Taipei, Sept. 9 (CNA) Taiwanese businesses are mulling moving manufacturing operations from China amid the intensifying trade war between the Washington and Beijing, with those in the textile, electronics and bicycle industries most likely to relocate operations, according to the latest survey released by the Ministry of Economic Affairs (MOEA).
The U.S. imposed a 25 percent tariff on up to US$50 billion of Chinese goods in July and is threatening tariffs on an additional US$200 billion.
China-based Taiwanese businesses could be badly hit if trade tensions between the U.S. and China heat up further, experts have warned.
The intensifying trade war could cause Taiwanese businesses with operations in China to withdraw, Economic Minister Shen Jong-chin (沈榮津) said, noting that in the 1990s, many Taiwanese manufacturers set up factories in China due to higher land, labor costs and strict environmental protection regulations in Taiwan.
According to the MOEA survey, the fallout from the trade war between the world's two largest economies will have minimal impact on Taiwan's petrochemical, steel/aluminum and machinery manufacturers, which mainly supply products to China's domestic markets, but could deal a blow to the textile, electronics and bicycle industries, which export products to the U.S.
To minimize fallout from the U.S.-China trade war, the textile industry, which has established factories in Southeast Asia, is most likely to ramp up production in the region, while the electronics and bicycle industries could move operations back to Taiwan, with the production facilities they already have in the country, an economics official said.
Some electronics and bicycle manufacturers have restarted their factories in Taiwan, while many others have adopted a wait-and-see attitude, according to the official.
Liu Meng-chun (劉孟俊), head of the First Research Division under Taipei-based Chung-Hua Institution for Economic Research (CIEA), said that capital outflows from China have persisted in recent years due to the changing business operating environment, increasing labor and tax costs and because of the rise in the U.S. dollar against the Chinese yuan.
The U.S.-China trade war has accelerated those capital outflows, but the key problem is that China, which used to be the world's factory, is losing its competitive edge as a manufacturing base of low production costs, Liu added.
According to statistics from the MOEA's Investment Commission from January to August, 40 percent of inquiries by Taiwanese businesses about foreign direct investment were related to investment in China, while 60 percent focused on Southeast Asia.
In the past, 60-70 percent of such inquiries were related to investment in China. This shows a potential shift in the investment intentions of Taiwanese businesses.
Chang Ming-pin (張銘斌), director general of the MOEA's Department of Investment Services, said most domestic companies interested in investing in China are eying the domestic market there, while most considering relocating are doing so because of the deteriorating operating environment in China, but not necessary due to the fallout from the U.S.-China trade war.
As to whether China-based Taiwanese businesses will move their operations back to Taiwan, CIER President Wu Chung-shu (吳中書) said that given Taiwan's relatively strict environmental regulations, research and development or capital-intensive industries are most likely to return.
By: Liao Yu-yang and Evelyn Kao, September 9, 2018
Source: Focus Taiwan
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