Chun-Yi Lee, Director of the Taiwan Research Hub, University of Nottingham
(This is the transcript of speech delivered by Chun-Yi Lee at the Internasional Seminar on the Taiwan Strait in the Shifting Geopolitical Landscape: Reviewing the Past, Paving the Path to Determine Better Future, PACIS UNPAR, 28 May 2025)
I have been working on China-Taiwan economic security in my past research. What I would like to share with you and also with professors and students in Tunghai University are my observation throughout those past years. My topic is whether hearts and minds can be bought, as I said, of the cross-strait relations.
I have some concepts that I would like to share with you. I start from the principles of the foreign direct investments. I would like to explain a little bit why country or companies would like to invest to another country because there are several reasons.
And then I would talk a little bit about the historical background of Taiwanese investment in China and Chinese investment in Taiwan. They are very different in terms of the types of the investments and also in terms of the years and months, but I will share with you my observations.
Because I’m coming from a political economist perspective that one would assume with a closer investment and also with a longer term of the investments, two countries or two societies will get closer, but it really didn’t happen in the case of China and Taiwan.
So I would explain to you what happened after the bilateral investments of Taiwanese investment in China and Chinese investment in Taiwan. And I would like to present or to share with you what are my thoughts of the money in terms of buying hearts and minds.
Principles of the Foreign Direct Investment
In terms of the concept, I anchor of my research on the political economy.
From the perspective of the international political economic, the concept of economic interdependence suggests that when two countries invest on each other, that would concern with international economic issues, the actors who conduct economic diplomacy are not only the governments, not only diplomats; there are also business people; there are also civil societies and NGOs. And in terms of that, because of the investments, it usually would be longer term.
The business group come and then stay. They will share their understanding, they will bring closer of their understanding from different countries to the host countries. Supposedly, it will bring two countries closer. This is what economic interdependence argues; They’re very optimistic thinking of the investment that can do.
Of course, you may say that it doesn’t really happen in reality. And I would agree with you, especially in terms of the Chinese investment in Taiwan, and the Taiwanese investment in China.
Maybe we can even talk about the Chinese investment in Indonesia later, because this morning, I took the famous Woosh to come to Bandung. And I was very impressed with that. I understand that with such investment, probably not quite yet for Indonesian people’s hearts and minds. And this is what we can discuss about.
Let me introduce you from the business perspective. Business school says that the reason the country will invest, because first, they want to seek foreign markets. Because the domestic market is too small, then the country wants to expand markets when they went abroad to invest.
Second, they want efficiency. Efficiency means that cost down in terms of labor. For instance, if your home country, the labor price is too high. So you went abroad to invest. You are seeking of the cheaper labor force. For instance, usually that’s the British companies or American companies, they come to Taiwan, they come to China, they come to Indonesia because labor cost is low.
Or they seek for the natural resource, for instance, and environmental regulation. For instance, Taiwanese investments into China in the 1980s because Taiwan started to develop and the government started to get stricter in terms of environmental regulation, whereas China was still very underdeveloped at the time, and they didn’t care about environmental regulation.
So those are the efficiency reasons. The companies are thinking of cost down, save the money, make more profits. Or the company will invest abroad because they want to find alternative resource. For instance, they want to find the timber, the water, electricity, or rare earth. They are thinking of investment in order to get closer to their resources, which they need.
The last point is about strategic asset seeking. Even so, strategic asset seeking, it doesn’t mean on the diplomacy side. It means that the company is thinking that how strategically they can add on in terms of the investment abroad to bring more profits.
All the principles of FDI so far, we just need to remember from a company’s perspective is to make money. Investment abroad is to make money and profits.
Taiwanese Investment in China and Chinese investment in Taiwan
Let me introduce you the bilateral investment data from the Taiwanese investment to China and Chinese investment on Taiwan.
Source: Investment Commission, Ministry of Economic Affairs
I just want to show you the green sign is Taiwanese investment on China. The brown, very small dots is the amount of the Chinese investment in Taiwan. There’s really very few Chinese investment to Taiwan because Taiwan is going to get even more stricter on the Chinese investment. But having said so, with this column or the color of the data, you can see it was quite asymmetric investments. Taiwan invested a lot on China, whereas China was more or less relatively small on Taiwan.
So let me provide you another figure. Taiwanese investment in China before COVID, before 2018 the investment actually was 70% of the Taiwan’s total economic investments.
What about Chinese investment on Taiwan? Three percent. I will tell you why.
So let me give you a bit of a discussion. So I introduce you first, a lot of Taiwanese investment on China, very small investment for China to Taiwan. This is because of amount and the years of Taiwanese investment in China.
Taiwan has invested on China since 1980s. It was illegal. The Taiwanese government didn’t allow Taiwanese business to go to China, but Taiwanese business were very smart, or if you can say, sneaky. They invested through the third countries or third area, Hong Kong, Singapore, Maccau. So the investment, although it was illegal at the time, already started.
Therefore, a lot of the discussion with the amount of investment, a lot of the discussion already started with Taiwan’s investment of China on not just about the amount of investment, but about what kind of the business people’s, their role can do to enclose the economic or political relations across Strait.
A lot of publications say that the civic influence, remember I said that in the school of politics and economy, we believe that the business people, NGOs, they are also active diplomats. A lot of publications talking about Taishang, — the Taiwanese business people and their influence on the Chinese local government or central government, whether they will be able to enhance cross-strait relations. My own book was published in 2011 to discuss the Taishang, Taiwanese business people who could be the security asset cross-strait, but time has passed.
Taiwanese business people in China did not hold the status that influence the local government or central government, because actually Taiwanese investment in China already declined a lot. And also again, domestically, Taiwan actually do not really value much about the role of Taishang in China. We are also discussing about all these Taishang, Taiwanese business people’s political identity.
Remember, Taiwan is a democracy. So Taishang, Taiwanese business people, they can also go back to vote. So the reason that Chinese local and central government wanted so much to provide preferential policies to those Taiwanese people, because they can vote.
They can vote for a party which can be more friendlier to China. So a lot of the discussion is about Taishang, Taiwanese business people’s political identity, but actually Chinese government gave up to those Taiwanese business people.
They didn’t vote for the party that Chinese government wanted or feel that they can be closer to China. They feel Taiwanese people, they just wasted Chinese government’s hospitality, if you like. For the Chinese investment in Taiwan, the amount is very small, so there’s not much to talk about.
And again, what was talking is about actually since China just started to invest in Taiwan after 2009, after Ma Ying-Jeou government opened or relieved the barriers for the Chinese investment to Taiwan. The time is short and the amount of Chinese money invested in Taiwan is also not a lot. China didn’t build any high-speed railway track in Taiwan. China didn’t build any stadium in Taiwan. China didn’t build any port or the water dam in Taiwan, because Taiwanese government, although they allowed China to invest, but they didn’t allow China to invest on the infrastructure and key sectors that Taiwan would look into. So the Chinese investment in Taiwan is very limited.
I’m telling you now, what are the difference? Why there are so much investment from Taiwan to China? Why there are little or comparatively very small investment from China to Taiwan? The Taiwanese investment started in 1980. It was for the reason of cheaper labor. China was still the world factory and is still a little bit true now, but was really the wolrd factory in the past. The Chinese workers wage is really small and and so is the natural resource. At the time, the local and central government give the Taiwanese business preferential policies about reduce the land rental, not checking your license, not checking your environmental regulation.
My interviewee, Tai Sang, Taiwanese business people told me, when the local government come to check the environment regulation, they called them and said that we were coming, so prepare that you know, so you can pass. So all that actually is what? Let Taiwanese business people to have more profits, preferential policy, all that. So that is actually, although you can say the government preferential policy is the act of the political intention, but at the end, that’s to add Taiwanese business people’s profits.
So the Taiwanese investment in China is acting as a market principle. And another thing is, Taiwanese business people are very lazy. They don’t learn a new language.
They come to Indonesia, for instance, they need interpreters. They need someone to translate for them. I went to Vietnam to do fieldwork, very few Taiwanese business people can speak Vietnamese.
They won’t need to translate the language. Taiwanese business in China shares the same language. So it’s very comfortable, very warm for Taiwanese business in China, in terms of the profit, in terms of the environment.
On the contrary, Chinese investment in Taiwan is small. Taiwan is a very small island. We don’t have big markets. We are very short of the natural resource.
What we have actually is high skilled workers. So China actually just wants our ICT industry. They don’t invest on Taiwan because we actually do not have that money, but they want our people.
But for a company, if you want to invest on a country just for the high skilled workers, you can do other things. You can count. So my interviewees in Hsinchu Science Park told me, especially between 2015-2020, before COVID, China paid Taiwanese engineers to go to Shanghai, the same money as they received in Taiwan, but in RMB, five times more.
And they arranged for their children’s education in international school, everything is prepared, splended. They don’t need to come to Taiwan to invest. It is only for the skilled workers. That’s the reason why the percentage investment in Taiwan is small. For those companies who come to Taiwan to invest, as I interviewed those Chinese companies in Taiwan, they told me to follow the party’s principle. The central Chinese government wants them to invest in Taiwan at a time to make the government look good and to make the Cross Strait relationship harmonious. It was between 2010 to 2016.
Economic Cooperation Framework Agreement (ECFA) in 2010
The ECFA, the Economic Cooperation agreement between China and Taiwan, was signed in 2010. It was signed between China and Taiwan, but a lot of people in Taiwan questioned: was it signed between China and Taiwan, or it was signed between CCP, the party, and the KMT, the pro-China party back then. Because this agreement, especially on the service trade clause, a lot of the discussion on that didn’t go through Taiwan’s legislative Yuan.
Although we have the mainland tourists come to Taiwan, but at the time they were really not very polite. A lot of our Taiwanese vendors who wanted the Chinese market, everyone wanted the Chinese market, but they did not feel like their attitude or the way they behave made Taiwanese feel respested.
The ECFA was passing really fast and through backdoor. It didn’t go through legislative Yuan’s examination. This triggered Sunflower Movement in 2014. The Sunflower Movement which was initiated by young generation was so ferociously guarding Taiwan’s democracy. The young generation were saying that for such an important economic agreement the government didn’t go through legislative Yuan. This is degrading of the democracy. They occupied legislative Youan in March for about a month, from March 18 to April 10, 2014.
Those young people now are 30s, mid-30s, and become the pillar for the DPP, the opposite party to the KMT, the governing party now. They are still very strong and very active.
I’m running this Taiwanese Insight, which is an academic blog to report or invite all the contributors to write something about Taiwan. We did an anniversary of the Sunflower Movement in Taiwan and the Umbrella Movement in Hong Kong. Both movements happened in 2014. Sunflower Movement in March, that was Taiwan, as I said, it was against that kind of unclear regulation and didn’t go through the legislative Yuan. Hong Kong was at the time also had umbrella movement in September. We look at what is Taiwan and Hong Kong now.
What also I wanted to say that in Taiwan, we had an election in January 2024. I mentioned to you earlier, the party-side agreement with CCP was KMT. This president is from Democratic Progressive Party (DCP). It is the third time for the party to be elected.
In any democracy, it is very rare for a party to be elected three times. I mean functional democracy. It’s very rare for a party to be elected three times in Taiwan because Taiwanese people are now very cautious about China. We wanted to have a very clear divide between Taiwan and China, and this is one of the important reasons.
The governing party was elected third time. They had a lot of complaints in terms from the people, young generations, they don’t have money to buy their houses inflation after COVID. Despite all these domestic complaints, they still won.
So the China factor actually played a role in Taiwan’s democracy and election.
Why Chinese money cannot buy people’s hearts and minds?
So why Chinese money cannot buy Taiwanese’ hearts and minds? You probably would say that their money to Taiwan is not a lot. Yes, but they did actually contribute to Taiwan’s trying to buy over Taiwan’s ICT sector and also the engineers. They still wanted to buy Taiwan’s foods, Taiwan’s fish products, Taiwan’s agricultural products. The reason I think that Chinese money doesn’t look so good for Taiwanese, because first Hong Kong, 2019. A lot of Taiwanese younger generation don’t want today’s Hong Kong to be tomorrow’s Taiwan.
They realize what China said, one country, two system, just a lie. It will never happen. And they ended Hong Kong’s total independence or special legislative zone much earlier than they promised, 50 years.
So Taiwanese people saw what happened in 2019 and the surprise of Hong Kong actually contribute again of the DPP’s winning of the presidential election and maybe President Tsai Ing-wen’s second term after Hong Kong’s suppression or the violent suppression from the Chinese government.
Another reason Chinese money doesn’t look so good in Taiwan is although China promised to buy all Taiwan’s agricultural products and investments, but China also punished on Taiwan.
The pineapple war, what does that mean? I mentioned that a lot of Taiwan’s fruits and also agricultural products were shipped to China.
When China said, Taiwan is competitive, we love what you produce, let’s buy your agricultural products. Their aim is to buy or win over our farmers’ pineapple. But when they feel like Taiwan cannot be bought off, they say, sorry guys, we don’t buy your pineapples, we don’t want your pineapples.
They wanted to use that to intimidate our farmers, our agricultural workers to say that if you don’t listen, you don’t work for or be closer to China, your products will be no way to sell. Well, American backed Taiwanese farmers by buying a lot of pineapples. Japan also bought a lot of pineapples. We probably can consider next time to ship to Indonesia.
What I said is about that China was trying to use carrot and stick, and it was really obvious again to Taiwanese, even agricultural workers.
Nancy Pelosi’s visit to Taiwan in August 2022
The last thing is this famous lady, Pelosi visited Taiwan in August 2022. It’s honour that Taiwan can host Pelosi, but it’s also it also induced the Chinese fighter jet across the median line. So far, China doesn’t recognize there’s a median line of the Taiwan Strait. After Pelosi’s visit, the fighter jet just visited Taiwan’s airspace whenever they want. Taiwanese people, especially after Pelosi’s visit, was constantly prepared and thinking that, China has been no way that they would let Taiwan to express ourselves.
And again, Pelosi, of course, is to indicate that how much strong support American back then to Taiwan. The visit is trigger a lot of the Chinese issues or Chinese, especially netizens, anger. Especially a lot of younger generation presented or they type on the internet that they want their Chinese government just directly sinks Taiwan or shoots Taiwan.
Concluding Remark
What I wanted to give you an observation with this very short presentation is to say that Chinese money, although has been in Taiwan, but it’s not a lot. And also Chinese gestures, especially to Taiwan, has been very hostile and negative.
And even if we don’t talk about the direct investment on Taiwan, we’re talking about why Taiwanese doesn’t feel like the prosperity of the motherland with a question mark? Why Taiwanese don’t want it to be part of China, because Taiwan knew that the part of China is at the end of what Taiwan has been strive for the democracy.
I think I end my presentation here.
