Email not displaying correctly? View it in your browser.
FOLLOW
subscribe
SHARE
April 20, 2019

It was inevitable that Foxconn Technology Group chairman Terry Gou’s Wednesday announcement he’s running for president of Taiwan would invite comparisons to Donald Trump. Both men are brash billionaires who claim their business experience qualifies them for political leadership. Gou has said he was inspired in part by Trump’s example. They share a fondness for baseball caps.

The similarities have been overdrawn. The dynamics of Taiwan’s political system bear little resemblance to those of the United States. And, unlike Trump, Gou runs a $170 billion business that really matters—for Taiwan, the rest of China and the entire global economy.

Global investors seemed chuffed by Gou’s decision to toss his hat into the political ring. On Thursday, shares of Foxconn, formally known as Hon Hai Precision Industry Co., jumped 6%, and the company’s listed affiliates did even better. Taiwan stocks rallied across the board.

Some market pundits speculated Gou would champion a more business-friendly agenda for Taiwan and bring stability to the self-ruled island’s tumultuous relationship with Beijing. Others hailed his personal rapport with Trump, commander-in-chief of Taiwan’s most important strategic ally.

The euphoria is misguided. Gou’s political prospects are uncertain. He has declared he’ll campaign as a member of Taiwan’s opposition party, the Kuomintang (KMT). But to secure the party’s nomination, he’ll have to persuade party stalwarts he’s a better candidate than Han Kuo-yu, the charismatic KMT politician recently elected mayor of Kaohsiung, the southern port city that is a bastion of the ruling Democratic Progressive Party.

Gou is certain to tout his success as a businessman and the extensive network of relationships with Chinese political leaders he has cultivated over nearly three decades of running factories on the mainland. In the political realm, those achievements may prove liabilities rather than assets.

Gou runs Foxconn with an iron fist. Even admirers worry his temperament is ill-suited to a democracy as boisterous as Taiwan’s. Tsai Ing-wen, the incumbent president, homed in on Gou’s imperious management style this week by noting that while he may be accustomed to being “the boss of a big company,” as Taiwan’s president, he’d have “23 million bosses, so you have to adjust your attitude a bit.”

Meanwhile, the vast scale of Foxconn’s operations in China—the company operates factories in a dozen mainland provinces and is China’s largest private employer—create potential for conflict of interest that make Trump’s business dealings in Russia seem trivial.

The more immediate question is: Who will run Guo’s business while Guo is running for office? Foxconn says Gou will remain chairman but is stepping back from day-to-management. He has no clear successor. The company counts on iPhones, which it assembles for Apple, for about half of its total revenue. But demand for smartphones has peaked and Apple is beset by competitors. The Financial Times observes that Foxconn now faces “more serious challenges than at any time in its 45-year history.” Bloomberg‘s Tim Culpan, who has covered Gou for two decades, points out that the Taiwanese billionaire “remains a hands-on micromanager” and worries that in his absence, “there’s every chance that the underlying businesses would falter for lack of direction.”

More China news below.

Clay Chandler
@claychandler
clay.chandler@fortune.com
.
Innovation and Tech

The (not so) mighty Amazon. After 15 years in China, Amazon has announced its retreat from the country's ecommerce market, where it occupies a measly 0.6% share. Rumors of the ecommerce giant's withdrawal were confirmed by the company in a statement to Reuters. Amazon Inc says it will stop operating its China marketplace as of July 18, but Amazon's cloud service will continue. Reuters

JD on the rocks. Last August, JD.com founder Richard Liu was arrested in Minneapolis after a student accused him of rape. He was released on bail, and in December prosecutors declined to pursue the case for lack of evidence. This week the student instead launched a civil suit against both Liu and JD.com, seeking $50,000 in damages. New York Times

Meitu brushes up. Meitu, the maker of a once-popular beautifying app, is moving into the world of cosmetics as app downloads drop and sales of its own-brand smartphone sag. In 2016, Meitu gave Hong Kong its largest IPO in a decade but its share price has since halved. Seeking new growth, Meitu will release a face cleaning brush that it claims can automatically determine the best pulse-setting to treat an individual's skin. Reuters

TikTok gets blocked. The Madras High Court has ordered the Indian government to ban Chinese app TikTok, which has over 120 million Indian users, claiming the short-video sharing platform spreads pornography and exposes underage users to sexual predators. Apple and Google both have since removed TikTok from their India app stores. Some observers think Indian officials are more concerned that the app could be used to spread political propaganda. Quartz

.
content from Deloitte
The Tax of Tomorrow
In today's digital world, tax leaders are recognizing the value that technologies could deliver to their operating models. In this article, Deloitte looks at the five trends that may disrupt the tax sector and how tax professionals can adapt.
Read More
.
Economy and Trade

Behind the numbers. China's economy grew higher than expected in the first quarter, hitting 6.4% growth over the year before. That prompted some banks to raise their forecasts for the year ahead. However, other economists warn that the Q1 figure, boosted by strong government intervention, disguises a long-term structural weakening. CNBC

Trade war enforcers. The U.S. and China have mostly agreed to mechanisms that would allow each side to evaluate whether the other is adhering to the terms of a trade deal, but pundits fret handing China the power of oversight could leave the U.S. at its mercy. Expectations now are that the two sides will reach an agreement in late May. Bloomberg

All aboard the BRI. Switzerland will sign an accord backing the Belt and Road Initiative (BRI) when President Ueli Maurer is in China later this month. Italy signed an MOU on the BRI last month, becoming the first G7 nation to do so - a move the U.S. strongly opposed. Most of western Europe is wary of the BRI too, so much so China's ambassador to the U.K. asked the British government to help boost the image of the BRI by signing up too. South China Morning Post

.
.
In Case You Missed It

China's e-commerce sector is increasingly being driven by KOL ‘influencers' Week in China

China Investigates Ericsson Over Licensing as 5G Competition Heats Up WSJ

One Month, 500,000 Face Scans: How China Is Using A.I. to Profile a Minority NYT

Leica China video sparks backlash over Tiananmen Square image BBC

Tencent wins key approval to sell Nintendo's Switch in China Reuters

.
Politics and Policy

Sent down youth, part 2. China plans to send around ten million student "volunteers" to rural areas to help regenerate the countryside by "promoting science" and "spreading civilization," according to a document from the Communist Youth League. It's a strange echo of a post-Cultural Revolution policy from Mao, where millions of youth - including current president Xi Jinping - were sent to "learn from the peasants." One scholar frames the new policy as a cover up for mass unemployment among graduates. HKFP

This edition of CEO Daily was edited by Eamon Barrett. Find previous editions here, and sign up for other Fortune newsletters here.

.
EMAIL ALAN MURRAY
subscribe
share: TW FB IN
.
This message has been sent to you because you are currently subscribed to The CEO Daily
Unsubscribe here

Please read our Privacy Policy, or copy and paste this link into your browser:
http://www.fortune.com/privacy

FORTUNE may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.

For Further Communication, Please Contact:
FORTUNE Customer Service
225 Liberty Street
New York, NY 10128

Advertising Info | Subscribe to Fortune