tesla and Amazon, he said any suspension of production due to political pressure would disrupt supply chains – something China needs to explain to the world.
Lu Xiaomeng, geotechnical director of Eurasia Group, said the investigation may be a way for China to seek influence in Taiwan’s elections, in which relations with the mainland will become a core issue.
“I think Beijing is definitely motivated to engage and discuss this presidential campaign with Terry Gou,” she said on Bloomberg TV.
For Teneo’s Verdau, “the crackdown was surprising given Gou’s close ties to mainland leaders and Foxconn’s role in China becoming the world’s largest exporter and manufacturer.” However, “senior leaders may be unhappy that Gou is preparing to disrupt Taiwan’s presidential campaign. The action against Foxconn appears to be an attempt to send a message to Gou that he should consider the broader political situation rather than indulging in his own ambitions.” ,” he added.
Taiwan Vice President and presidential front-runner Lai Ching-te expressed support for Hon Hai Precision Industry at a campaign event on Sunday.
“China should not force Taiwanese companies to take a stand during the election,” he said. “China should recognize that Taiwanese companies have made a huge contribution to its economy.”
Taiwan’s Executive Yuan President Chen Chien-jen told reporters in Taipei on Monday that the government has been in contact with Hon Hai and will provide assistance according to the situation.
Khoon Goh, head of Asia research at Australia and New Zealand Banking Group, said the Foxconn investigation could lead to weakness in Taiwan’s stock market and put pressure on the local currency. The Taiwan dollar fell to a seven-year low against the yuan. Dollar.
Beijing has been increasing scrutiny of Western companies amid rising geopolitical tensions. In March, authorities raided the Beijing offices of New York-based due diligence firm Mintz Group and detained five of its Chinese employees. April, Bain & Company. comfirmed Chinese authorities questioned staff at its Shanghai office.
The following month, Chinese national security officials visited a branch of Triumph, a consulting firm based in New York and Shanghai.
At a forum in Beijing last week, Takehiko Nakao, chairman of Mizuho Research & Technology, said the arrests, made without a public explanation of the reasons, had heightened unease among international companies. China’s Foreign Ministry said in an email in September that 17 Japanese had been detained in China since May 2015.
“Japanese companies want to expand, but they are also a little cautious,” said Nakao, a former president of the Asian Development Bank, adding that part of the reason for that caution was China’s detention of a senior executive without a public explanation. “If there’s even one person like that, people become very concerned.”
However, the Foxconn case is unique to Wildau. “The fact that the founder of Foxconn is running for president in Taiwan puts his company more directly in the political spotlight than a typical multinational operating in China,” he said. “Additionally, mainland leaders do not view Taiwan as a foreign country, so they may be more willing to use Foxconn’s influence to influence Taiwanese politics rather than an explicitly foreign company.”
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