Taiwan Sees Rapid Growth in China Trade

Taiwan's trade with China has been growing rapidly in recent years; in 2007 the value of this two-way trade soared to US$102.3 billion, leaving the island with a surplus of US$46.26 billion-a growth of 20% over the year before, and an all-time high.

The boom in cross-strait trade has made Taiwan more and more economically dependent on China; in 2007, the ratio of Taiwan's exports to China in total shipments topped 30% for the first time. China is now the island's largest trade partner as well as largest export market as well.

Taiwan is China's third-largest import source, after only Japan and South Korea. However, the share of Taiwan-made products in China's import market dropped slightly last year to 10.6%, down from 11% in 2006.

Statistics released by the Bureau of Foreign Trade (BOFT) under the Ministry of Economic Affairs (MOEA) show that Taiwan's US$102.3 billion in two-way trade with China in 2007 represented a growth of 16.1%. In that total, exports amounted to US$74.28 billion, up 17.3%, and imports made up US$28.02 billion, up 13.1%.

Taiwan's export reliance on China has shot up by almost 10 percentage points since 2001, to 30.1% last year.

The BOFT explains that China's soaring economic growth is the main factor behind the boom in trade between the two sides of the Taiwan Strait, and that strong demand for Taiwan's computer and electronic products there helps build up Taiwan's trade surplus with the mainland. Among Taiwan's major exports to China are electrical machinery, electronic parts, opto-electronic devices, and computers and related products. These categories together accounted for 54.6% of the island's total exports in 2007, up 10.6 percentage points from 2004.

Many observers worry about the exodus of manufacturers from Taiwan to China in recent years, not only in traditional industries but also in information technology (IT) and related fields. As a result, exports of Taiwan-made IT equipment and related parts to China have been declining at an accelerated pace, with the annual reduction expanding from 2.3 % in 2006 to 7.1% in 2007.

Taiwan still bans imports of about 2,000 products from China. The US$28 billion worth of products that the island bought from China last year was just half as much as it procured from South Korea and accounted for only 12.8% of the island's total imports, a much lower import-dependency ratio than recorded by the United States, Europe, and Japan, not to mention South Korea.

At more than 30% Taiwan's export reliance on China, however, is the highest among China's major trading partners, followed by South Korea with 22.1% and Japan with 15.3%.

In recent years China has become a global manufacturing base for garments, computers, toys, home appliances, and foodstuffs, among other products. U.S. imports from China rose 12% last year to US$320 billion; EU purchases of Chinese products jumped 32% to US$250 billion; and South Korean procurement of Chinese products rose about 30% to US$57 billion-all far greater than Taiwan.

BOFT officials note that Taiwan has gradually opened its doors to Chinese-made products in recent years--especially after 2002, when both Taiwan and China entered the World Trade Organization (WTO). The officials believe that the island's ratio of imports from the mainland will continue growing, since its government is very likely to continue relaxing its restrictions on Chinese goods.

Taiwan's Export Reliance on China, 2001-2007 Unit: US$B
Year	Export value	Growth (%)	Reliance (%)	Trade surplus
2001	25.607	-6.7	20.3	19.704
2002	31.528	23.1	23.3	23.56
2003	38.292	21.5	2.54	27.274
2004	48.93	27.8	26.8	32.138
2005	56.271	15.0	28.4	36.177
2006	63.332	12.5	28.3	38.549
2007	74.279	17.3	30.1	46.259

Source: BOFT

Import and Export Reliance on China of Major Trading Partners
	Import reliance (%)		Export reliance (%)
	2000	2007	2000	2007
Taiwan	4.4	12.8	18.1	30.1
EU	6.7	16.0	2.7	5.5
Japan	14.5	20.5	6.3	15.3
South Korea	7.7	17.8	10.7	22.1
United States	8.2	16.5	2.1	5.6

Source: BOFT