China Launches Tax Investigation on Apple iPhone Maker Foxconn

China is investigating Foxconn, one of Apple’s top suppliers, according to a state media report. The examination comes weeks after founder Terry Gou announced his presidential run and said Beijing won’t coerce him despite his large commercial interests in Taiwan.

Analysts said Gou’s presidential run will unnerve foreign businesses in China, even if the investigations are unrelated. On Sunday, the state-owned Global Times reported that tax authorities audited Foxconn’s largest facilities in Guangdong and Jiangsu. According to unidentified sources, the natural resources ministry probed the company’s land use in Henan and Hubei.

Foxconn said that following the law was one of its “basic principles. It said we would actively cooperate with the relevant units on the related work and operations. Hon Hai Precision Industry, or Foxconn, operates iPhone manufacturing in Guangdong and Henan, including the world’s largest in Zhengzhou.

On Monday, Foxconn Industrial Internet, a Shanghai-listed business, fell 10%. Taipei-listed Foxconn Technology lost over 2%.

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China’s Crackdown on Foreign Business Operations

The probe was revealed after Chinese police searched GroupM’s Shanghai headquarters, owned by WPP, as Beijing increased pressure on foreign corporations. Due to a national security crackdown on overseas consulting firms, they say they’re becoming more concerned about raids and detentions in the world’s second-largest economy.

Last week, Japanese officials announced that China had arrested a Japanese national who worked for drugmaker Astellas Pharma and had been imprisoned for breaking criminal and anti-espionage laws.

“China’s ongoing crackdown on foreign business operations continues to discomfit the investment community,” said Kaiyuan Capital CIO Brock Silvers. China’s economy needs investors, but policy initiatives raise worries about basic instability.”

Self-made septuagenarian billionaire Gou stated he would run for Taiwan’s presidency as an independent in January.

Terry Gou’s Defiance of Beijing and the Implications for Foxconn’s Shareholders and Supply Chain

Gou told reporters that he won’t “comply with its orders” when pressured by Beijing after years of doing business in China. “If the Chinese Communist regime says, ‘If you don’t listen to me, we will confiscate Hon Hai [Foxconn]’s property, According to a Taipei press conference video, Gou said, “Yes, please do it.”

Since worldwide consequences are immense, he didn’t think Beijing would threaten Foxconn. He said Foxconn has thousands of shareholders worldwide, including large investment firms and pension funds. Which nation, investment business, or company would invest in China if the CCP confiscated Foxconn’s property?

Gou said that the company supplies several major Western companies. A serious supply chain catastrophe will result from its closure.

Beijing’s Pressure on Taiwan and Foxconn’s Favoritism in China

Gou is behind ruling Democratic People’s Party (DPP) leader Lai Ching-te, Kuomintang leader Hou Yu-ih, and Taiwan People’s Party leader Ko Wen-je in the polls.

Beijing pressures democratically ruled Taiwan to embrace its rule. The current government considers Taiwan a de facto sovereign nation. The Global Times reported that Xiamen University professor Zhang Wensheng said Foxconn profited from Beijing’s favoritism on Sunday.

Read: Apple supplier Foxconn says it will cooperate with Chinese authorities on tax, land use investigations

Zhang told the news outlet that Taiwan-funded companies like Foxconn benefit from [China’s] growth and rapid development on the mainland. Still, they should also take social responsibility and promote peaceful cross-strait relations.