Taiwan leader hits out at China as Foxconn probe becomes election issue

TAIPEI, Oct 24 (Reuters) – Taiwan Vice President Lai Ching-tae on Tuesday hit out at China over an investigation into Foxconn ( 2317.TW ), a major Apple ( AAPL.O ) supplier that has put pressure on them during the election.

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

They believe it was released for political reasons related to Taiwan’s January election, where company founder Terry Gou is running as an independent candidate for president.

The Global Times reported in an English-language story late Sunday that by contesting, Gou could split the opposition’s vote, guaranteeing victory to Lai, who is already leading the polls.

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

Speaking at a press conference in Taipei, when asked about Beijing’s investigation into Foxconn, Lai said China should “affectionately appreciate” Taiwanese companies’ help in the country’s economic development.

“During the election, there is no need for China to pressure Taiwanese companies to declare a position, or directly support their preferred candidate,” he said.

Taiwanese companies will lose confidence in China and move production elsewhere if they are afraid, which is a big loss for China, Lai added.

Foxconn is pushing to diversify its manufacturing base outside of China to places like India, which may have contributed to Beijing’s pressure on the company, one of the sources said.

Gou declined to comment on the investigation, referring questions to Foxconn and indicating that he is no longer involved in the day-to-day running of the company, even though he remains a major shareholder.

Koh canceled a campaign event scheduled for Monday evening without explanation, and no events are scheduled for Tuesday, his media team said.

Foxconn said in a statement on Sunday that legal compliance is a “fundamental principle” of its operations and that it will “actively cooperate with relevant departments in related work and activities.”

Shares of Foxconn extended their declines on Tuesday, falling more than 2% against a flat broader market ( .TWII ). Shares fell 2.9% on Monday.

Allegations of interference

Taiwan often blames Beijing, whether militarily or economically, for ensuring its election results favor China, but its government has not commented on the Foxconn investigation.

A senior Taiwanese security source, speaking on condition of anonymity because they were not authorized to speak to the media, told Reuters that China’s senior leadership was unhappy with the Global Times story, a government assessment.

That’s because an investigation was quickly launched by the ruling Democratic Progressive Party, which Lai leads, to accuse China of trying to meddle in the election to gain voter support.

Authorities in China have yet to confirm the investigation, which has not received further media coverage within the country.

Speaking at a separate event, former Taipei Mayor Ko Wen-jae, who is running as the presidential candidate of his Taiwan People’s Party and is second to Lai in many opinion polls, said China, a “proclaimed world superpower,” should explain the investigation.

“The biggest problem in this case is that there is no way for the Taiwanese government to communicate with the mainland on behalf of Taiwanese companies,” Ko said.

After President Tsai Ing-wen took office in 2016, China cut off the regular government-to-government dialogue mechanism with Taiwan.

Our Standards: Thomson Reuters Trust Principles.