Two decades ago, Taiwanese industry began its decline as a result of China’s opening its doors to the world. With its low labor, land and raw material costs, China turned itself into the world’s factory.
This led to the hollowing out of Taiwanese industry as an increasing number of companies relocated to China. The common language and culture facilitated the process.
This made it more difficult for companies remaining in Taiwan to maintain their competitive edge; the nation bled jobs; and its economic reliance on a hostile country was exacerbated.
However, the economic tide is turning once again. Alongside its economic development and changes internationally, China has become a less attractive location for companies seeking to enhance their competitiveness by reducing costs. Chinese firms seeking to avoid rising labor and land costs have also begun to relocate overseas.
While this trend is not exactly new, the present and potential tariffs being levied on Chinese goods by US President Donald Trump’s administration have only accelerated the process. The main beneficiaries of the exodus of Chinese firms are, in the short term at least, Southeast Asian nations, such as Malaysia, Thailand and Vietnam, which offer a skilled workforce, good infrastructure and a network of free-trade agreements, as well as shelter from Trump’s tariffs.
These countries are benefitting from increased Chinese investment, coupled with the potential for technology transfer. However, they also want local workers to be employed and are not happy with the mass immigration of Chinese workers and importation of Chinese-manufactured equipment.
Malaysia has had its fingers burned before by allowing Belt and Road projects.
Taiwan has reason to be wary of increased Chinese investment — and is far more sensitive to the idea of immigration of Chinese workers as part and parcel of that process. Where Malaysia had reason to be concerned of a new wave of Chinese colonialism, Taiwan has the loss of its very sovereignty to contend with.
Just as Chinese companies are leaving due to hardheaded economic considerations, many Taiwanese companies in China are also beginning to explore the idea of returning home. This opens a window of opportunity for the government, but it cannot take anything for granted. These companies left Taiwan for China because of economic considerations, not out of infidelity. Now, as they consider their next move, it will be economic considerations informing them, not some kind of affinity with their homeland. Southeast Asian countries have a lot to offer Taiwanese companies, too.
Six months ago, Quanta Computer, one of the world’s leading laptop makers, relocated part of its server production back to New Taipei City’s Linkou District (林口). On Tuesday, Quanta chairman Barry Lam (林百里) said the company also plans to relocate production to Southeast Asia.
Inventec Corp president Maurice Wu (巫永財) has said that his company, a consumer electronics manufacturer, is moving part of its China operations to Taiwan.
In this way, the potential accelerated dislocation of Taiwan’s economic reliance on China might be an unintended, yet welcome, side effect of the US’ trade dispute with China.
In those terms, whether the Taiwanese companies relocate to Southeast Asian countries or Taiwan, the effect will be the same. In fact, this is also the thinking behind the government’s New Southbound Policy.