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Taiwanese are helping IT industry in China

Over the past 15 years, the nation's information technology (IT) industry has grown rapidly. In 1986, the value of output was only US$2.1 billion; in 1994, it reached US$9.4 billion; in 2000, it reached as high as US$47 billion. In 2001, affected by the international economic downturn, the value of the IT industry's output dipped to US$42.7 billion. From 1986 to 2000, the average growth rate was 26 percent.

After 1990, the IT industry began to invest abroad on a large scale. As a result, a huge share of Taiwan's IT products were manufactured abroad. In 1992, 90 percent of the nation's IT products were made domestically, while 10 percent were made abroad.

In comparison, only 36 percent of Taiwan's IT products were made at home last year, while 64 percent were made abroad. That is, nearly two-thirds of the output value of Taiwan's IT industry was created by overseas production bases.

A significant portion of the overseas production bases for Taiwanese businesspeople are in China. In 1995, only 14 percent of Taiwan's IT products were produced in China; last year, 47 percent were.

Between 1996 and 2001, the average annual growth rate of Taiwanese businesspeople's IT products made in China was 35.5 percent. As a result, Taiwan's direct investment in China should have contributed tremendously to the development of that country's IT industry.

China's official statistics on its IT hardware products and exports are scattered and incomplete. Therefore, this article will primarily use the statistics of China's high-tech industry, supplemented by some statistics of its IT hardware industry.

Since the mid-1990s, China's high-tech industry has grown very rapidly. The value-added to its high-tech industry increased almost three times in six years -- from 108.1 billion yuan in 1995 to 309.5 billion yuan in 2001. Consequently, the share of value-added of high-tech industry in China's total industries increased from 8.8 percent in 1995 to 13.9 percent in 2001.

The value of China's high-tech exports was just US$4 billion in 1992 but by last year it had soared to US$67.9 billion. Between 1992 and last year, the average annual growth rate of high-tech exports was 33.4 percent. As a result, the share of high-tech exports in China's total exports increased from 4.7 percent in 1992 to 20.8 percent last year.

The majority of China's high-tech exports consisted of computer and telecommunication products. The share of these products in China's total high-tech exports was 49.1 percent in 1997, increasing rapidly to 80.4 percent last year.

According to China's Ministry of Information Industry, the sale of the country's IT hardware products increased from 13.4 billion yuan in 1992 to 62.6 billion yuan in 1995, to 115.5 billion yuan in 1998 and to 181.5 billion yuan in 2001. Between 1992 and 2001, the average annual growth rate of the sale of China's IT hardware products was 36.1 percent. This figure exemplifies the rapid expansion of China's IT industry in the 1990s.

As a matter of fact, the majority of China's high-tech exports were produced by foreign-invested enterprises (FIEs). The share of FIEs in China's total high-tech exports was 71.5 percent in 1996, increasing to 76 percent in 1999 and to 82.2 percent last year.

To summarize, China's IT industry expanded rapidly in the 1990s, while around 60 percent to 70 percent of its IT hardware products were contributed by Taiwanese businesspeople in 1999 to 2001. In addition, the above analysis also suggests that at least 60 percent to 70 percent of China's IT hardware exports were contributed by Taiwanese businesspeople during the same period.

Tun Chen-yuan is the director of the China Economic Analysis Project at the Cross-Strait Interflow Prospect Foundation.
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