Due to rising political tensions and diversification strategies, only 11.4 per cent of Taiwan’s foreign investment went to mainland China last year, down from 83.8 per cent in 2010. Chinese investments in the island are also down. In 2022, China accounted for 34 per cent of Taiwan’s overall foreign investment, down from two thirds a decade ago. US lawmakers start visit in Taiwan.

Taipei (AsiaNews) – As tensions between Taiwan and China grow, more and more Taiwanese companies and businesses are leaving the mainland as those in power in Beijing increasingly talk about forcibly reunifying with the motherland what they consider a “rebel” island.

Last year, Taiwanese investment in China hit a record low with 11.4 per cent of the island’s total foreign investment, Taiwan’s Mainland Affairs Council reported, a far cry from 83.8 per cent in 2010 when relations between Beijing and Taipei were much closer.

The drop is linked to Taiwanese businesses choosing to diversify their global investments, a strategy that met with considerable success in recent years.

Between 1991 and 2023, 45,523 Taiwanese investments were made in China, averaging more than 1,400 a year, for a total of US$ 206.37 billion or 50.7 per cent of overall foreign investment, data from Taiwan’s Ministry of Economic Affairs’ Investment Commission show.

In terms of amount and proportion, the decline becomes more evident with the latest figures, with only 328 investments last year worth US$ 3.04 billion, down 39.8 per cent over the same period in 2022.

As the confrontation between the United States and China worsened, over a number of issues, from trade to technology, Taiwanese businesses have diversified their investment strategy, switching production and supply chain.

As a result, Taiwanese investments are moving from mainland China to other shores, most notably the United States, Europe, and Japan.

With investments from the rebel island drying up, China’s economy is growing at a lower rate, a trend that should continue in 2024.

Several major international institutions, like the World Bank, International Monetary Fund, S&P Global Ratings and Goldman Sachs, expect China’s growth to hover around 4 per cent according to the most optimistic estimates.

Last year, Taiwan’s growth was also not particularly impressive at 1.4 per cent.

According to Japan's Nomura Securities Co, Beijing faces at least four major challenges: stagnant consumption, a sluggish housing market, slow foreign trade, and overcapacity in emerging industries, including electric and hybrid vehicles.

While Taiwanese businesses flee China, mainland companies are struggling to keep their business ties with the island.

Official data for 2022 show that China accounted for 34 per cent of Taiwan’s foreign investment, followed by 31 per cent for Southeast Asian nations and India, and 13 per cent for the United States and Europe. This is in stark contrast with a decade ago when China accounted for more than two thirds of Taiwan's overall foreign investment.

In the past few years, many Taiwanese investors have lost faith and hope in the Chinese economy, especially since President Xi Jinping's rise to power.

As business prospects get worse, while taxes and labour costs rise, Taiwanese companies are developing five-year plans to gradually pull out of the mainland.

This is an effect of Xi’s failed “common prosperity” policy and ongoing political and trade disputes between China and the United States.

For its part, China's economy faces structural challenges, with many buildings standing unfinished in several provinces and cities, and foreign investors looking for ways to leave the country.

The situation is compounded by severe deflation, low consumer demand, and high unemployment and savings, all indicating a weak recovery.

Another sign of things to come is in agriculture, with the United States overtaking China as the main market for Taiwanese products for the first time, last year.

The same goes for electronics, with the island's chipmakers boosting ties with the US at the expense of the mainland.

Amid rising cross-strait tensions and warming US-Taiwan relations, Congressman Mike Gallagher began a visit to the island at the helm of a delegation of US lawmakers.

The Republican chairs the House of Representatives Committee on China, which focuses on American economic and security competition with the Chinese Communist Party (CCP).

Upon arrival with five other lawmakers, Gallagher noted that “Taiwan has shown the world” that it is possible “not only survive, but thrive” while standing up to Beijing’s “bullying”.

The visit includes meetings with Taiwan’s top leaders, like outgoing President Tsai Ing-wen and Vice President Lai Ching-te. Mr Lai won last month's presidential election and is set to take office in May.

For her part, Ms Tsai stressed that this visit is a sign of “staunch US support for Taiwan’s democracy through concrete action”.

In 2022, then US House Speaker Nancy Pelosi visited Taiwan, provoking Beijing’s ire; to show its displeasure, China ordered its largest-ever military exercises around the rebel island.

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• china
• economic crisis
• disinvestment
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