After the levying of tariffs last July by Washington on some US$250 billion worth of Chinese exports to the United States, many companies doing business in China are now considering pulling out. While the trade war is certainly a factor in such decisions, China’s slowing growth from such long-running factors as a declining birth rate, an aging population, and rising wages are also behind the choice of some foreign companies to discontinue operations in China and return home.
Some of these companies are from Taiwan, many of which share a common language and business culture while having long experience operating in China. In 2018, 726 applications for $8.5 billion worth of investments in China were made by Taiwanese companies, although investment flows to the mainland have been decreasing in recent years since hitting a peak of $14.6 billion in 2010.
Since the launch of Taipei’s incentive plan in January, 28 Taiwanese companies have sought to return their operations to the island, mostly in the electronics, information, metal and machinery industries, according to a statement issued last Friday by Taipei’s Ministry of Economic Affairs (MOEA).
Fourteen of these companies have been approved already, including such names as Quanta, a manufacturer of notebook computers, auto-parts maker Mobiletron, and Giant, one of the world’s leading bicycle brands. According to the MOEA, those 14 projects approved to date represent some $1.3 billion in investments, along with 4,400 jobs. So far, the projects approved represent some 11% of the $11.4 billion worth of inflows to Taiwan that the MOEA recorded under “Overseas Chinese and Foreign Investment” in 2018.
With another 30 companies considering a return to Taiwan in order to take advantage of government incentives (including relaxed credit conditions and recruitment of migrant workers), Taipei could see substantial investment flowing back from China in 2019.
No one knows for how long the trade wars between China and the US will continue, but in the meantime, those Taiwanese companies that are not locked into China’s capable logistics chain may find it financially compelling to return home and wave the national flag. Of course, these investment flows could reverse should the Chinese Nationalist Party (Kuomintang, or KMT), which won 15 of 22 city and county mayoral races last November, achieve victory in the 2020 election and adopt pro-Beijing policies.