Publicly listed firms repatriated NT$114.4 billion (US$3.72 billion) of investment gains from China last year, a 175.7 percent surge from NT$41.5 billion in 2021 and the most since 2013, data released last month by the Financial Supervisory Commission showed. That came as listed firms posted a combined profit of NT$454.1 billion from their Chinese investments last year, a NT$98.2 billion decrease from 2021, but still the second-highest total over the past decade, driven mainly by the semiconductor and electronic components sectors.
Previously, listed firms rarely repatriated their investment gains from China, as Beijing imposes strict foreign-exchange controls to curb capital outflows. Taiwanese firms also tend to keep most of their profits in China for further investments. However, this has changed in the past few years as they have been scaling back new investments in the world’s second-largest economy amid US-China trade disputes as well as escalating tensions across the Taiwan Strait.
There are three main reasons for Taiwanese listed firms to repatriate their investment gains. The first is to meet funding needs and business planning. Firms remit their investment income and proceeds from share sales to their parent companies to bolster working capital and align with their business groups’ capital planning strategy.
Second, the fund repatriations were in response to firms’ deployment strategies, as more Taiwanese businesses shifted their investment targets to the US or countries covered by the government’s New Southbound Policy, introduced in 2016 and aimed at boosting interactions with ASEAN and South Asian nations, as well as Australia and New Zealand.
Third, China’s economic outlook has become more worrying for Taiwanese businesses, and nervousness over geopolitics has limited their investments there. For example, there are growing concerns over the transparency and accuracy of China’s economic data, making it harder for businesses to make investment plans. The Chinese National Bureau of Statistics last week reported that profits at industrial firms continued to plunge in the first three months of the year, down 21.4 percent year-on-year, even though the same agency just 10 days earlier reported that China’s first-quarter GDP expanded 4.5 percent annually, which was the fastest in the past year.
In other words, demand for China’s goods is still weak, despite a rebound in overall economic growth that has been driven largely by the services sector following the end of strict COVID-19 restrictions at the end of last year. As the recovery in China’s economy is still patchy and the strength of its rebound is closely linked to the global trade environment, it is not surprising that listed firms repatriated about one-quarter of their profits made in China last year.
The latest data also showed that businesses remain wary of China’s investment environment and firms have started to evaluate the ramifications of geopolitical risks, despite messages from senior government officials that China welcomes foreign investment. On one hand, US-China trade tensions have continued to escalate, with the dispute shifting from trade to investment and technology. In March, Beijing launched a cybersecurity review of US chipmaker Micron Technology, a move that followed Washington’s efforts to contain China’s access to strategic semiconductor technologies.
On the other hand, relations between Taiwan and China have become even tenser in the past few years, with little room for any breakthrough in the short term as some people have suggested. Just two weeks ago, China launched an investigation into so-called trade barriers that Taiwan has imposed on more than 2,400 Chinese imports spanning from agricultural products and textiles to minerals and petrochemicals. The changes were similar to many of those Beijing has imposed on Taiwanese goods over the years, which suggests the unpredictability of China as an export market.
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