Economic Ties with China

As introduced by the Yearbook of the Republic of China:

Cross-strait economic activities have been proliferating in recent years. According to statistics compiled by the Investment Commission of the Ministry of Economic Affairs (MOEA), Taiwanese investment in China up to 2002 totaled US$26.61 billion, which accounted for 43.39 percent of Taiwan's total foreign investment. Trade volume between the two sides also increased, from US$8 billion in 1991 to US$41.01 billion in 2002. Of this figure, exports to China amounted to US$33.06 billion, comprising 25.3 percent of Taiwan's total exports, and imports from China amounted to US$7.95 billion, or 7.1 percent of Taiwan's total imports. Taiwan thus enjoyed a bilateral trade surplus of US$25.11 billion. Currently, China is Taiwan's third largest trading partner, top export destination, and the leading source of Taiwan's trade surplus.

Cross-strait economic and trade flows are conducted under the principles of "Putting Taiwan's interests first, while promoting globalization for Taiwan" in order to attain "mutual benefit with sound risk management". Now that both Taiwan and China have joined the WTO, certain economic and trade policies have to be adjusted. Starting on February 15, 2002, the MOEA has permitted direct transactions between businesses engaged in cross-strait trade and adjusted the regulations on inspecting goods from China. The MOEA also continues gradually to increase the scope of Chinese goods permitted for import, as long as those imports do not present a threat to national security or produce an adverse effect on Taiwan's industries. By the end of 2002, 6,707 of industrial products and 1,351 agricultural products-a total of 8,058 items, or 75.79 percent of all applications-had been opened for import. To prevent Chinese imports from having significant negative effects on the domestic market, however, safeguard mechanisms on these imports have been set up to the full extent permitted by WTO regulations.

The government lifted bans on indirect investment in China by ROC citizens in October 1990. A large number of Taiwan's industries have set up factories in China to take advantage of cheap labor and low overhead costs. Many of these manufacturers receive orders in Taiwan, produce their goods in China, and then ship the goods from China directly to their overseas buyers. As of the end of September 2003, the Investment Commission of the MOEA had approved 30,661 investment cases in China with a total value in excess of US$32.97 billion. Statistics show that the most popular destinations for this investment were, in descending order, Jiangsu Province, Guangdong Province, and Fujian Province. Sectors receiving the most investment were the electronics and electrical appliance, food and beverage, and plastic product industries.