Diversifying, Not Decoupling

A new report by the CSIS Trustee Chair analyzes a formal survey of over 600 Taiwanese companies, finding that although worries about the risks of doing business with China remain high, Taiwanese companies are engaging in a variety of diversification strategies rather than decoupling from China.

The views and actions of Taiwanese companies provide invaluable insights into both cross-strait relations and trends in the geoeconomic environment. Firms from Taiwan are deeply embedded in supply chains that traverse the West, the People’s Republic of China, and the Global South, operating along the most complex geostrategic fault lines in the world. Moreover, Taiwanese industry may be the “canary in the mine,” with its views and conduct providing a preview of how global industry may behave when faced with competing forces to either shift business away from China or stay put. Multinational companies and financial institutions trying to assess their options, as well as policymakers attempting to evaluate the efficacy of their economic policies, will gain a deeper understanding of this landscape by examining the views and behavior of Taiwanese industry.

In November 2023, the Trustee Chair in Chinese Business and Economics conducted a second formal survey of Taiwanese firms to assess how companies’ views and behavior may have shifted since an initial survey in July 2022. In addition to remeasuring their assessment of risks and coping strategies, a second survey could also evaluate whether steps by China to normalize inward and outward international travel and by Beijing and Washington to stabilize ties had any effect on firms’ intentions to move business operations.

This report, by Scott Kennedy and Andrea Palazzi, presents the key findings of the survey with regard to how Taiwanese companies evaluate the various geostrategic risks they face and how best to respond, both in terms of government policies as well as their own behavior. It then delves further into Taiwanese firms’ decision to move operations from the Mainland and explores why they are more prone to move than their counterparts from elsewhere. The final chapter evaluates the policy implications for the various actors with a stake in these geopolitical challenges.

This report is based on a survey carried out by the Trustee Chair in Chinese Business and Economics at CSIS. The dataset is available to interested parties upon request.

This report was made possible by general support to CSIS as well as funding from the Taipei Economic and Cultural Representative Office in the United States (TECRO).