Current economic status quo: What is the current economic situation like between Taiwan and China?

The controversy of Taiwan’s independence status has always been the major factor in facilitating international tensions between Taiwan and China across the Taiwan’s Strait. As the 21st largest economy in the globe and the 16th ranked largest trading economic partner in the world, Taiwan’s economic status is expected to influence over 10 trillion dollars worth of the global economy in the case of an invasion from China, according to Bloomberg. Taiwan’s current financial specialization and expertise in its semiconductor innovative industry consolidated its role in international relations, as up to 92% of the world’s semiconductor manufacturing and production has originated from Taiwan, approximately 70% of the world’s chips, and up to 33% to 50% of the world’s total chips come from Taiwan. China, a supposed economic and political adversary to Taiwan, has imported about 10% of total semiconductor production from TSMC. 

A reason for this can be explained by the inevitable interdependence of both Taipei and Beijing: Despite the fact that China leads the world in labor-intensive aspects of chip production, China specializes in ICT (Information and communication technology) and automobile manufacturing industry, as they are ranked both number one worldwide respectively. In fact, nearly 60% of Taiwan’s semiconductor has been sold to China. 

Taiwan’s economic industry has been further supported by the advent of the COVID-19 pandemic post-2020. The massive boost in worldwide demand for technological and communication devices that relies on semiconductor industries meant Taiwan’s economic importance has risen. This could be explained by a 6.5 % increase in GDP growth in 2021, and a nearly 25% increase in exports in 2022 for Taiwan.

Recent policies have even further strengthened Taiwan’s economic industry. In 2016, the Taiwanese government under the presidential leadership of president Tsai Ing-Wen has expanded its trade partners to more Southeast Asian countries — an attempt to diversify from its huge reliance on imports into China. Foreign direct investment into Vietnam, for instance, has risen by 73% to 4.2 billion dollars. This particular policy has yielded tremendous results in the specific context of Apple global production, as Apple’s total production in India has risen from 10% to 19%. Although Apple still relies on employment of Chinese workers, Taiwan’s expanding foreign direct investment into countries like India is sending a clear message to China: that their economically developed semiconductor industry manifests as a strong protector of Taiwan. Another policy under her leadership was implemented to provide an incentive for mainland manufacturers and chip industries to return to Taiwan, an attempt that successfully increased the economy by around 70 billion dollars. 

This policy, however, has sparked tensions between Taiwan and China. Perhaps this tension has already been demonstrated in China’s current economic policy to curtail Chinese tourism to Taiwan and put a ban on Taiwan’s agricultural sectors such as mangoes and pineapple industries. However, the attempt to institute this policy to gain 68 billion dollars can be explained by the increasing role that the Chinese plays in this industry — Beijing has opened dozens of semiconductor fabrication plants in recent years, and many others are under construction—sometimes with Taiwanese companies involved in the building. One example of this is Huawei Technologies' new claims to replace the current Taiwanese imports into China.