Published: Friday, May 17, 2020
WASHINGTON – Whether it is tapioca or computer chips, Taiwan is moving away from China – the world’s number two economy. The world’s No. 2 economy threatens to seize the democratically-ruled island, if need be.
The Biden administration has helped to boost the investment of the world’s largest maker of computer chip, which powers everything from medical devices to smartphones. A Taiwanese company announced shortly after that it would be ending its two decade-long presence in mainland China as part of a global race for the top spot in the high tech industry.
Taiwan is making these changes in the face of a growing rivalry between China and the United States. It wants to be less dependent on Beijing, and more independent from Chinese pressure. At this time it also wants to strengthen its economic and trade relations with its biggest ally, the United States. This shift is also taking place because China’s economy has been slowing down and businesses around the world are trying to diversify after supply chain disruptions caused by the pandemic.
As a striking illustration of this shift, Taiwan’s top export destination in the first three months of 2017 was the U.S. for the first since 2016, when comparable data were available. Taiwan’s official statistics show that the island exported $24.6billion worth of goods to America in the first quarter, compared to $22.4billion to mainland China.
Taiwan’s Ministry of Economic Affairs reports that Taiwan’s investment in mainland China has fallen to its lowest level in over 20 years. It dropped nearly 40%, to $3 billion, last year, from the year before. Taiwan’s investment in the U.S. grew nine-fold, reaching $9.6 billion by 2023.
Washington and Taipei have signed a free trade agreement and are now in the process of negotiating its next phase. U.S. legislators have also introduced a bill that would end the double taxation of Taiwanese workers and businesses in the U.S.
Daniel Kritenbrink, Assistant Secretary of State, said: “Everything is motivated… by a desire to strengthen Taiwan’s deterrent capabilities and resilience. This will help maintain the status quo while deterring China to be tempted to take action against Taiwan.”
TSMC, the world’s largest computer chip manufacturer, announced that it will expand its U.S. investment to $65 billion last month. The Biden administration had pledged $6.6 billion worth of incentives to put the company on track to producing one-fifth the world’s most sophisticated chips by 2030.
TSMC invests in Japan, a strong U.S. ally in the region, as well as its U.S. investments. Foxconn is a Taiwanese company that is Apple’s primary contractor. It is currently building a manufacturing facility in India. Pegatron is another Taiwanese business that produces parts for iPhones and computers.
King Yuan Electronics Corp. a Taiwanese firm specializing on semiconductor testing and packaging announced last month it would sell its $670m stake in an enterprise in the eastern Chinese town of Suzhou. KYEC cited geopolitics and the U.S. ban on exporting advanced chips to China, as well as Beijing’s desire for self-sufficiency.
KYEC stated in a press release that “the environmental environment of semiconductor production in China has changed and the competition on the market has become more severe.”
Taiwan’s exports of electronic components, computer equipment and semiconductors to the U.S. increased by more than three times in 2018 to nearly $37 billion. Taiwan’s exports to the U.S. of tapioca, and its substitute (key ingredients in boba tea), have more than tripled between 2018 and 2023. The island is also shipping more fruits and tree nuts, and farmed salmon.
Hung Tran is a senior non-resident fellow at the Atlantic Council GeoEconomics Center.
Taiwan’s share of exports to Hong Kong and mainland China fell from 44% in 2020, to less than a third in the first quarter 2024. Tran called it “a big change.” “I think the share of exports (to mainland China and Hong Kong will continue to decrease.”
Beijing has been trying to maintain a balance between its claims over Taiwan and favorable economic policies. This is to encourage closer ties, which could make it more difficult for Taiwan to separate.
In 2016, when the independent-leaning Democratic Progressive Party came to power in Taiwan, the new government implemented a policy that distanced the island from mainland China and boosted economic ties with countries in the region. This was especially true in Southeast Asia. Beijing, unhappy with Taiwan’s actions, used its economic leverage to force Taiwan into submission.
The island has been closed to mainland tourists and imports of Taiwanese fruits, seafood and snacks have been suspended. China banned Taiwanese pineapples in 2021 due to biosecurity fears, causing a major blow to Taiwanese growers whose fruit was exported almost exclusively to the mainland.
Ralph Cossa said that Beijing’s actions had helped to push the island out.
He said that the Chinese president “Xi Jinping” was tactically clever, but strategically stupid in many of his decisions. His loyalty tests against Taiwanese businessmen as well as other heavy-handed decisions and business practices have contributed to the success Taiwan’s policy to distance itself with China.
Cossa stated that Lai Ching Te, the new president of the island, will continue this policy.
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Aaron Kessler, AP data reporter in Washington, and Johnson Lai, videojournalist in Taipei, contributed.
Source: ABC News