China is no longer dependable for boosting socioeconomic development.
During the Cold War, Taiwan’s regional defense was crucially supported by a robust economy. Taiwan dedicated 6 to 11 % of its GDP to bolstering its regional defense between 1951 and 1991, a time when the economy was booming.
Taiwan’s financial growth has slowed down since the 2000s. Military spending as a percentage of GDP has decreased from 10 % in 1961 to 6 % in 1991 due to increased demand for social welfare spending. Taiwan’s military spending will simply make up 2.6 % of its GDP in 2024, despite having a higher defense budget.
Taiwan has relied on exporting technologically advanced technological goods to China since the 1990s to maintain economic growth. Following its democratic peace with the United States, China’s financial liberalization has made the cross-strait production network functional.
However, China is no longer dependable for Taiwan to grow its economy, according to the country’s mounting social conflict with the United States, real estate crisis, stagnant household consumption, and rising local government debts.
Taiwan’s development model, which relied on sending transitional products to China for ultimate assembly, is evolving. Taiwan’s total exports from China and Hong Kong decreased from 44 % in 2020 to 35 % in 2023. In the meantime, the proportion of imports to the United States, Europe, and ASEAN nations as a whole increased by 7 %.
Taiwan’s investment in China decreased by 17 % to US$ 2.5 billion in the first three quarters of 2023, which is significantly less than its$ 9.6 billion US investment and slightly higher than theUS$ 2.3 billion Singapore investment. According to China’s salary increases, more stringent labor laws, and environmental regulations, Taiwan began to invest less in the country before 2013.
Geopolitical tensions between the US and China since 2018 have accelerated the evacuation of investments. Taiwan’s funding away from China will continue to be hampered by the continued political tensions between the US and China, the economic slowdown of the Chinese government, its restrictions on private enterprise, and its growing hostility toward foreign traders.