Covid-19 pandemic saw boost in Taiwanese investment into China

Taiwanese businesses boosted investment into China this year, despite Taipei’s push to reduce economic reliance on its giant neighbor amid a US-China trade war and a growing military threat from Beijing.

Total approved investment from Taiwan to China rose to $4.7 billion in the first 10 months of this year, an increase of 47% over the same period in 2019, the Ministry of Economic Affairs said in a report Friday. Excluding mainland China, outbound investment climbed 19% to $7 billion in the period.

With most major economies hit hard by the global coronavirus pandemic, China is retaining its appeal for many Taiwanese businesses, even as President Tsai Ing-wen’s government offers incentives to bring investment back home. Some businesses have relocated their operations back across the strait, but China still remains Taiwan’s top trading partner.

Angela Hsieh, a regional economist for Barclays Plc in Singapore, cautioned against reading too much into the surge this year, pointing to the low level of investment and a significant slowdown since 2018.

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“I personally don’t think we should overly interpret this 47% jump because the amount of investment was extremely low, as investment to China has been slowing sharply since 2018,” she said, citing a more than 50% plunge in investment in 2019 compared to the previous year.

Hainan Allure

Still, China’s success in controlling the pandemic and its rapid economic recovery have made it a drawcard for investment, not just from Taiwan. A survey published Friday by the American Chamber of Commerce in Shanghai shows US businesses turning upbeat on China after the election of Joe Biden, with the majority planning no change or to increase their investment there.

Taiwanese-invested facilities involved in tech and automotive supply chains centered around the Yangtze River Delta have shifted production back across the strait. Other firms are beginning to look to parts of China such as Guangdong and Sichuan.

The island province of Hainan, which Beijing is grooming to be its newest free trade area as part of its economic response to Covid-19, is wooing Taiwanese investment. Taiwan is the second-biggest investor in Hainan in terms of number of registered businesses, Taiwan-based United Daily News reported earlier this month.

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