Taiwan nips at Alibaba again, demands that Taobao withdraw from the island in six months

Taiwan’s government has it in for Alibaba – or at least that’s the facade it’s projecting.

As reported by Taiwan’s Economic Daily News, the island’s Ministry of Economic Affairs yesterday demanded that Alibaba’s Taiwan branch for Taobao depart from the island within six months. It also imposed a fine of NT$240,000 (US$7,877) on the company.

The ministry is claiming that Taobao has unlawfully failed to register in Taiwan as a mainland Chinese company. According to regulations that govern mainland investments in Taiwan, companies that aren’t registered in Taiwan or mainland China will be treated like mainland Chinese companies if a mainland entity either owns 30 percent, or has the power to appoint board members. In Taiwan, Taobao’s local branch is registered as a subsidiary of Taobao in Hong Kong – which Taiwan considered neither Taiwanese nor Chinese. But the Ministry of Economic Affairs is claiming that documents revealed after Alibaba’s IPO indicate Taobao Hong Kong to in effect be a mainland Chinese company.

In March, Alibaba faced a similar threat from Taiwan’s Ministry of Economic Affairs with regards to Alibaba.com, which was operating in Taiwan as a subsidiary of a Singapore-registered company. The government’s call came one day before Alibaba founder Jack Ma was scheduled to appear at National Taiwan University to officially announce a US$315 million fund for Taiwanese startups.

A Taobao spokesperson gave the following statement to Tech in Asia: “We are having positive ongoing discussions with the relevant Taiwanese authorities and find a suitable way forward in order to continue to serve the needs of Taiwan consumers and merchants.”

In Taiwan, Taobao employs about 100 staff and devotes most of its efforts to bringing Taiwanese sellers into the marketplace. The Economic Times says that if Taobao withdraws from Taiwan, ordinary Taiwanese people can still buy and sell goods on Taobao, but merchant and customer service might be slowed down.

It’s hard to know if Taiwan’s calls stem from legal concerns or political showmanship. The timing of its last demand, coupled with damning follow-up statements from Taiwan’s National Development Council, indicate that there might be some showmanship and PR at play. It’s all just fist-shaking for now, but we’ll see how high the stakes are as the six-month period comes to a close.