The Chinese Ministry of Commerce on Oct. 12 announced that it would consider adopting further measures in response to Taiwan’s trade barriers on certain goods from China, based on the findings of an investigation it launched late last year. The measures could include tariffs or other forms of economic pressure. The announcement is yet another political move by Beijing that is more declarative than substantive. The timing was not coincidental, as it came shortly after President William Lai (賴清德) delivered his first Double Ten National Day speech after taking office on May 20, which was moderate on the cross-strait relationship, but still irked China.
The two sides could resolve their trade spat at any time using WTO mechanisms, the Executive Yuan said. It expressed regret over Beijing’s accusations and called on Chinese authorities to stop its economic coercion and political manipulation of Taiwan.
Beijing was attempting to pressure Taiwanese businesses in China to continue their manufacturing operations or investment there, amid a gradual exodus of foreign companies from China, the Mainland Affairs Council said on Thursday last week.
The latest announcement followed China’s suspension of preferential tariffs on 134 Taiwanese products under the Cross-Strait Economic Cooperation Framework Agreement on June 15, citing Taiwan’s “failure” to reciprocate by easing trade restrictions on Chinese products. While the move affects certain Taiwanese industries, its economic impact is estimated to be minimal due to the nation’s declining trade dependence on China in the past few years. Moreover, Chinese economic coercion is becoming increasingly ineffective and might be counterproductive.
As a global supply chain realignment continues following the COVID-19 pandemic and as more firms relocate their operations from China to avoid US tariffs, including China-based Taiwanese companies returning home in the past few years, Taiwan’s economic and trade dependence on China has fallen.
For example, exports grew 10.2 percent year-on-year in the first nine months of this year, with shipments to the US surging 59.7 percent and those to ASEAN members rising 14.3 percent, while exports to China (including Hong Kong) fell 2.7 percent, Ministry of Finance data showed. Moreover, the proportion of exports to the US rose to 24.1 percent, the highest in 25 years, while that of exports to China (including Hong Kong) fell to 31.2 percent, the lowest in 23 years. The proportion of exports to ASEAN members was stable at 18.2 percent, the data showed.
The government also approved US$41.56 billion in outbound investments, excluding China, in the first nine months of this year, representing a 137.75 percent surge from the previous year, thanks to Taiwan Semiconductor Manufacturing Co’s investment in its US subsidiary.
Outbound investments to New Southbound Policy countries — mainly Singapore, Vietnam and Malaysia — rose 83.09 percent to US$7.93 billion in the same period, higher than those to China at US$3.34 billion, Department of Investment Review data released last week showed.
As Taiwan continues to transform its industrial and export structure, and as more firms shift to global markets rather than focus on China, the nation has firmly established itself as a key player in the global tech supply chain. As a result, it has become increasingly difficult for China to use economic coercion to pressure Taiwan over political disputes.
Nevertheless, the government should still take note of China’s actions, which not only aim to put pressure on the ruling Democratic Progressive Party, but also influence Taiwan’s bid to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Taipei must still evaluate possible scenarios and explore the potential of negotiating with Beijing.
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