Taiwan-mainland China investment plunges to 22-year low as politics plague ties
- 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
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.
“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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Lee has identified a market in the mainland, but he focuses more intently now on Taiwan, Japan and South Korea.
“People are telling me to spin off if you want to do a China thing, because [otherwise] you don’t want to be connected to China. That’s how bad things are,” he said.
Taiwan’s approved mainland Chinese investment bound for Taiwan reached US$29.7 million last year on 30 total project applications, according to the department. Most of the money went to wholesale, retail, electronics parts, banking and information software services.
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That number marks the lowest annual figure since Taiwan began allowing mainland investment in 2009 and a precipitous fall from a peak in 2013. Approved deals in 2013 reached US$349.5 million across 138 applications.
Taiwanese investors prefer to avoid mainland China because of US pressure to “decouple”, said Peng Peng, executive chairman of the Guangdong Society of Reform.
Some are afraid of getting caught in a conflict over the next few years, he said.
Beijing sees Taiwan as part of China, to be reunited by force if necessary. Most countries, including the US, do not recognise Taiwan as an independent state, but Washington is opposed to any attempt to take the self-governed island by force and is committed to selling it weapons.
Many Taiwanese firms are still trying to thread the needle and operate in both the mainland and US-allied countries.
[Investors] can find a space where each side gets along
Taiwan-based tech firms have shifted production of sensitive technology to Western countries while making more common gear, such as smartphone parts, in mainland China, said Eden Chung, a semiconductor analyst with the market research firm TrendForce in Taipei.
The lure of ongoing subsidies from countries such as Japan motivates decisions on whether to move production, Chung said.
Although opening a subsidiary for each side of the East-West divide can add costs to doing business, she said, “[investors] can find a space where each side gets along”.
Some US-wary companies from Taiwan still access the mainland quietly through third companies, Hsu said. “Taiwanese firms can find a way to work around given the de-risking and decoupling.” he said.
