Upon the inception of a sudden and full-scale currency revaluation in late 1980’s, Taiwan’s internal market situations began to deteriorate rapidly. These ranges from a sporadic upsurge of the land and real estate prices, wages, the costs of utilities and other inputs to production at home. On the other hand, the simultaneous emergence of rival competitors in Taiwan’s traditional export market plus the growing protectionism of the industrialized countries and so on have held sway with parallel negative impact. A broad cross-section of the local manufacturing investors had to introduce costs-saving production methods, including notably shifting of whole plant to sites of low-cost production abroad.
1991 marked a watershed in Taiwan’s legacy of two-way capital flows, as from then on its net direct investment abroad turned positive for the first time (with the exception of 1992 and 1995). 2002 witnessed, however, entrance into the WTO membership of both Mainland China and Taiwan. Massive injection of Taiwanese capital into the augmented manufacturing base on the mainland followed and has been steadily expanding ever since because of widely-shared market expectation. It is worth noting, further, that up to 2005 China alone attracted a stunning 71.1% of Taiwan’s total outward investment in that year, according to official approval figure. This naturally caused an uproar. Notwithstanding, the evolution of Taiwan’s pattern of direct investment abroad is in keeping with the ongoing trends of globalization and the spatial distribution of the multinationals it facilitates. It is of policy significance to recognize in this connection that, as a net capital exporter, Taiwan’s industrial and investment structure has been transformed as approximating more closely a developed market economy than that of the developing countries. But capital outflow from Taiwan entails, in the meantime, acute investment shortage at home. As a consequence, unemployment rises in recent deca