Taiwan Determined to Move Away from China

Taiwan Determined to Move Away from China
Taiwan Determined to Move Away from China

Taiwan seems to have decided to follow the same path as European, American and Japanese companies.

For similar reasons, the island’s large business community has taken steps to diversify its investment, trade, and supply sources away from China and toward Southeast Asia and South Asia. Some Taiwanese investments have even been made in the United States. Beijing is concerned about these trends. The Chinese economy is weakened, and just when it needs the support that Taiwanese companies have provided for decades most, that support is disappearing.

Unlike the United States, the European Union, and Japan, Taiwan has kept a low profile in its rejection of doing business with Beijing for diplomatic reasons. America, unlike Taiwan, has made its hostility toward China clear. It has banned certain types of trade and technology investment in China. It has increased tariffs on Chinese goods entering the United States. The European Union has also not minced its words, recently announcing tariffs on electric cars made in China. Japan has led an effort to make the world less dependent on China for rare earth elements.

Taipei, on the other hand, has not officially made any openly hostile announcements. However, the steps taken by its business community, as well as those of America, Europe and Japan, are unequivocal.

Politics and public statements aside, the commercial reasons that these economies are shunning China are much the same. For decades, developed countries across the continent viewed China as an attractive place to do business. Production costs were cheap, and operations in China were reliable. Although Beijing imposed demands on foreigners that went beyond what is normal in global economic relations, low production costs and reliability offset Beijing’s measures. Trade and investment flourished. But in recent years, that balance has shifted dramatically.

Chinese wages have been rising faster than in the rest of the world, particularly elsewhere in Asia. This trend has eroded China’s former advantage in production costs. Although the recent depreciation of the yuan has restored some of this advantage, foreign companies are aware of the volatility of currency values ​​and do not factor it into their long-term plans.

As for China’s former reputation for reliability, the pandemic’s cuts to Chinese shipping and Beijing’s prolonged “zero COVID” policy have gone a long way toward erasing that reputation. At the same time, Beijing’s recent obsession with security has made official China more troublesome than ever. The combination of diminishing appeal and rising taxation has tipped the decision-making balance against China for companies on every continent.

The signs that Taiwanese companies are moving away from China are clear, even clearer than in Europe or the United States. Although China remains Taiwan’s largest trading partner, its share of Taiwanese trade has been steadily declining since 2021. That year, Chinese sales to Taiwan and Chinese purchases from Taiwanese producers accounted for the equivalent of $208.4 billion, or about a quarter of the total. By 2023, that amount had fallen by nearly 20% to about $166 billion – about a fifth of the total.

In contrast, Taiwan’s trade with Southeast Asia increased from $117.5 billion in 2021 to $134.6 billion in 2022, an increase of nearly 10% in a single year. Taiwan’s dependence on China for exports has also been reduced. Even including Hong Kong, recent figures show that it has not been this low since 2018. Most of the difference went to Southeast Asia.

The figures also show a dramatic shift in Taiwanese investment. Investment flows from the island’s businesses to China have been falling since 2010. In 2023, they were down nearly 40% from the previous year. At $4.17 billion, they were less than a third of the 2018 level last year.

Much of the difference has gone to Southeast Asia, including Singapore, Vietnam, Indonesia, Malaysia and Thailand. These countries now receive some 40% of Taiwanese investment, a proportion that exceeds the flow to China. Investment in Vietnam has quadrupled, particularly in the area dearest to Beijing’s heart: advanced electronics. Taiwanese tech companies Foxconn, Wistron, Pegatron and Quanta all plan to expand their presence in Vietnam.

These economic realities are bound to trouble Beijing, especially their implications for Taiwan’s security. The more Taiwanese trade and investment expands in Southeast and South Asia, the more the Asian community becomes involved in Taiwan and the more likely it is to resist Beijing’s efforts to disrupt things. No one is arguing that these countries have the military power to counter China’s repeated threats to seize Taiwan. Nevertheless, the interest in Taiwan’s independence of a broader group of countries makes Beijing’s position all the more delicate.

The opinions expressed in this article are those of the author and do not necessarily reflect those of The Epoch Times.

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