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Taiwan Selling More to US Than China   05/17 06:17


   WASHINGTON (AP) -- Whether it's tapioca balls or computer chips, Taiwan is 
stretching toward the United States and away from China -- the world's No. 2 
economy that threatens to take the democratically ruled island by force if 

   That has translated to the world's biggest maker of computer chips -- which 
power everything from medical equipment to cellphones -- announcing bigger 
investments in the U.S. last month after a boost from the Biden administration. 
Soon afterward, a Taiwanese semiconductor company said it was ending its 
two-decade-long run in mainland China amid a global race to gain the edge in 
the high-tech industry.

   These changes at a time of an intensifying China-U.S. rivalry reflect 
Taiwan's efforts to reduce its reliance on Beijing and insulate itself from 
Chinese pressure while forging closer economic and trade ties with the United 
States, its strongest ally. The shift also is taking place as China's economic 
growth has been weak and global businesses are looking to diversify following 
supply chain disruptions during the pandemic.

   In a stark illustration of the shift, the U.S. displaced mainland China as 
the top destination for Taiwan's exports in the first quarter of the year for 
the first time since the start of 2016, when comparable data became available. 
The island exported $24.6 billion worth of goods to the U.S. in the first three 
months, compared with $22.4 billion to mainland China, according to Taiwan's 
official data.

   Meanwhile, the island's investments in mainland China have fallen to the 
lowest level in more than 20 years, dropping nearly 40% to $3 billion last year 
from a year earlier, according to Taiwan's Ministry of Economic Affairs. Yet, 
Taiwan's investments in the U.S. surged ninefold to $9.6 billion in 2023.

   Washington and Taipei signed a trade agreement last year, and they're now 
negotiating the next phase. U.S. lawmakers also have introduced a bill to end 
double taxes for Taiwanese businesses and workers in the U.S.

   "Everything is motivated by ... a desire to build Taiwan's deterrent 
capability and their resilience, all in support of maintaining the status quo 
and deterring China from being tempted to take ... action against Taiwan," 
Assistant Secretary of State Daniel Kritenbrink said.

   The world's biggest computer chip maker, TSMC, announced last month that it 
would expand its U.S. investments to $65 billion. That came after the Biden 
administration pledged up to $6.6 billion in incentives that would put the 
company's facilities in Arizona on track to produce about one-fifth of the 
world's most advanced chips by 2030.

   Apart from its U.S. investments, TSMC is putting money into Japan, a staunch 
U.S. supporter in the region. Foxconn, a Taiwanese conglomerate known for being 
Apple's main contractor, is building manufacturing capacity in India, while 
Pegatron, another Taiwan business that makes parts of iPhones and computers, is 
investing in Vietnam.

   King Yuan Electronics Corp., a Taiwanese company specializing in 
semiconductor testing and packaging, said last month that it would sell off its 
$670 million stake in a venture in the eastern Chinese city of Suzhou. KYEC 
cited geopolitics, the U.S. export ban on advanced chips to China and Beijing's 
policy of seeking self-sufficiency in the technology.

   "The ecological environment of semiconductor manufacturing in China has 
changed, and the market competition has become increasingly severe," KYEC said 
in a statement.

   Exports of semiconductors, electronic components and computer equipment from 
Taiwan to the U.S. more than tripled from 2018 to reach nearly $37 billion last 
year. It's not just tech: The island more than tripled exports of tapioca and 
its substitute, key ingredients in boba milk tea, to the U.S. between 2018 and 
2023 and is shipping more fruits, tree nuts and farmed fish.

   The recent trade data reflect "the strategy from both Taiwan and the U.S. to 
reorient that trade in an effort to de-risk from China," said Hung Tran, a 
nonresident senior fellow with the Atlantic Council's GeoEconomics Center.

   The share of Taiwan's exports to mainland China and Hong Kong fell from 
about 44% in 2020 to less than one-third in the first quarter of 2024. That was 
"a very big movement," Tran said. "And I think that the share (of exports to 
mainland China and Hong Kong) will probably continue to decline."

   Since the 1990s, Beijing has tried to balance its claim over the island with 
favorable economic and trade policies, aiming to foster closer ties that could 
make it harder for Taiwan to break away.

   When the independent-leaning Democratic Progressive Party gained power in 
Taiwan in 2016, the new government put forward a policy to distance the island 
from the mainland and boost economic ties with other countries in the region, 
especially in Southeast Asia. Unhappy Beijing turned to its economic leverage 
to try to bring Taiwan to heel.

   It has restricted travel by mainland tourists to the island and suspended 
imports of Taiwanese seafood, fruits and snacks. In 2021, China banned 
Taiwan-grown pineapples over biosecurity concerns, devastating Taiwanese 
farmers whose exported fruit nearly all went to the mainland.

   Ralph Cossa, president emeritus of the Honolulu-based foreign policy 
research institute Pacific Forum, said Beijing's actions have helped push the 
island away.

   Chinese President "Xi Jinping is tactically clever but strategically foolish 
in many of the decisions he has made; his loyalty tests on Taiwan businessmen 
and other heavy-handed business practices and decisions have been a major 
contributor to the success of Taiwan's" policy to distance itself from China, 
he said.

   And that policy will continue with Lai Ching-te, the island's new president, 
Cossa said.

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