Journal Article

Buying Taiwan? The Limitations of Mainland Chinese Cross-Strait Direct Investments as a Tool of Economic Statecraft

Lee, Chun-Yi, Knoerich, Jan

2024

Overview

Chinese cross-border investments are often assumed to be state driven and a tool of Beijing's economic statecraft. However, corresponding evidence remains inconclusive. This article examines mainland Chinese direct investments in Taiwan and finds that they are not particularly effective tools of economic statecraft. Their excessive politicization and the sheer possibility that investments could be used for Beijing's economic statecraft resulted in a considerable pushback by Taiwan's government, bureaucrats and civil society against large and sensitive investments. The agency enjoyed by Taiwan hindered Beijing from deploying cross-Strait direct investments for political purposes, and Beijing has not openly promoted or supported such investments in Taiwan. Moreover, cross-border direct investments are by nature less exploitable for political purposes because they involve company-level commercial and entrepreneurial decisions. This sets them apart from other forms of economic statecraft, such as sanctions or trade restrictions, where the state has greater influence. Mainland Chinese companies have had limited commercial interests in Taiwan, and the investments that have been made there do not appear to have triggered significant political or security externalities. These findings suggest more generally that foreign direct investment might not be particularly effective as a tool of economic statecraft.

• Publisher: Cambridge University Press
• Subject: Borders / Bureaucrats / Civil society / Companies / Externality / Foreign investment / International trade / Investments / Politicization / Politics / Sanctions / Trade / Trade restrictions