TAIPEI -- Taiwan will move fast to disentangle its economy from mainland China's in anticipation of worsening trade tensions between Washington and Beijing, Shen Jong-chin, the island's minister of economic affairs, said in a recent interview with Nikkei.
Taiwanese businesses play an important role in U.S.-China trade, especially through contract manufacturing, and the island would suffer if a trade war were to ensue. Taipei will call on companies that have moved to the mainland to return home and will encourage them to spread out production among other Asian markets, Shen said.
The administration of U.S. President Donald Trump is investigating China's trade practices and looking into slapping punitive tariffs on telecommunications equipment and other Chinese products for alleged violations of intellectual property rights. Washington and Beijing are pursuing negotiations on the matter. But the risk remains that supply chains will be disrupted, Shen said.
Apple sources semiconductors and other iPhone parts from Taiwan, for instance, and Taiwanese companies including Hon Hai Precision Industry -- also known as Foxconn Technology Group -- assemble the popular smartphones in China, as well as computers, game consoles and other electronics, and export them to the U.S. A trade war could dent Taiwan's gross domestic product by nearly 2%, by some estimates.
Taiwan's National Security Council began discussing responses shortly after Trump called for new sanctions last week, according to Shen. The island had come to rely too heavily on China as an export market and site for production hubs, and "from now on will distribute those through Southeast Asia and elsewhere," said the minister. "We will support research and development in Taiwan" and encourage native businesses expanding in China to invest in the island, he added.
Shen expressed hope that U.S.-China trade tensions will be turned into an opportunity for the administration of Taiwan President Tsai Ing-wen to further reduce the island's reliance on China.
China, for its part, announced a large-scale package of measures, including tax breaks for high-tech companies, last month to lure Taiwanese businesses and workers. The enticements are "aimed at drawing away [the island's] research and development capabilities and intellectual property, according to Shen.
Businesses including Taiwan Semiconductor Manufacturing Co., the world's biggest contract chipmaker, are expanding in China, but "a growing number of companies are avoiding China for fear of leaks of technology," Shen said.
On March 16, Trump signed a law encouraging reciprocal visits between high-ranking officials in the U.S. and Taiwan, to the ire of China, which claims sovereignty over the island. Shen expressed a hope to capitalize on the law "to the extent possible."
Shen also said that Taiwan aims to seize the opportunity presented by the revised Trans-Pacific Partnership, which was signed in March by 11 countries, including Japan but without the U.S.
"We are making ample preparations," Shen said, suggesting that Taiwan will quickly apply to join once the deal is put into force.
Touching on concerns that China might try to block Taiwan from the pact through close countries, Shen said that Taiwan "can only do what it can."