According to a recent survey released by the Center for Strategic and International Studies (CSIS), Taiwanese companies are redirecting their China businesses to Southeast Asia.

Released on October 5, the survey found that 25.7% of more than 500 Taiwanese corporate executives have already transferred their production or sourcing outside of China. 33.2% said they were considering moving. 

For most of those who moved, 63.1% confirmed they headed for Southeast Asian countries, whereas 51.3% returned to Taiwan. 

But Taiwanese companies based in China are also looking to depart the self-ruling island as well. Again, Southeast Asia is the most popular destination, with 67.8% confirming they were moving to the region. Following up were Japan and South Korea, with 29.4%. Those aiming for South and Central Asia made up 14.1%. And conversely, 20.9% are planning for mainland China. 

From this finding, CSIS concludes that Taiwan is not on the way to decoupling from the Chinese economy. Rather, it is about diversifying the supply chain and having some products entirely produced on the mainland.

Still, the think tank noted that compared to previous years, the number of Taiwanese companies leaving China is rising. In a 2020 study by Taiwan’s China National Federation of Industries, the number of companies moving accounted for 24.6%.

At least 76.3% of respondents agreed that Taiwan needs to reduce its economic dependence on China. This indicates that most are not comfortable about their business reliance on the country.

According to Nikkei Asia, the study’s results reflect the effect of Taiwanese President Tsai Ing-wen’s flagship foreign policy on Asia. The measure, New Southbound Policy (NSP), encouraged companies from Taiwan to reduce their dependence on China and increase collaboration with neighbors in the South.

At a conference on October 7, Tsai said that Taiwan made over $2.2 billion in investments in the 18 NSP nations from January to July, making up 43.9% of Taiwan’s overall outbound investment at that time.

Yet, diverting to the South may also pose some risks for Taiwan.

Ian Tsung-yen Chen, an associate professor at National Sun Yat-sen University told Nikkei Asia, “Taiwanese investors will face a more unfriendly investment environment in the democratically regressed regions of Southeast Asia, and their investment and rights will not be guaranteed by an effective and fair judicial and dispute settlement mechanism.”

CSIS suggests that Taiwan work to stop the confidence crisis and strike a balance between diversifying away from China and keeping strong economic links that benefit itself.

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