Taiwanese Firms Intensify Moves Into China's Domestic Market

Driven by the revaluation of the renminbi and soaring incomes in China, growing numbers of Taiwanese enterprises have stepped up their efforts to tap the huge market potential there. After years of rapid economic development and rising living standards, China is transforming from "the world's factory" into the "world's market."

Aurora, for instance, plans to expand the number of its direct-sale branches in China to 300 by the end of this year, up from 264 now, and ultimately to 1,000. This will give Aurora the largest retail network for office automation products (such as copying machines) and office furniture in the country.

To pave the way for expansion of its sales network, Aurora is striving to raise its profile among Chinese consumers. As part of this effort, the company has spent 100 million renminbi (yuan) on a corporate pavilion-one of only five such-at Shanghai Expo.

The company has already made major inroads into the medium-to-high-end sector of China's office-furniture market and has hit the top-10 list for suppliers in the OA market there. Operations in China accounted for 43% of the company's total revenue last year, and the figure is expected to top 50% this year.

RT-Mart China plans to open 37 new outlets this year--boosting its total to 160-and has targeted an annual increase of 30%, reaching 1,000 in 10 years. The company expects its revenue to increase 20% to 50 billion yuan this year, up from 40.4 billion yuan in 2009; this will push it past Carrefour China to become the largest hypermarket chain in the country, as well as the leading foreign-invested retailer there. Its profit jumped 24.3% to 1.26 billion yuan in 2009, making it the biggest source of profit for the Ruentex Group, its parent firm in Taiwan, whose core textile business was in the red last year.

Cybermart, a 3C retail chain under the Hon Hai Group, has purchased land in Chongqing, Nanjing, and Jinan (Shandong Province) as sites for new outlets. The chain wants to expand the number of its China outlets to 50 within five years, up from 34 now; it expects to rack up revenues of 30 billion yuan this year, 20% more than 2009.

Buynow, a 3C retail chain under the Clevo Co., a notebook PC maker, plans to increase the number of its outlets in China from the current 20 to 50 by 2015. It expects to see its revenue grow 30% to 5 billion yuan this year.

The Hongsheng Group, a major contract manufacturer for leading global fashion-bag brands, has created its own brand and opened its first retail outlet in Dongguan, in order to make headway in China's domestic market. The own-brand bags carry price tags of 2,000-3,000 yuan, only one-tenth those of famous international brands, but are claimed to have comparable quality. The company expects to derive 20% of its revenue from sales in China this year, up from last year's 15%. It now has 10 factories there, with a total workforce of 7,500 and an independent R&D team to help clients design new products.

The Pou Chen Group, a leading contract manufacturer for top international footwear brands, is marketing women's shoes bearing its own "Aee" brand and priced at 500-700 yuan in CHina. It has opened its first "Footzone" footwear retail outlet in Zhongshan City, Guangdong Province, and expects to have 30 outlets by the end of the year. "Footzone" is Pou Chen's second retail chain in China, following "YY Sports" stores for sportswear and sporting goods. YY Sports now boasts 10,000 outlets throughout China.

Yeh Chunrong, chairman of the Dongguan Taiwan Business Association , plans to establish a hypermarket chain in China to help Taiwanese manufacturers there develop the Chinese domestic market. The capital for the projected venture is set at HK$300 million (NT$1.22 billion, or US$38 million), which will be put up by the chamber's 32 branches. The plan calls for the opening of 10 hypermarkets in three to five years, and for annual revenues to reach NT$13.9 billion (US$434 million). The first hypermarket will be opened in Dongguan by year-end.

Yeh notes that Taiwanese firms in Dongguan account for half of Dongguan's foreign trade, which amounts to US$120 billion a year, but are facing tough challenges of survival because of China's soaring labor costs. The switch of part of their sales to the Chinese domestic market can greatly alleviate this problem, Yeh believes.