Really Going WTO?  (c) Simon Xi Zhang, 2002



1. Taiwan's Trade Surplus against China from Trading Guided by Investment

As mentioned above, the cross-strait trade is influenced by investment. It is not accidental that major Taiwanese products exported to China are: electronic products and machinery; basic metal and its products; plastics and rubber; textile raw materials and textiles. Most of them are not exported to China for immediate sale, but as raw materials or semi-products, processed in southeastern Chinese factories owned by Taiwanese, and then either flow back for further processing in Taiwan (largest four categories of Chinese export to Taiwan are the same four categories imported from Taiwan), or exported to third areas as mainland Chinese products.

There is large and continuous inflow of these to-be-processed goods from Taiwan; many mainland products cannot be exported to Taiwan[36]. The two factors in combination make China, famous in US as a powerful trade-surplus grabber and cheap-goods dumper, bear its largest trade deficit against Taiwan, totaling $22.34 billion last year[37]. Not surprisingly, China is also the largest trade-surplus source for Taiwan[38]. From a pure numeral viewpoint, China is already important for Taiwan's foreign trade.

[36] See, p.8, supra.

[37] The second largest number is owed to South Korea, amounting a trade deficit on Chinese part of $10.86 billion in 2001, less than 50% of Taiwan trade deficit. Table of Total Value of Import & Export in 2001 (Country/Area specific), MOFTEC, PRC.

[38] Chinese data is affirmed by Taiwanese data ($18.16 billion trade-surplus with China). See, Cross-Strait Trade Situation Analysis of December 2001 (February 27, 2002), Ministry of Economic Affairs. This amount ($18.16 billion) is arrived at by using Hong Kong Customs data on "entrepot trade to China from Taiwan" to adjust Taiwan Customs data.