Despite Beijing terminating official communications with Taiwan’s Tsai Ing-wen government in June last year and political relations plunging to their coolest in nearly a decade, China remains Taiwan’s number-one trading partner, and the trade volumes continue to rise. Exports to the mainland in the first seven months of this year grew 21.3% to reach US$47.2 billion, while imports increased 10.6% to US$28.3 billion. Together with Hong Kong, China takes almost 40% of Taiwan’s total exports. The bulk of those exports are electronic parts, including components for assembly into Apple and other finished products destined eventually for overseas markets. Taiwan is also the second-largest foreign investor in China after Hong Kong. The Investment Commission under the Ministry of Economic Affairs puts Taiwan’s accumulated approved investment in China at US$167.4 billion. Since China’s economic opening in 1979, Taiwanese companies have tended to invest in China through subsidiaries in other countries such as the British Virgin Islands and Hong Kong, for reasons ranging from avoiding Taiwan government scrutiny to taking advantage of other nations’ free-trade regimes. As a result of that investment, as many as 1.5-2 million Taiwanese businesspeople (known as Taishang) and their families are believed to be living in China. According to figures from China’s Ministry of Commerce, Jiangsu Province, adjacent to Shanghai, has attracted a full 31% of the Taiwanese investment by value, followed by Guangdong Province with 19%, Shanghai 15%, Fujian Province 8%, and Zhejiang Province 6%. Although most of the investment is in manufacturing, an increasing amount has been going into China’s service sector. Financial services, including insurance, account for 7% of the Taiwanese investment, and wholesaling for 6%. Recently, however, the rate of Taiwanese investment in China has been slowing. Last year’s US$9.67 billion worth of new projects was down 11.9% from a year earlier, according to Taiwan’s statistics, and a further drop of 22.2% occurred from January to May this year. China also is becoming more selective about the types of Taiwanese businesses it welcomes. In the past, virtually any Taiwanese company willing to set up shop in China would receive tax breaks and other preferential treatment in the interest of national development, Tan says. Now those inducements tend to be limited to companies possessing what China regards as needed technology.
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