Taiwan to adjust structure of trade, economic ties with China

Taiwan to adjust structure of trade, economic ties with China

The economic landscape of the Asia-Pacific region is undergoing significant changes, with Taiwan playing an active role in these transformations. As the world's fifth-largest exporter, China has experienced remarkable growth in international trade, leading to a growing interdependence between the two economies. This article examines Taiwan's adjustment of its trade and economic ties with China, drawing on insights from a study published in the Journal of International Economics [1].

Taiwan, a key player in the global economy, has been actively pursuing its ambition to become the Asia-Pacific Regional Operation Center. With more than two decades of market-oriented reforms, Taiwan's economy has grown significantly, and its trade volume has surpassed that of Japan [1]. China's rapid advancement in international trade, with its trade volume growing more than three times faster than world trade growth in the same period [1], has further strengthened the interdependence between the two economies.

The study by Lin and Zhang [1] employs a recursive dynamic computable general equilibrium (CGE) model to evaluate the impact of China's World Trade Organization (WTO) accession on trade and economic relations across the Taiwan Strait. The results suggest that China will continue to emerge as one of the world's largest manufacturing centers, and Taiwan will become an upstream supplier for China's massive manufacturing production [1]. This economic integration will enable both economies to reduce the cost of vertical integration among manufacturing industries and become stronger competitors in the global manufactured goods market [1].

The study also highlights the potential benefits of further integrating Taiwan's economy with China via a "Greater China" free-trade area (FTA) after its WTO entry [1]. This integration will not only enable Taiwan to take advantage of China's massive market but also promote technological advancements and innovation within both economies [1].

However, the political differences between Taiwan and China must not be overlooked. Despite complementary factor endowments and mutual economic interests, tensions between the two economies persist. It remains to be seen how Taiwan will navigate these challenges while continuing to pursue economic integration with China.

References:
[1] Lin, C., & Zhang, J. (2003). China's WTO accession and trade and economic relations across the Taiwan Strait: A computable general equilibrium analysis. Journal of International Economics, 62(2), 413-435. https://www.sciencedirect.com/science/article/pii/S1043951X03000555