Investors shy away from China’s ‘Taiwan Town’ as tensions rise

Only a handful of shops remain open at “Taiwan Town”, a huge shopping complex designed to encourage Taiwanese businesspeople to put their money in China.

For years, the island of Pingtan in China’s south-eastern Fujian province has offered Taiwanese investors tax breaks, subsidies and help with securing residency. While many initially invested, few remain in the complex. With the exception of a few tourists taking pictures of rusting statues decorated in traditional Taiwanese garb, it is largely empty.

“In the past few years, because of things like Taiwan independence and Covid-19, they don’t . . . come,” said Chen, a shopkeeper selling speciality snacks from western Taiwan’s Taichung at one of the few outlets still in business, who asked to withhold their full name to discuss sensitive topics.

The complex is one of the many ways Fujian — the Chinese province closest to Taiwan — hopes to attract Taiwanese investment. It is a small part of a grander scheme to establish the region as a “model zone” for cross-Strait integration. Beijing regards Taiwan as part of its territory and threatens to annex it with force if Taipei refuses indefinitely to submit to its control.

But Fujian’s efforts come as Taiwanese hearts and minds overwhelmingly reject the notion of unification, and as political and economic concerns push cross-Strait investment to multi-decade lows.

Taiwanese investment in Fujian fell 80 per cent year on year to just $220mn last year. Across the whole of China, Taiwanese investment fell 40 per cent to just over $3bn. Both levels represented 22-year lows, according to Taiwanese government figures.

Trade has also suffered. The province’s imports from Taiwan fell 10.2 per cent last year, while exports declined 15.6 per cent, among the sharpest declines of any its major trading partners.

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Taiwanese businesspeople, meanwhile, said they were more sceptical about their presence in the country as rising production costs, trade tensions and geopolitical risk pushed them to alternative hubs.

“No matter how China wants to sell that economic zone . . . the take [up] from taishang seems not to be high,” said Chun-Yi Lee, director of the Taiwan studies programme at University of Nottingham, using a common term for Taiwanese businesspeople.

Businesses are concerned about increased labour costs, competition with local companies and fallout from the US-China trade war, she added. “So the carrot is there but the problem is they don’t want to bite.”

Many of Taiwan’s early Chinese settlers came from Fujian and speak versions of its local dialects. Cities such as Fuzhou in the north of the province and Xiamen in the south are less than 20km from parts of Matsu and Kinmen, Taiwan-controlled islands just off the Chinese coast.

Taishang have also been a feature of Fujian’s modern development, having invested heavily in the province’s factories and infrastructure as China opened its economy in the 1980s.

Beijing hopes those ties will promote further industrial integration and head off cross-Strait conflict, said Wu Liping, the Fujian-born president of the Shanxi Taiwan Compatriots Association and a member of a provincial Chinese advisory body. “Even if our political views are different . . . we are all the children of China,” he said.

It is a message reinforced at Taiwan-themed malls, industrial parks and cultural sites across the province. In Fuzhou’s old town, an exhibition in a series of courtyards at the Taiwan Assembly Hall recreates a rest house for Taiwanese scholars seeking to pass the civil service examinations during the Qing dynasty. Cultural ties can promote “a beautiful future for national rejuvenation”, it adds.

But Fujian’s recent overtures come as the mainland has adopted an aggressive military posture towards the island nation, which last month inaugurated Lai Ching-te as president. Beijing regards Lai as a “dangerous separatist”.

Last week, China unveiled laws formally criminalising efforts to promote Taiwan’s independence, with punishments as severe as the death penalty, though it lacks jurisdiction over Taiwan. Taipei’s China policy body on Thursday warned its citizens against unnecessary travel to China, including Hong Kong and Macau.

“Generally, us taishang keep a pretty low profile and don’t promote ourselves,” said Jessie Chen, a Taiwanese businessperson who provides technology and other consultancy services for mainland manufacturers, adding that they want to avoid political issues. “But it’s very obvious that [China] needs human talent and wants us to bring over some of our technologies.”

With multiple concerns about the business environment in China, taishang are looking elsewhere, said Frank Shih-Chien Chien, vice-president of the Kaohsiung Global MICE Association, who was visiting Fuzhou for a conference. “If they are not coming back to Taiwan, then they are reinvesting in south-east Asia,” said Chien, who participates in business delegations to mainland China.

“To us, it’s just a slogan,” said Chi Shih-Yuan, a Taiwanese businessman who was visiting Fuzhou for a conference promoting cross-Strait co-operation in the events industry, of Fujian’s pitch for “integrated development”.

While he was happy to promote co-operation in the conferences industry, the agricultural machinery company he was an investor in would look to India or Indonesia to open a new factory, given the countries’ larger demographic dividends and concerns that China’s industrial subsidies had stoked retaliatory measures in markets such as Europe, he added.

“At the moment, cross-Strait [business] is not easy.”

Additional reporting by Andy Lin in Hong Kong and Kathrin Hille in Taipei