ASSESSMENTS

Taiwan Confronts the Costs of Economic Integration With Mainland China

Oct 2, 2018 | 09:00 GMT

A container truck drives along a pier at Taiwan's busy northern Keelung harbor.

A container truck drives along a pier at Taiwan's busy northern Keelung harbor on Aug. 8, 2011. Today, China accounts for over 40 percent of Taiwan's exports, of which 80 percent are intermediary goods that are assembled in China before being sold domestically or exported.

(PATRICK LIN/AFP/Getty Images)

Highlights

  • Taiwanese electronic firms are still more advanced than mainland China's in developing most cutting-edge technologies, but they are increasingly linked to mainland supply chains.
  • This integration could help Beijing move up the production value chains, compromising Taiwan's competitive advantage.
  • U.S.-China trade tensions will likely increase production costs and push Taiwanese-owned, low-end manufacturing companies to move away from China and into Southeast Asian states.
  • Though Taiwan will continue to struggle to form regional, multilateral free trade agreements, it could see more success pursuing bilateral deals with the mainland's biggest rivals.

Taiwan is caught in the middle of the escalating trade war and larger strategic competition between mainland China and the United States. And the clash is threatening the self-governing island's export- and tech-oriented economy, which relies heavily on the mainland's supply chains for assembly, export opportunities and market access....

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