Taiwan’s front-runner attacks China as Foxconn investigation turns into election issue

TAIPEI (Reuters) – Taiwan Vice President Lai Ching-te on Tuesday criticized China over its investigation into Apple Inc’s (2317.TW) main supplier Foxconn, saying Beijing should “cherish” Taiwanese companies and not pressure them during elections.

Foxconn faces a tax investigation in China, two sources close to the company said on Monday, confirming a report in China’s state-backed Global Times newspaper.

The sources said they believe the matter was disclosed for political reasons related to Taiwan’s January elections, in which company founder Terry Gou is running as an independent candidate for president.

The Global Times newspaper said in an English-language article late on Sunday that Jo could split the opposition vote, potentially ensuring victory for Lai, who is already leading in the polls.

China claims Taiwan as its own territory, and Beijing hates Lai, whom it believes is a separatist. He says only the people of Taiwan can decide its future, and Beijing has rejected his offers for talks.

Speaking at a news conference in Taipei, in response to a question about Beijing’s investigation into the Foxconn case, Lai said China should “cherish and appreciate” Taiwanese companies for their help in that country’s economic development.

“During elections, China does not need to pressure Taiwanese companies, require them to announce a position, or even directly support the candidate it prefers,” he said.

Lai added that Taiwanese companies will lose confidence in China, and if they feel afraid, they will shift production elsewhere, which will represent a great loss for China.

Foxconn is seeking to diversify its industrial base outside China to places such as India, which one source said may have contributed to Beijing putting pressure on the company.

Joe has not commented on the investigation, with his campaign team referring questions to Foxconn and noting that he is no longer involved in the day-to-day management of the company, although he remains a significant shareholder.

Joe, without explanation, canceled a campaign event originally scheduled for Monday evening, and has no events planned for Tuesday, according to his media team.

Foxconn said in a statement on Sunday that legal compliance is a “fundamental principle” of its operations, and that it will “effectively cooperate with relevant units in relevant businesses and operations.”

Foxconn shares continued their declines on Tuesday, down more than 2% compared to the flat broader market (.TWII). Shares closed down 2.9% on Monday.

Accusations of interference

Taiwan often accuses Beijing of seeking to exert pressure, whether military or economic, to influence the results of its elections to ensure a favorable outcome for China, whose government has not commented on the Foxconn investigation.

A senior Taiwanese security source, who spoke on condition of anonymity because he was not authorized to speak to the media, told Reuters that the government’s assessment was that China’s top leadership was not satisfied with the Global Times story.

The source added that this is because the ruling Democratic Progressive Party, headed by Lai, jumped into the investigation too quickly to accuse China of seeking to interfere in the elections in an attempt to gain more support from voters.

The authorities in China have not yet confirmed the investigation, which has not received further media coverage within the country.

Speaking separately, former Taipei Mayor Ko Wen-ji, who is running for president from his Taiwan People’s Party and is ranked second to Lai in several opinion polls, said China, “which claims to be a global power”, should explain the investigation.

“The biggest problem with this is that the Taiwanese government has no way to communicate with the mainland on behalf of Taiwanese companies,” Kuo said.

China cut off the mechanism for routine government-to-government talks with Taiwan after President Tsai Ing-wen took office in 2016.

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