The mainland is set to overtake Taiwan in computer hardware exports for the first time, thanks to the migration of Taiwanese manufacturers to the mainland. The Beijing Evening News at the weekend quoted figures from the Taiwan Association to Promote the Information Industry as saying that China's hardware exports this year will rise 30 per cent from the US$18.45 billion of 1999 and overtake those from Taiwan. This growth will make China the world's third-biggest hardware exporter, up from fifth last year. This is a result of Taiwan information technology (IT) firms shifting their production to the mainland, a trend that is accelerating as the goods they make become increasingly hi-tech. In the 1980s, Taiwan companies invested in the mainland to produce low-tech, labour-intensive items such as shoes, toys and plastic and rubber goods. Taiwan's IT industry followed, starting with low-tech items such as keyboards, mice and computer frames. But the products have become increasingly more sophisticated, with more than 50 per cent of monitors and digital cameras of Taiwan companies produced in the mainland, the China News Service said. Now Taiwan IT firms have applied to their government for permission to manufacture their latest computer notebooks in China, it said. This flow of investment was going on despite poor political relations and the attempt by Taipei to limit the transfer of high-technology to the mainland. 'The economic development of Taiwan and the mainland are inseparable. In the face of the financial difficulties in Taiwan, more and more people realise that its industry must move here. The future of Taiwan is in the mainland,' the news service said. This production shift is a double-edged sword for Beijing. While it means welcome high-technology products, bringing with them good wages and jobs, it also raises the stakes in a possible conflict with the island. Were Beijing to launch an invasion or even a limited military operation against Taiwan in the name of reunification, it would risk losing forever this increasingly lucrative source of foreign investment.