Prime Minister Sanae Takaichi shakes hands with Chinese President Xi Jinping ahead of their October 31 Japan-China summit meeting in Gyeongju, South Korea. (©Kyodo)
The Taiwanese government on November 28 sharply raised its economic forecast for 2025, projecting a robust 7.37% growth.
Driving this is an unexpectedly strong global appetite for artificial intelligence–related technologies, which has fueled a surge in exports of electronic components and information appliances.
After the Democratic Progressive Party took power in 2016 and maintained its policy of not accepting Beijing's One China Principle, Taiwan has come under steady economic pressure.
Beijing's suspensions of agricultural imports and restrictions on group travel have weighed on sectors such as farming and tourism. Even so, the broader Taiwanese economy has continued to post solid growth, showing resilience despite China's own slowdown.
As Japan faces similar economic coercion following Prime Minister Sanae Takaichi's remarks on a Taiwan contingency, Taipei's approach may offer some useful guidance.
Taiwan's Economic Reorientation
When former President Tsai Ing-wen took office in 2016, her administration pivoted away from the cross-strait economic integration pursued under Ma Ying-jeou's Kuomintang government.
The shift aimed to curb Taiwan's dependence on China.
Building on that, the administration rolled out the "New Southbound Policy" to strengthen economic and trade links with Southeast Asia and other partners, while encouraging the return of manufacturing that had migrated to China.
By 2024, only 7.5% of the island's outward investment went to China — a steep decline from 58.5% just a decade earlier.
Limits of Beijing's Leverage
Cheng Chang Chih, chief executive of the Research Institute for Democracy, Society and Emerging Technology, explains that one reason China's pressure failed to deliver a decisive blow is that Taiwan's competitive electronics components and machinery sectors were never overly dependent on the Chinese market.
"In fact, China actually depends on Taiwan's core industries," he says. "Its economic pressure has focused on agricultural and fishery products, leaving electronic components and machinery largely untouched."
Cheng also points to Taiwan's core industrial model — contract-based ICT manufacturing — as another source of resilience.
Foxconn, for example, assembles Apple's smartphones in its Chinese factories, but the end customer is an American company. That structure makes Taiwan far less vulnerable to being held hostage by the Chinese market.
Since contract manufacturers do not handle proprietary products end-to-end, from development through production, they can reconfigure their supply chains with relatively greater flexibility.
Toward Collective Economic Defense
Another set of countermeasures includes diversifying supply chains and establishing an international economic framework.
Victor Cha of the Center for Strategic and International Studies told a US House Committee on Rules hearing in 2023 that a collective economic deterrence framework — akin to NATO's collective defense system — could offer a viable counter to China's economic coercion.
According to Cha, China imports nearly 100% of the silver powder used in solar panel production from Japan, the United States, and South Korea.
On top of that, G7 members plus Australia have 395 items upon which China is 70% dependent. They amount to trade value of over $37 billion USD.
Those structural vulnerabilities, he argues, suggest that Beijing could face meaningful pushback if it sought to coerce members of a collective economic system.
Can Takaichi Step Up?
Regarding building such an economic apparatus, Cheng says, "the success rate is low unless the United States, the world's largest economy, takes the lead."
That said, he expresses hope that the Takaichi would show "proactive leadership," adding that "if Japan takes charge, a certain level of consensus could be reached within the Indo-Pacific region."
RELATED:
- Weathering China: Can Japan Handle the Travel Advisory?
- Rethinking Japan's Tourism Boom: From Volume toward Sustainability
- Expert: Why A Taiwan Contingency Won't Stay Just an Internal Matter
Author: Yoshiaki Nishimi, The Sankei Shimbun
(Read this in Japanese)
