Cross-Strait economic and trade relations are undergoing profound change. Taiwanese companies are accelerating their global expansion, even as economic ties across the Taiwan Strait grow more distant. Yet cross-Strait commerce involves more than trade and investment statistics. It encompasses companies operating factories across the Strait, employees who travel between Taiwan and China for work, and families divided between the two sides. These relationships have developed through years of business activity and daily life. Daniel Liu, Director of the Regional Development Study Center at the Chung-Hua Institution for Economic Research (CIER), said Taiwan must reconsider how to balance economic development, security, and existing cross-Strait ties amid sweeping changes in market and political conditions.
Export Markets Realign as the United States and ASEAN Gain Importance
Taiwan’s economic and trade focus is gradually shifting, as reflected in its export structure. In the first eight months of 2026, Taiwan exported US$180.3 billion in goods to the United States, accounting for 31.4% of total exports. Exports to China and Hong Kong totaled US$139.5 billion, or 24.3%, while exports to ASEAN reached US$115.1 billion, or 20%.
The distribution has changed markedly since 2020, when China and Hong Kong accounted for 43.9% of Taiwan’s exports, compared with 14.6% for the United States and 15.4% for ASEAN. Although export values to all three markets have increased in recent years, their relative shares have shifted significantly, with the United States gaining importance and ASEAN playing an expanding role.
Liu noted that this shift is not solely the result of order diversion from China to the United States. It is also influenced by increased demand for AI, developments in the electronic components sector, and changes in global production strategies. The United States has seen rising demand for AI servers and information and communications technology products, while China and Hong Kong continue to be significant markets for electronic components. Southeast Asia has taken on expanded roles in production and assembly. As a result, these markets remain closely linked through global supply chains.
Investment in China Falls to a Historic Low: Existing Taiwanese Business Operations Still Require Attention
The shift in investment flows has been even more pronounced. China’s share of Taiwan’s total outbound investment fell from 83.8% in 2010 to 44.4% in 2016 and 33.3% in 2020. In the first eight months of 2026, it declined further to approximately 1.05%, equivalent to about US$660 million.
Liu observed that Taiwan’s overseas investment has progressively shifted from a focus on China to a more diversified global presence. Significant investments by Taiwanese firms in the United States have contributed to the overall increase in outbound investment, further diminishing China’s relative share. Nonetheless, the persistent decline in new investment in China indicates a fundamental change in corporate strategy.
However, lower levels of new investment do not diminish the importance of existing operations. Since 1991, approved Taiwanese investment in China has exceeded US$210 billion. Factories, employees, customers, and supply chains built over decades must continue operating. Policy attention should therefore extend beyond new investment to address the management of existing operations, protection of corporate rights and interests, safeguarding technology, and adjustments to global business footprints.
Engagement and De-Risking Are Not Mutually Exclusive: Enterprises Must Strengthen Supply Chain Resilience
China’s role for Taiwanese companies has also become more complex. It remains an important market, customer base, and production location for some industries. In others, Chinese companies have become direct competitors and are entering third-country markets through overseas expansion. Taiwanese companies must determine which products remain competitive, which partnerships are worth maintaining, which technologies require protection, and how to adjust their business strategies when customers become competitors. No single position can adequately address all these issues.
Liu stated that engagement and de-risking have often been viewed as opposing strategies. Those who support engagement may appear reluctant to emphasize risks, while those who prioritize risk may seem compelled to reduce economic ties. This either-or approach no longer reflects business realities. Companies require assurance that orders can continue, technologies can be protected, products can comply with regulatory requirements, and supply chains can remain functional amid political tensions. Engagement and de-risking should be integrated to address these needs, enabling companies to sustain partnerships while adapting to change.
De-risking involves more than diversifying markets or relocating production. Even if assembly moves to a third country, the risk remains concentrated if critical components still depend on a single source. Redirecting orders to the United States also exposes companies to shifts in local policies and customer requirements. Companies should assess their technologies, materials, production capacity, and customers, then establish backup arrangements for difficult-to-replace links. The true measure of effective de-risking is whether a company can continue operating and delivering products when conditions change.
Government Should Strengthen Information and Support Services to Reduce Corporate Transformation Costs
As companies continue adjusting their global footprints, the government should account for the varying capacities of different-sized businesses. Large companies can establish plants in multiple countries and maintain dedicated legal and supply chain teams. Small and medium-sized enterprises, however, may need assistance finding alternative suppliers and understanding regulations in new markets. The government should provide timely and practical market and regulatory information, help protect technologies and resolve investment disputes, and support companies in identifying alternative customers and sources of supply. Overall export growth does not necessarily mean every industry can transform successfully. Shifts in investment flows also do not eliminate the adjustment costs facing individual companies.
Ongoing cross-Strait communication remains essential for practical reasons. Political differences are unlikely to be resolved solely through economic and trade engagement, and political tensions do not negate the operational requirements of businesses, the rights of investors, or the need for cross-Strait travel. Communication is effective when it facilitates information exchange, enables the identification of issues, and supports dispute resolution. For individuals and businesses operating across the Taiwan Strait, reliable communication channels can reduce uncertainty and safeguard their rights and interests.
Liu emphasized that evolving conditions in cross-Strait economic and trade relations necessitate an updated approach for Taiwan. Understanding China requires continuous monitoring of its markets, industries, and policies, as well as identifying opportunities for cooperation and sources of competition. De-risking involves recognizing critical links, establishing contingency plans, and broadening available options. Engagement entails maintaining channels for addressing issues and resolving disputes arising from existing ties. Pursuing these three strategies concurrently is essential for safeguarding Taiwan’s interests.
The real objective is to ensure that Taiwan maintains the autonomy to decide whom to work with, where to invest, and how to protect its technologies and citizens amid market restructuring and political tensions. Companies should retain the flexibility to adapt as needed, existing operations should receive support during challenges, and cross-Strait disputes should have established channels for resolution. Taiwan can achieve a pragmatic adjustment to evolving cross-Strait economic relations by balancing security, development, and the needs of its population. Coordinating these three approaches will enable Taiwan to sustain economic growth, security, and established ties during global market restructuring and political change. This coordination will also enhance the resilience of Taiwanese companies’ global expansion and strengthen Taiwan’s international engagement.
Source: Daniel Liu (October 5, 2026). Rethinking Cross-Strait Economic and Trade Relations amid Profound Change. Commercial Times. https://www.chinatimes.com/opinion/20261004002012-262110