Recently, the IPO of Foxconn Industrial Internet Co., Ltd. in China has experienced "lightning." From the submission of the prospectus to the eventual meeting, Foxconn spent only 36 days (20 working days), creating a new record for the A-share IPO, which is what the outside world calls the "light speed IPO." Undoubtedly, recently the mainland regulator supervised the opening of the "green channel" for new economy enterprises, Foxconn's own excellent performance, and "individuals on both sides of the strait" congenital advantages, which together contributed to Foxconn "light speed IPO". It is expected to be the largest technology company in the A-stock market. However, the author believes that Foxconn’s "Speed ​​of Light IPO" not only reflects the high attraction of mainland capital markets to Taiwanese-funded enterprises, but also reflects the fact that the traditional economic cooperation model between the two sides of the strait has been in the background of profound and complex changes in the international and cross-strait political and economic patterns. Enter a new round of profound changes. As the mainland has entered a phase of high-quality economic development, the ever-increasing cross-strait economic strength, and the continuous strengthening of cross-strait economic and social integration, the cross-strait economic cooperation is undergoing a “quiet revolution†that will enable the future economic and trade relations between the two sides of the strait. Cross-Strait relations have far-reaching implications.
The Model of Growth under the Pattern of Cross-Strait Traditional Economic Cooperation
Today we talked about Foxconn, and we all know that it is a world-renowned electronic product foundry company. Its founder, Mr. Gou, is an outstanding Chinese entrepreneur. But if we put the clock back 40 years ago, then Foxconn's parent company, Hon Hai Precision Group, was only an unknown SME in Taiwan. In 1988, Hon Hai Precision Group began to invest in Foxconn in Shenzhen, where it mainly produces 3C products. Since then, Foxconn has entered a rapid development track and has created a "kingdom of foundry" with great international competitiveness in the mainland. As the so-called “Thirty Years of Hedong in the Thirty Yearsâ€, Foxconn Group's key to the present is that it seized the opportunity of the mainland’s reform and opening up and became a model for the growth of enterprises under the cross-strait economic cooperation model. Since entering the mainland market, Foxconn has undertaken OEM production orders for major IT companies around the world as its main business, and it has played its long-term export advantages. What is more important is that Foxconn makes full use of the advantages of cheap land and abundant low-cost labor force on the mainland to fully realize the advantages of OEM, and realizes an organic combination of maximum cost control and maximized production efficiency. From the perspective of economics, in the past, the cross-strait economic cooperation model was mainly based on the mainland’s cheap and abundant land, labor, and other preponderant factors. Taiwanese businessmen used the mainland as a processing and export base to form “Japan imports - Taiwan orders - mainland China. Production-export to Europe and the United States, the four corners of the industrial division of labor model. Foxconn is the leading Taiwanese company in mainland China. Its huge industrial parks built in various parts of the mainland, the demand for more than one million jobs, and the huge promotion effect it brings to local foreign trade after it is put into production can be described as the truest portrayal of the development and growth of Taiwanese enterprises under the cross-strait traditional economic cooperation model. .
The International and Cross-Strait Political and Economic Environment Behind Foxconn's IPO Market
In recent years, Taiwanese companies represented by Foxconn have also faced “growing pains†while growing rapidly. Especially since the international financial crisis, the global, especially the continental economic environment, has entered a period of profound changes, coupled with the ups and downs of cross-strait relations, which objectively pose a severe challenge to the traditional cross-strait economic cooperation model on which mainland Taiwanese enterprises rely.
On the one hand, after the international financial crisis, the difficult recovery of the world economy and the complex and volatile economic situation, especially the economic downturn in Europe and the United States and a significant rise in trade protectionism, have had a negative impact on Taiwan enterprises that have long been engaged in processing exports. And Europe and the United States are trying hard to revitalize the manufacturing sector, which has also exerted greater pressure on Taiwanese companies that used to work in the mainland. This has prompted Foxconn and other Taiwanese companies to go to the United States to increase investment in manufacturing. On the other hand, in recent years, China’s demographic dividend has disappeared and labor, land, and other production costs have risen rapidly. Foxconn and other Taiwanese companies have repeatedly failed to attract hundreds of thousands of laborers, and Vietnam, India and other Southeast Asian and South Asian countries have labor, land, etc. In terms of cost, it still maintains a large advantage. Objectively, it also makes mainland Taiwanese companies face the “double attack†of high-end manufacturing in Europe and the United States and low-end manufacturing in Vietnam. This has caused mainland Taiwanese companies to be in a dilemma, choose to go to Vietnam and other lower-cost regions, but will face problems such as dissatisfaction with various types of water and soil. If they stay on the mainland, they will face problems such as rising costs. They must undergo transformation and upgrading, but transformation and upgrading are not easy. . At the same time, in recent years, the mainland’s economy has developed rapidly, local companies have begun to emerge, and their competitiveness has increased. The economy in the island has been sluggish, and the impact on Taiwan companies has also increased.
Objectively, the internal and external political and economic environment faced by mainland Taiwan enterprises represented by Foxconn in the past few years is not entirely a challenge. In fact, the rapid development of the mainland's economy and the transformation process have also provided Taiwanese companies with unprecedented opportunities for development. For example, the mainland's domestic demand market is growing rapidly, and will soon surpass the United States as the world's largest consumer market. At the same time, the mainland has launched a new round of reform and opening up and promoted the construction of the “One Belt and One Road†to a considerable degree in enhancing its international political and economic influence. In addition, the rapid development of the new economy such as artificial intelligence and cloud computing in the mainland has also created a new blue ocean for the transformation and development of Taiwanese companies.
The new trend of cross-strait economic integration after the listing of Foxconn
First, new cross-strait economic cooperation is expected to accelerate further. In recent years, the mainland's new economy has flourished and has become an important force in leading the development of a new global economy. Leading Taiwan companies such as Foxconn are actively deploying in the fields of AI talent cultivation, IOT industrial field applications, big data, financial technology and other fields, and have already achieved initial success. The Foxconn Industrial Internet’s listing on the A-share market is another major breakthrough for Foxconn’s full embrace of the new economic development. According to the prospectus, Foxconn will mainly raise funds for applications such as the construction of industrial Internet platforms and cloud computing. In the future, leading companies on both sides of the Strait will hopefully accelerate cooperation in the new economic field. The mainland will become the new homeland for new economic cooperation between the two sides of the strait.
Second, more Taiwanese companies will deeply integrate into domestic markets such as domestic demand and capital. In the past, Taiwanese companies mainly used the mainland as a production and processing base, and their willingness and ability to cut into the mainland domestic market were insufficient. With the expansion of the domestic domestic market, more and more Taiwanese companies will increasingly focus on expanding the mainland market. The mainland and European and American markets are expected to go hand in hand to become the "two wheels" for the advancement and development of Taiwanese companies. In addition to the domestic demand market, both the high price-earnings ratio in the short-term mainland capital market and the long-term capital market development prospects are in stark contrast to the island’s capital markets, which are like “a pool of stagnant waterâ€. In the foreseeable future, more Taiwanese companies will embrace the mainland capital market and become the new force for the development of the capital market in the mainland.
Again, cutting into the mainland-dominated industrial chain will become a more realistic choice for Taiwanese companies. At present, Foxconn and other mainland Taiwanese companies are mostly centered on European and American industrial chains and play a role in the Asia-Pacific network of labor divisions that they are leading to, such as the Apple supply chain and the Tesla supply chain. With the rapid rise in the status of the mainland in the global industrial chain and value chain, especially with the implementation of the mainland’s “Made in China 2025†strategy, the international supply chain led by mainland enterprises will play a more important role in the global supply chain system. Passive or active participation and integration into the mainland supply chain will become the best choice for Taiwanese companies.
In addition, cross-strait industrial cooperation is also expected to become a new driving force for cross-strait economic cooperation. As a manufacturing enterprise with strong international competitiveness, Foxconn is an important role model for the mainland to promote economic “from imaginary to practical†and to promote the spirit of craftsmen. The direction in which Foxconn has promoted the transformation of the industrial Internet and the integration of new economic development also fits the current continent. Promote new demands for economic upgrading. In the foreseeable future, the cooperation between the two sides of the Taiwan Strait, led by Foxconn, will become a new highlight of the transformation and upgrading of the economic cooperation between the two sides of the Taiwan Strait after the high-quality development stage of the mainland economy.
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