No Rule of Law When Doing Business with China, Says Head of Victims Association
After Kao Wei-Pang came to Canada from Taiwan in the late 1960s, he completed his postdoctoral work at McGill University and went on to teach for two years at Montreal’s Vanier College.
“I have deep feelings for Canadians,” says Kao.
That’s why as the Canadian government is seeking to develop closer ties to China and even to explore a possible free trade deal with the communist country, Kao is warning Canadians to tread carefully.
Kao, himself a victim of China’s corruption and unfair business practices, is the founder of the Taiwanese Victims of Investment in China Association.
The chemical engineer made his fortunes in Taiwan in the plastics industry starting in the mid-1970s, launching small and medium-sized enterprises.
By the late 1990s, he was finding it difficult to compete with mainland Chinese products, which had lower production costs. So he invested US$500,000 in a venture in China, starting a factory that manufactured large pots made of bronze or cast iron, with an international market in the United States.
Seeing the profitability of the venture, however, his well-connected vice general manager effectively robbed Kao of his investment and drove him out of the venture, Kao says.
The vice general manager took out loans against the factory’s assets by forging Kao’s signature and colluding with the local bank officials, and used the loan along with equipment and other assets from Kao’s factory to start another factory making the same products.
When Kao attempted to seek justice through the legal system, the vice general manager, whose father was a deputy ministerial official, saw to it that Kao’s legal case didn’t go anywhere. Now, nearly 20 years after his factory was fraudulently taken from him, Kao says he still hasn’t found any restitution from the courts, and the vice general manager is now living in Canada.
‘Extremely risky to do business in China’
“It is extremely risky to do business with China, no different from taking chestnuts out of the fire,” Kao said in an interview in Chinese.
The Taiwanese Victims of Investment in China Association publicizes cases of Taiwanese business people who have been cheated, wrongly imprisoned, or even killed while conducting business in China.
Kao says China’s Taiwan Affairs Office received 28,000 complaints from Taiwanese businessmen about being wronged in China within a period of 10 years in 2011. The actual number is probably much higher, he says, as many of the victims dare not make their ordeal public out of fear for the safety of their family and relatives in China.
“In a country that is not ruled by law, its own citizens’ security cannot be guaranteed, let alone businesses from outside China,” Kao says.
Kao notes that this abuse is not only limited to Taiwanese. Similar cases have been reported among Korean and Japanese business people who invested in China. He mentions a detailed report in the Japanese publication Bunshun on Japanese manufacturers who had been abused by the Chinese system as an example.
Clive Ansley, a Canadian lawyer who practiced law in China for 14 years, says China’s judicial system is corrupt and controlled by the Chinese Communist Party. “There is no legitimate court system,” he said.
In his later years of practicing in China, Ansley found that it was no longer possible for foreigners to win in Chinese courts.
The federal government recently held a public consultation on a possible Canada-China free trade deal, and the results showed that Canadians had a wide range of concerns and expressed that they weren’t sure a free trade agreement would be able to address those concerns.
Canadians said they saw “significant challenges associated with doing business in China,” such as the inconsistent rule of law in China, skepticism that Beijing would live up to any trade agreements, competition from China’s state-owned enterprises, and the impact on Canadian jobs.
A recent survey by the US-China Business Council shows that more American companies are losing their optimism about the business climate in China compared to previous years, due mainly to Beijing’s policies toward foreign companies. Among the challenges cited are competition from Chinese companies, license and approvals, investment barriers, intellectual property rights enforcement, among other concerns.
Kao says Canadians shouldn’t just focus their sight on the short-term benefits they may be getting on business deals with China.
“Once you are in the trap, you cannot escape safely,” he says, warning that in time, “your technology will become that of others’, your investment will become others’ assets, and you will be driven out of China.”