Taiwan Investments in Southeast Asia and India Pass China for First Time

The Lede: In a recent Nikkei report and interview, a Taiwanese cabinet minister said that Taiwanese companies have been investing more in Southeast and South Asia than in China for the first time as the January presidential election nears. 

What We Know:

• Taiwanese investments to Southeast and South Asia, including India, reached $5.2 billion in 2022, surpassing the $5 billion plowed into China over the same period. For 2023, investments in Southeast Asia and India by Taiwanese companies reached $4.3 billion compared with $1.26 billion in China in the first nine months of the year.
• Taiwan’s Minister of Economic Affairs Wang Mei-hua marked the milestone as an achievement on the part of President Tsai Ing-wen’s administration’s efforts to pivot toward the neighboring regions and away from China under the New Southbound Policy.  She explained that the milestone is just the start of a larger trend driven in large part by U.S.-China trade tensions.
• It is anticipated that economic affairs with China will factor into Taiwan’s upcoming presidential election on January 13. Opposition parties worry that Beijing could put political and economic pressure on Taiwan by terminating parts or all of the bilateral Economic Cooperation Framework Agreement (ECFA) for cross-strait trade. 

The Background: As the minister of economic affairs, Wang oversees economic and energy security, trade, foreign investments, and industry, which includes Taiwan’s critical semiconductor sector. Taiwan’s tech suppliers moved to diversify away from China when the U.S.-China trade war heated up in 2018, which spurred a push by suppliers to look toward countries such as Vietnam, Thailand, and India. China has been investigating Taiwan for its alleged implementation of trade barriers. Beijing has said that the probe will be completed a day before the election. China has recently banned some Taiwanese agricultural produce, which is a common way that Beijing puts pressure on the island’s economy. It also launched probes into Taiwanese technology company Foxconn’s factories in the Mainland after its founder Terry Gou announced his bid for the presidency as an independent candidate. Gou withdrew from the race last Friday.

Likely Outcomes:

• As indicated by Wang, geopolitical and cross-strait conditions will likely continue to pull Taiwanese investment toward the neighboring regions. This will be especially pertinent if the Beijing-averse, incumbent Democratic Progressive Party (DPP) wins in the upcoming election as the New Southbound Policy has been implemented under the party’s rule. Another DPP presidential administration under the current vice president Lai Ching-te would likely put forth more effort toward this policy. This is quite a possible outcome due to the anticipated split in votes between the opposition parties after the candidates of the Kuomintang (KMT) and Taiwan People’s Party (TPP) failed to unite under one ticket last week. 
• The continuation of this investment trend away from China would add to the long list of offenses that Beijing holds against the DPP and another reason why China may try to influence the election in Taiwan. A victory by an incumbent party may not necessarily reverse this trend, however, as ‘de-risking’ from China has come into fashion among U.S.-aligned governments. Beijing would be pushing for Taiwanese political leadership that will be open to economic ties with the Mainland rather than actively searching elsewhere for alternatives. 

Quotables:

"In fact, in every presidential election, China does use various methods to seek to influence Taiwan's elections. We foresee the means of economic pressure from China will only increase and won't decrease…We didn't talk about 'de-risking' at that time [in 2016], but the principle is the same: Don't put all your eggs in the same basket” - Wang Mei-hua, Minister of Economic Affairs of Taiwan

Good Reads:

Taiwan to continue shifting investment away from China, minister says (Nikkei)