Taiwan-mainland China investment plunges to 22-year low as politics plague ties

Name: Taiwan election exposes generational rift over potential reunification with mainland China
Uploaded: 2024-01-15T12:00:19.000Z
Duration: 5 min 27 s
Description: Taiwan election exposes generational rift over potential reunification with mainland China

Investment figures on both sides of the Taiwan Strait have fallen to new lows thanks to political tension and consequent shifts in supply chains

Many Taiwanese companies are moving outside the mainland, but some still seek to do business there and are finding workarounds

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Taiwan is moving investment and activity away from mainland China to avoid heightened geopolitical tensions. Photo: AFP

Ralph Jennings

Published: 8:00pm, 15 Jan 2024

Taiwanese investments approved for mainland China, a historic destination for the island’s export manufacturing sector, fell to a 22-year-low in 2023 while mainland investment in Taiwan also plumbed new depths, showing both sides of the strait have been impacted by political friction and global supply chain shifts.

Investments approved for Taiwanese companies in the mainland reached about US$3.04 billion last year, the Department of Investment Review under Taiwan’s Ministry of Economic Affairs said on Monday. That figure covered 328 specific project applications.

The dollar figure is the lowest for any single year since 2001, when it reached just US$2.78 billion, department data shows. The department approved 1,186 projects that year.

Taiwanese investors, once lured by the mainland’s lower costs, have been branching out to US-allied countries since 2018. This shift gets them around US tariffs on mainland-originated exports and meets US demands that they avoid selling sensitive technology to clients across the strait.

“Firms are increasingly confronted with the higher costs of serving two sides of the ocean and thinking about how to allocate resources,” said Jason Hsu, a tech consultant and former Taiwan lawmaker.

Lydia.ai, a firm that designs software for insurance companies, has been told by US venture capital firms to avoid the mainland if it wants their funding, Taiwanese co-founder Anthony Lee said. The firm raised US$13 million from 2016 to 2023.

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Taiwan election exposes generational rift over potential reunification with mainland China

Lee has identified a market in the mainland, but he focuses more intently now on Taiwan, Japan and South Korea.