China launches investigation into iPhone maker Foxconn, says state media

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China has launched an investigation into Apple iPhone maker Foxconn over tax and land use, Chinese state media reported on Sunday.

The Global Times, citing anonymous sources, said tax authorities inspected Foxconn’s sites in the provinces of Guangdong and Jiangsu and natural resources officials had inspected sites in Henan and Hubei.

Foxconn said it would co-operate with the investigation. “Complying with laws and regulations is a basic principle for the group worldwide,” said Foxconn in a statement. “We will actively co-operate with the relevant authorities’ operations.”

The Global Times article quoted an expert saying “Taiwan-funded enterprises, including Foxconn . . . should also assume corresponding social responsibilities and play a positive role in promoting the peaceful development of cross-strait relations”.

Foxconn founder Terry Gou is running as an independent candidate in Taiwan’s presidential elections in January, a contest that will have a significant influence on Taiwan’s relationship with China and tensions in the Taiwan Strait.

Gou, who handed Foxconn management to a successor chief executive four years ago, resigned his seat on the board in early September after announcing his presidential run, but retains a 12.5 per cent stake in the company.

Beijing has in the past targeted local subsidiaries of Taiwanese companies with regulatory probes and political pressure at sensitive or tense times. Chinese officials frequently urge Taiwanese companies to help promote “peaceful development” between the two sides.

China claims Taiwan as part of its territory and reserves the option to take the island with force if Taipei resists unification. The People’s Liberation Army is continuously stepping up moves to probe the airspace and waters near Taiwan.

Gou trails all other three presidential candidates so far with a support rating of just 7 per cent, according to a poll conducted this week by Formosa, one of Taiwan’s leading pollsters.

The founder insists that despite his decades of doing business in China, which has made Foxconn the country’s largest private employer and exporter, he is not doing China’s bidding.

“If the Chinese Communist party regime were to say ‘If you don’t listen to me, I’ll confiscate your assets from Foxconn,’ I would say ‘Yes, please, do it!’” Gou said at the announcement of his presidential run on August 28. “I cannot comply with their orders. I won’t be threatened.”

Apple is also trying to navigate an increasingly complex relationship with China at a time of historic tensions between Beijing and Washington. Last week, Apple chief executive Tim Cook travelled to China and met with members of Xi Jinping’s leadership team, including Vice-Premier Ding Xuexiang and China’s commerce and information technology ministers.

Chinese government departments and state-owned enterprises have in recent months banned or discouraged employees from using Apple devices. In September, Beijing warned of iPhone-related “security incidents”.

The investigation into the Apple supplier also highlights broader uncertainty among foreign businesses in China after Beijing cracked down on the operations of consultancies and due diligence groups.

On Friday, the Financial Times reported Chinese police had raided the Shanghai offices of WPP-owned media agency GroupM.

Additional reporting by Ryan McMorrow and Sun Yu