The outbreak of the US-China trade dispute last year has unavoidably had a strong effect on Taiwan, an important economic and trading partner to both countries. However, a crisis can also provide a turning point.
According to data released on June 28 by the Ministry of Economic Affairs, 47.9 percent of orders received overseas were produced domestically last year, 1.1 percentage points higher than a year earlier, and for the first time in four years, higher than the volume of orders produced in China, including Hong Kong.
The survey also showed that 15.8 percent of Taiwanese firms operating in China were considering moving their production lines to other regions, and 41.8 percent of those companies — mainly from the high-tech industry — intended to shift their production back to Taiwan.
One day prior to the survey, the ministry announced that the total volume of investment pledged by Taiwanese businesses returning to the nation had exceeded NT$400 billion (US$12.89 billion).
It is clear that the trend of Taiwanese businesses in China returning home is intensifying, which would help boost the manufacturing sector in Taiwan, improve the nation’s economy, and improve wages and employment.
As a developing country, Taiwan created an economic miracle. Not only were products labeled “Made in Taiwan” seen around the world, the cash flow also helped the TAIEX reach 10,000 points and helped feed a consumer market boom.
Yet, the rapid economic growth had many aftereffects, including sharply increasing wages and soaring land costs, as well as frequent protests organized by environmental and labor rights advocates.
Due to perceived uncertainty, businesses started moving abroad, and they made China their main destination, as reforms there were just beginning, salaries were low and land was cheap. The totalitarian government offered tax incentives and subsidies, and effectively stabilized the labor market. There was also a shared language.
The first wave of Taiwanese businesses moving to China belonged mainly to traditional manufacturing industries, followed by a second wave belonging to technology industries.
Official data show that capital outflows were about US$200 billion to US$300 billion, but the actual number could be several times higher.
The massive outflow of funds, talent and technology from Taiwan to China reversed the economic situation on the two sides of the Taiwan Strait. Having experienced double-digit percentage growth for nearly three decades, China has now become the world’s second-largest economy and “the world’s factory,” as products labeled “Made in China” replace “Made in Taiwan” products.
In Taiwan, by contrast, companies have been emptied out, job opportunities have disappeared, salaries are stagnant, and management personnel and business owners have left the nation. These factors have weakened domestic investment and consumption, resulting in continuous economic deterioration in sharp contrast to China’s rapid growth.
Taiwan’s GDP per capita still far exceeds China’s, but economic behavior involves many psychological factors. As Taiwan’s economic trends point downward, China is on an upward course, and this is having a strong effect on consumer behavior in the two countries.
To Chinese, the future is predictable, so they care less when spending money and make more ostentatious purchases. Taiwanese, on the other hand, tend to be cautious and conservative. Taiwanese would rather accumulate savings to support their families or prepare for retirement than go shopping.