In the near future, Taiwanese investment in mainland China is expected to plunge to around 10% of investment levels seen in 2023. Although some investment data from the end of 2023 have not yet been released, available data suggest that Taiwan’s 2023 investments in the U.S. were about triple those in mainland China, with the U.S. attracting about nine times more investment from Taiwan than in 2022. This marks the first time since 1993, when Taiwanese regulations allowed for investment in China, that America has attracted more Taiwanese funding than China. The decline of Taiwan’s investment in China is attributed both to the economic slowdown affecting the mainland as well as to inability of Taiwan and Mainland China to set aside political issues across the Taiwan Strait.
U.S.-China confrontation has led to punitive tariffs, worsening the business climate for Taiwanese companies operating in China. Another factor driving Taiwanese investment trends are steps taken by Taiwan’s Democratic Progressive Party government to reduce Taiwan’s economic dependence on China. The DDP under Tsai Ing-Wen even offered financial incentives for Taiwanese companies operating in China to move their production back onshore to Taiwan.
Data show that Taiwan’s total foreign investment approvals from January-November 2023 rose 87% year-over-year to $25.7 billion. Meanwhile, Taiwanese investments into mainland China dropped 34% during the same period, falling to just $2.9 billion or 12% of total foreign investment approvals. Back in 2010 when Taiwan and China signed the landmark Cross-Strait Economic Cooperation Framework Agreement, 84% of Taiwan’s investment went to the mainland. That fell to 34% in 2022 and was 12% in 2023.
Approvals for Taiwanese investments in Europe and the U.S. have surged, with investments in the U.S. for January through November of 2023 totaled $9.6 billion, nine times higher than the same period in 2022. Taiwan’s 2023 investments in Europe and the U.S. comprised 37% of total Taiwanese overseas investment. Taiwan’s investments in Germany rose 25-fold to $3.9 billion (15%), exceeding investments in mainland China figure. Taiwanese investments in semiconductor facilities and other technology are playing a key role in driving this trend.
Source: Nikkei, January 2, 2024