Economic ties are no longer boosting cross-strait relations, as Taiwanese businesses continue to shift investment away from China amid deepening US-Beijing decoupling, an expert said at a seminar in Taipei yesterday.
Lai I-chung (賴怡忠), president of the government-affiliated think tank Prospect Foundation, said at the seminar that following the outbreak of the Washington-Beijing trade war, Taiwanese investment in the US has far outpaced investment in China.
Photo: CNA
This shift has weakened the traditional role of economic interconnectedness as a "lubricant" in cross-strait relations, he said.
Before 2016, trade relations between Taiwan, China and the US were closely intertwined under a model described as "Taiwan taking orders, China producing and products sold to the West," Lai said.
However, during the first wave of the trade war in 2018, Taiwanese firms began ramping up investment in Southeast Asia, he said.
By 2022, such investment surpassed that in China for the first time since 1993.
Data from the investment review agency showed that during the first 11 months of this year, the US ranked as Taiwan's second-largest destination for outward foreign direct investment, reaching US$4.2 billion and accounting for 11.64 percent of the total.
Vietnam ranked fifth with US$987.8 million (2.72 percent), while China fell outside the top five and was not specifically listed in the top tier of regions.
While investment in Southeast Asia remained steady, capital flows into the US began to exceed that into China significantly, driven largely by market demand and supply chain security.
Data from the investment review agency showed that in the first 11 months of this year, approved investment (or capital increase) in foreign countries except China accounted for NT$36.29 billion (US$1.16 billion), down by 17.98 percent from a year earlier.
Over the same period, the amount in China was NT$13.94 billion, down by 61.32 percent from a year ago.
Looking ahead, Lai identified three factors shaping the trade war next year: potential US Supreme Court rulings on the legality of US President Donald Trump's tariffs, anticipated high-level meetings between Trump and Chinese President Xi Jinping (習近平) and the US midterm elections.
However, even if certain tariffs are challenged, Washington's use of them as strategic tools will likely persist, entrenching the decoupling trend, he said.
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