- Island government has approved 156 new investment projects this year, many relocating from China or opting to add capacity in Taiwan to avoid US tariffs
- US President Donald Trump has placed American tariffs on US$360 billion worth of goods made in China
When Tong Hsing Electronic Industries of Taipei decided to expand production of high-end packaging material for technology equipment, they initially talked about setting up a factory in China, but eventually "discarded" the idea because exports to the United States would be hit with tariffs resulting from the trade war between the two counties.
The 44-year-old developer, with registered capital of NT$1.654 billion (US$542 million), will instead open a factory in 2021 covering more than 33,000 square meters (355,000 sq ft) in Taiwan, one city away from a smaller existing plant, according to their public relations official.
Tong Hsing is joining a wave of Taiwanese companies that have picked their homeland for factory expansion this year to avoid the trade dispute between China and the US, in turn, accelerating the island's economic growth.
So far this year, the Taipei government has approved 156 Taiwanese companies to invest in their homeland, often after deciding against opening factories or adding to existing production in China.
The returnees won't be a huge per cent of GDP, but there's still an effect of moving it forward and creating jobsHo Kun-sung
They are, understandably, keen to avoid US tariffs on US$360 billion worth of goods made in China, including by firms headquartered offshore, officials and analysts said.
The NT$703.4 billion (US$23 billion) approved for their investments is enough to raise Taiwan's 2019 gross domestic product (GDP) by a detectable amount, according to the island government.
"This trend of course will raise the GDP and employ people " that's beyond a doubt," said Ho Kun-sung, chief operating officer with the Taiwan economic affairs ministry's Invest Taiwan office. "The returnees won't be a huge per cent of GDP, but there's still an effect of moving it forward and creating jobs."
Taiwan's budget office now forecasts the local economy will grow by 2.64 per cent in 2019, above previous estimates and accelerating from 2.6 per cent growth in 2018. Global GDP growth will ease to 3.2 per cent this year from 3.6 per cent in 2018, the International Monetary Fund said, citing trade tensions as the main driver.
A "relocation effect" of factories moving production from back from China has accelerated private investment, pushing economic growth up consecutively every quarter this year to date, the Taiwan Institute of Economic Research think tank said in early November.
The institute forecasts 2.40 per cent growth this year in Taiwan's GDP, which was valued at US$590 billion in 2018.
Taiwan's economy had struggled to grow before the trade dispute, which US President Donald Trump launched in July 2018, as local firms switched production to China and parts of Southeast Asia in search of lower costs.
Taiwan is the world's top beneficiary from "trade diversion effects" linked to the China-US dispute, the United Nations Conference on Trade and Development said, with a windfall of US$4.2 billion. Office machinery, including technology hardware, made up just over US$2.8 billion of Taiwan's total.
When we looked at Asian countries' potential to attract relocating companies, we did find that Taiwan's potential was strong, alongside Vietnam's, Thailand's and Malaysia'sMarie Diron
"When we looked at Asian countries' potential to attract relocating companies, we did find that Taiwan's potential was strong, alongside Vietnam's, Thailand's and Malaysia's," said Marie Diron, managing director of sovereign ratings with Moody's Investors Service in Singapore.
Technology hardware firms are particularly keen to leave China because US tariffs of 15 per cent to 25 per cent would "eat up their profit margins," said Pan Chien-kuang, senior industry analyst with the Market Intelligence & Consulting Institute in Taipei. Clients in the US, Japan and other "advanced countries" are also worried about the security of equipment made in China, Pan added.
Taiwan, which has been a world technology hardware hub for decades, also has more hi-tech talent compared to countries in Southeast Asia that are keen on foreign investment.
Among the more traditional industries, bicycle builder Giant Manufacturing was among the first to bring manufacturing back to Taiwan as the tariffs took effect.
The Taiwanese company moved bicycle and e-bike production from the Shanghai area back to its central Taiwan plant in the final quarter of 2018, and invested an unspecified amount in local personnel and equipment, Giant's senior global marketing executive Irene Chen said.
Giant obtained government permission in March to invest NT$5 billion (US$164 million) in new operations in Taiwan.
"Because of the US-China trade dispute, some of our production for the US market has been moved back to Taiwan," Chen said.
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