Taiwan sells more to the United States than to China, a major shift from Beijing

WASHINGTON (AP) Whether it's tapioca balls or computer chips, Taiwan is expanding toward the United States and away from China the world's second-largest economy that threatens to take the democratically governed island by force if necessary.

That resulted in the world's largest maker of computer chips that power everything from medical equipment to cellphones announcing greater investments in the United States last month after a boost from the administration Biden. Shortly after, a Taiwanese semiconductor company announced it was ending its 20-year operation in mainland China, amid a global race to gain an edge in the high-tech industry.

These changes, at a time of intensifying Sino-US rivalry, reflect Taiwan's efforts to reduce its dependence on Beijing and protect itself from Chinese pressure while forging closer economic and trade ties with the United States, its greatest ally. The shift also comes as China's economic growth is weak and global companies seek to diversify following supply chain disruptions during the pandemic.

In a stark illustration of this shift, the United States overtook mainland China as the top destination for Taiwanese exports in the first quarter of the year for the first time since early 2016, when comparable data became available. The island exported $24.6 billion worth of goods to the United States in the first three months, compared with $22.4 billion to mainland China, according to official Taiwan data.

Meanwhile, investment in mainland China's islands has fallen to its lowest level in more than 20 years, falling almost 40% last year to $3 billion from the previous year, according to the Taiwanese Ministry of Economic Affairs. Yet Taiwanese investments in the United States increased nine-fold to $9.6 billion in 2023.

Washington and Taipei signed a trade deal last year and are currently negotiating the next phase. US lawmakers also introduced a bill to end double taxes on Taiwanese businesses and workers in the United States.

Everything is motivated by (…) the desire to strengthen Taiwan's deterrence capacity and its resilience, all with the aim of maintaining the status quo and deterring China from being tempted to take (…) measures against Taiwan, Deputy Secretary of State Daniel Kritenbrink said.

The world's largest computer chip maker, TSMC, announced last month that it would increase its investments in the United States to $65 billion. This came after the Biden administration promised up to $6.6 billion in incentives that would allow the company's Arizona facilities to produce about a fifth of the world's most advanced chips by 2030.

In addition to its investments in the United States, TSMC invests in Japan, a strong supporter of the United States in the region. Foxconn, a Taiwanese conglomerate known as Apple's main contractor, is strengthening its manufacturing capabilities in India, while Pegatron, another Taiwanese company that makes iPhone and computer parts, is investing in Vietnam.

King Yuan Electronics Corp., a Taiwanese company specializing in semiconductor testing and packaging, announced last month that it would sell its $670 million stake in a company in Suzhou, eastern China. China. KYEC cited geopolitics, the US ban on exports of advanced chips to China and Beijing's policy of seeking technological self-sufficiency.

The ecological environment of semiconductor manufacturing in China has changed and market competition has become increasingly severe, KYEC said in a statement.

Taiwan's exports of semiconductors, electronic components and IT equipment to the United States more than tripled from 2018 to nearly $37 billion last year. It's not just about technology: the island more than tripled its exports of tapioca and its substitutes, key ingredients in boba milk tea, to the United States between 2018 and 2023 and is shipping more fruit, nuts and farmed fish.

Recent trade data reflects Taiwan and the United States' strategy to reorient that trade in an effort to reduce China-related risks, said Hung Tran, a nonresident senior fellow at the Atlantic Councils Geoeconomic Center.

The share of Taiwan's exports to mainland China and Hong Kong fell from around 44% in 2020 to less than a third in the first quarter of 2024. This is a very significant move, Tran said. And I think the share (of exports to mainland China and Hong Kong) will probably continue to decline.

Since the 1990s, Beijing has tried to balance its claims to the island with favorable economic and trade policies, aimed at fostering closer ties that could make separation from Taiwan more difficult.

When the independent Democratic Progressive Party took power in Taiwan in 2016, the new government pushed a policy aimed at distancing the island from the mainland and strengthening economic ties with other countries in the region, particularly in Asia from the South-East. Disgruntled, Beijing turned to its economic leverage to try to bring Taiwan into line.

It restricted mainland tourist travel to the island and suspended imports of Taiwanese seafood, fruits and snacks. In 2021, China banned pineapples grown in Taiwan over biosecurity concerns, devastating Taiwanese farmers whose exported fruit was almost all destined for the mainland.

Ralph Cossa, president emeritus of the Honolulu-based foreign policy research institute Pacific Forum, said Beijing's actions helped push back on the island.

Chinese President Xi Jinping is tactically intelligent but strategically foolish in many of the decisions he has made; its tests of loyalty to Taiwanese businessmen and other heavy-handed business practices and decisions contributed significantly to the success of Taiwan's policy of distancing itself from China, he said.

And this policy will continue with Lai Ching-te, the island's new president, Cossa said.

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AP reporter Aaron Kessler in Washington and video journalist Johnson Lai in Taipei contributed.

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