With rising labor costs in China, coupled with the continued rise in trade tensions between China and the U.S., Taiwanese businesses have accelerated their withdrawal from China in recent years, in contrast to the past 30 years when a large number of Taiwanese manufacturers relocated their production bases to China.
Taiwan‘s “Technology Newsline” reported on January 11, citing the Financial Times, that for more than 20 years, most of the production capacity of Taiwan’s leading eyewear industry company, Huamei Optical, has been located in mainland China and has now established a new factory in Taiwan. The new factory will start operating in early 2021 and will mainly produce higher-margin products.
The report said that Huamei Optical is not alone, CRIF China Credit Institute Editor-in-Chief Liu Ren said that there is a clear trend of Taiwan-invested companies withdrawing from China.
According to CRIF’s survey, less than half of the top 1,000 Taiwanese companies in China will see revenue growth in 2020, and total pre-tax profits will plummet by more than 20 percent to a nine-year low.
Liu Ren said this marks “the end of the era of cross-strait industrial co-prosperity.”
The report said that Taiwan’s major electronics foundry, most of the production capacity has been moved to Southeast Asia, India and Taiwan. Small and medium-sized enterprises in the textile, footwear, furniture, auto parts and tooling industries are also feeling the pinch because of surging labor costs, Beijing no longer providing subsidies for such industries, fierce market competition and serious problems with Chinese businesses infringing on intellectual property rights.
Data show that Taiwan’s direct foreign investment (FDI) in China will plummet by more than half in 2020.
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