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Taiwan’s China dependency is a double-edged sword

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Taiwanese President and chairwoman of the DPP Tsai Ing-Wen, seen pointing at a pineapple during a press conference at the Democratic Progressive Party (DPP) office. In response to China's ban on exports of Taiwan-grown pineapples, the Taiwan government has been promoting local products based on home grown pineapples, Taipei, Taiwan, 3 March 2021 (Photo: Reuters).

Author: Roy C Lee, Chung-Hua Institution for Economic Research

Taiwan’s remarkable economic performance in 2020 is something to celebrate given most countries globally plunged into recession because of the COVID-19 pandemic. Taiwan’s GDP increased by 3.11 per cent in 2020 compared to the global average of negative 4.5 per cent. It is the first time in three decades that Taiwan has achieved a growth rate greater than China’s.

But political debate broke out over one key element that enabled this achievement. Taiwan’s GDP growth in 2020 was mainly underpinned by an increased trade surplus and domestic investment. Exports increased to a record-breaking 4.9 per cent in 2020, with China (Hong Kong included) receiving close to 44 per cent of Taiwan’s exports, a 12 per cent increase from 2019. This makes China Taiwan’s single most important trading partner and a key source of trade surplus.

Many in Taiwan argue that trade dependence on China indicates that the current Democratic Progressive Party (DPP) government’s approach — keeping China at arms-length while pursuing a closer alliance with the United States — is just political rhetoric. Taiwan, after all, needs China for economic prosperity.

There are calls to address this high export concentration issue based on economic security concerns. One key risk is that this structure may increase China’s ability to coerce Taiwan for political benefit. China’s decisions in January and April 2021 to block Taiwan’s pork and pineapple imports based on arbitrary quarantine reasons are recent examples that support this argument.

The key question is whether trade concentration represents low resilience levels, over-dependence and other economic security risks that Taiwan faces, or to the contrary, is an indication of China’s ‘supplier dependency’ on Taiwan.

The top five export product categories from Taiwan to China measured in export value are electrical machinery and equipment and parts; machinery, mechanical appliances and computers; optical and other precision instruments and accessories; plastics and articles; and organic chemicals. Together, they accounted for 86.3 per cent of Taiwan’s exports to China in 2020.

Cross-strait trade is predominately electrical machinery trade — it accounts for 64 percent of total exports. Semiconductors are the most important product item under the electrical machinery category, accounting for 78 per cent of electrical machinery exports. As such, the 27 per cent increase in semiconductor exports to China in 2020 was the main factor underpinning the overall increase in exports.

Chinese demand for semiconductors surged in 2020 because of the growing demand for electronic consumer products due to the worldwide proliferation of working from home and home-schooling. The stockpiling strategy of Chinese tech firms, including Huawei and SMIC, in light of potential US export controls contributed to the surge of demand as well.

As far as the danger of economic coercion is concerned, the risk for Taiwan is at this stage limited. Taking semiconductor trade as an example, China’s current domestic capacity can only supply somewhere between 15 to 20 per cent of semiconductor demand. Semiconductors from Taiwan and South Korea are the main sources of supply underpinning China’s position as the global manufacturing powerhouse for semiconductor-enabled electronic products.

This ‘reverse’ dependency structure means that if Beijing were to weaponise semiconductor trade to coerce Taiwan, it could potentially harm China’s own economic growth much more than Taiwan’s. The ‘reverse’ dependency structure is one of China’s primary strategic concerns and was a key driver of China’s semiconductor import substitution policy created more than 20 years ago.

Taiwan’s current trade structure suggests that the threat of economic coercion is small. As a major hub in global supply chains, the future orientation of Taiwan’s trade relationship with China depends more on other external factors, like the direction of US policy towards China and supply chain reform.

As reflected in its Interim National Security Strategic Guidance, the Biden administration has formally initiated ‘strategic competition’ with China. On the supply chain restructuring front, the continuing trade war suggests the pressure for US-based suppliers in China to relocate will remain.

The draft ‘Strategic Competition Act of 2021’ passed by the US Senate’s Foreign Relations Committee in April (which was integrated as part of the US Innovation and…

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China’s November 2024 Economy: Navigating Mixed Signals and Ongoing Challenges

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In November 2024, China’s economy exhibited mixed results: industrial production rose by 5.4%, while retail sales grew only 3%, below forecasts. Fixed asset investment also faltered. Policymakers are anticipated to introduce measures to stimulate domestic demand and combat deflation.


China’s economy showed mixed performance in November 2024, with industrial production and exports showing resilience, while retail sales and fixed asset investment underperformed, amid ongoing challenges in the property sector. Policymakers are expected to implement targeted fiscal and monetary measures to boost domestic demand and address deflationary pressures.

The National Bureau of Statistics (NBS) has released China’s economy data for November 2024, revealing a mixed performance across key indicators. Retail sales grew by 3 percent year-on-year, a significant slowdown from October’s 4.8 percent growth and well below the 4.6 percent forecast. Industrial production, however, showed resilience, rising by 5.4 percent and exceeding expectations of 5.3 percent growth.

The property sector continued to drag on the broader economy, with real estate investment contracting by 10.4 percent for the January-to-November period, further highlighting the challenges in stabilizing the sector. Fixed asset investment also fell short of expectations, growing by 3.3 percent year-to-date, down from 3.4 percent in October.

In November, China’s industrial value added (IVA) grew by 5.4 percent year-on-year (YoY), slightly accelerating from the 5.3 percent recorded in October. This modest improvement reflects continued recovery in key industries, supported by recent stimulus measures aimed at stabilizing the economy.

The manufacturing sector led the growth, expanding by 6.0 percent YoY, while the power, heat, gas, and water production and supply sector grew by 1.6 percent. The mining industry posted a 4.2 percent YoY increase. Notably, advanced industries outpaced overall growth, with equipment manufacturing and high-tech manufacturing rising by 7.6 percent and 7.8 percent YoY, respectively, underscoring the resilience of China’s innovation-driven sectors.

Key product categories showed robust output gains in November:

From January to November, IVA increased by 5.8 percent YoY, maintaining steady growth over the year despite headwinds from a slowing property market and external uncertainties.


This article was first published by China Briefing , which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in ChinaHong KongVietnamSingapore, and India . Readers may write to info@dezshira.com for more support.

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Ukraine war: 10% of Chinese people are willing to boycott Russian goods over invasion – new study

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Since Russia’s 2022 invasion of Ukraine, some Chinese citizens express dissent through potential boycotts of Russian goods, reflecting a complex relationship despite government support for Russia.

Since Russia invaded Ukraine in 2022, the Chinese government has been criticised for its refusal to condemn the war. In 2024, the economic and diplomatic relationship between the two nations appears stronger than ever.

Because of strict censorship and repression imposed by the Chinese Communist Party (CCP), it is difficult to know the extent to which the general public shares their government’s support of Putin’s regime. But a newly published study I carried out with colleagues found that more than 10% of Chinese people surveyed were willing to boycott Russian goods over the war in Ukraine.

This is a surprisingly large figure, especially since existing surveys indicate that Chinese people hold a broadly positive view of their neighbour. We used a representative sample of 3,029 Chinese citizens for this research, to dig into public attitudes to Russia. The survey was done in 2022 after the Ukraine invasion.

We were aware that due to widespread censorship, our participants might not be willing to give honest answers to questions about Russia’s actions in Ukraine. They might also not feel safe to do that in a regime where disagreement with the CCP’s position is often met with harsh punishment. This is why we asked them to tell us if they would be willing to boycott Russian products currently sold in China.

We felt this question was a good indicator of how much the participants disapproved of Russian foreign policy in Ukraine. More importantly, we were also curious to find out whether Chinese citizens would be willing to take direct political action to punish Russia economically for its aggressive behaviour.

In our study, we split respondents into the three different ideological groups in China: “liberals”, who support the free market and oppose authoritarianism; “the new left”, who sympathise with the policies pursued in China under Mao Zedong; and “neo-authoritarians”, who believe the Russian-Ukrainian conflict is an extension of the rivalry between authoritarian China and the liberal United States. These groups were based on the main political beliefs in China.

We found that liberals were most likely to say they were willing to boycott Russian products. Liberals believe that China should work with, rather than against, western democracies. They also place a high value on human rights and democratic freedoms. Because of their beliefs, they are likely to think that Russia’s actions against Ukraine were unprovoked, aggressive and disproportional.

Chinese and Russian economic and diplomatic relations seem closer than ever in 2024.
American Photo Archive/Alamy

The new left and neo-authoritarians we surveyed were more supportive of Russian products. The new left see Russia as a close ally and believe that Nato’s expansion in eastern Europe was a form of aggression. Neo-authoritarians, on the other hand, believe that supporting Russia, an allied autocracy, is in China’s best interest.

Boycotting Russian goods

Asking Chinese participants if they are willing to boycott Russian products might seem like a simple matter of consumer preferences. However, our study reveals a great deal about the way in which regular citizens can express controversial political beliefs in a repressive authoritarian regime.

Boycotting products of certain companies has long been studied in the west as a form of unconventional political action that helps people express their beliefs. However, in the west, boycotting certain products is simply one of many ways people are able to take political action. In a country such as China, boycotting a Russian product might often be the only safe way to express disagreement with the country’s actions.

This is because citizens do not have to tell others they chose not to buy a product, and their actions are unlikely to attract the attention of the authorities.

Since Russian goods are readily available to Chinese consumers and China is encouraging more Russian exports to reach its market, the Russian economy could be significantly affected by an organised boycott campaign in China. The considerable level of support for a boycott expressed by some of our participants, as well as previous acts of solidarity with Ukraine in China, suggest that such a campaign could already be taking place in the country.

This could harm Russia because it regularly exports a number of different products such as meat, chocolate, tea and wine to China. These goods made up 5.1% of China’s total imports in 2023 – and this figure is likely to increase if Russia becomes more isolated from the west, and therefore more dependent on China for its trade.

While 5.1% of the Chinese market might seem like a low figure, China is home to over 1.4 billion people. In this context, even a small boycott could result in a serious loss to Russian companies.

Our research shows that Chinese citizens don’t always support the official position of the communist party. It also shows that many people there will express even the most unpopular political opinions – if they can find a safe way to do it.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Australia Can Enhance China’s Credibility in the CPTPP

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In early 2024, China sought to join the CPTPP, potentially offering modest economic benefits to Australia. Key reforms include limiting state-owned enterprise subsidies, enhancing data flows, and banning forced labor.


China’s Interest in the CPTPP

In early 2024, China expressed a keen interest in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade agreement involving eleven Pacific Rim economies and the United Kingdom. This move is anticipated to yield modest economic benefits for Australia. However, it also opens the door for vital reforms in areas such as the control of subsidies for state-owned enterprises, allowing free cross-border data flows, and prohibiting forced labor practices.

Economic Implications for Australia

A May 2024 report from the Australian Productivity Commission indicated that China’s accession to the CPTPP might raise Australia’s GDP by only 0.01%. This modest gain isn’t surprising, given Australia’s existing preferential trade arrangement with China through the Regional Comprehensive Economic Partnership. Nonetheless, the CPTPP encompasses more than just tariff reductions, focusing on broader trade principles and standards.

Reform Commitments Required from China

For China to become a CPTPP member, it must demonstrate adherence to high-standard rules initially developed with the country in mind. This commitment will help alleviate concerns among member nations like Japan and Canada, particularly regarding China’s economic practices and geopolitical tensions, such as those with Taiwan. Membership would necessitate reforms, including limiting SOE subsidies, enabling freer data flows, and banning forced labor, with significant penalties for non-compliance.

Source : Australia can encourage China’s credibility in the CPTPP

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