Foreign direct investment (FDI) in Taiwan, China

FDI in Figures

According to UNCTAD's World Investment Report 2023, FDI flows to Taiwan reached USD 10.1 billion in 2022, up by 88.1% compared to one year earlier. At the end of the same period, the stock of FDI stood at about USD 1137.2 billion, around 18% of the island’s GDP. According to MOEA statistics, from January to December 2023, 2,310 foreign direct investment projects were approved, totalling USD 11.25 billion. This represents a 9.98% decrease in the number of projects and a 15.4% decrease in FDI compared to the same period in 2022. Specifically, inward investment from Mainland China saw 30 approved cases with USD 29.69 million in total for the same period, marking a 34.78% decrease in cases and a 23.34% decrease in FDI compared to 2022. From July 2009 to December 2023, 1,586 cases were approved, amounting to a total investment of USD 2.59 billion. Taiwan was the 18th-largest economy in terms of outward investment in 2022, with FDI outflows totalling USD 16.2 billion (+43.5% y-o-y). Between 2020 and 2023, only 5% of Taiwan’s total outbound foreign direct investment (FDI) projects were directed to China, a stark decline from the 42% observed between 2012 and 2015, and the 23% between 2016 and 2019, as reported by fDi Markets. Concurrently, Taiwanese companies amplified their investments in both India and Vietnam, which together accounted for nearly a quarter of total outbound FDI projects during the same period.

Taiwan is an attractive destination for foreign direct investment as its economy benefits from regional economic dynamism, a population with high purchasing power, a strategic location, and the prominence of high-tech. Structural impediments in Taiwan’s investment environment encompass excessive or inconsistent regulation, market influence wielded by domestic and state-owned enterprises (SOEs) across utilities, energy, postal, transportation, financial, and real estate sectors, as well as foreign ownership restrictions in sectors considered sensitive. Foreign entities have the right to establish entities, own business enterprises, and participate in all forms of remunerative activity in Taiwan, akin to local firms, unless stipulated otherwise in pertinent regulations. Notably, Taiwan imposes foreign ownership constraints in specific industries, such as a 60% limit on foreign ownership of wireless and fixed-line telecommunications firms, which includes a direct foreign investment cap of 49% in the sector. Taiwan has a thriving business environment: the country ranks 6th in the World Competitiveness Ranking, 4th out of 184 countries on the 2023 Index of Economic Freedom, and 20th globally in the IMD World Talent Ranking 2023.

What to consider if you invest in Taiwan, China

Strong Points

Advantages for FDI in Taiwan include:

• The country has a very internationally oriented economy and the trade balance is largely in surplus
• A strategic geographical location: the country is a gateway to China and to the ASEAN markets
• Taiwan has a large industrial base (being for example the 4th largest electronics producer in the world) and strong R&D capacity (supported by public spending)
• Robust external financial position
• Support for R&D through public expenditure
• The workforce is abundant, skilled and affordable
• The financial markets are booming and present many opportunities for foreign investors.
• Overall, the business environment is very positive and Taiwan ranked in the 15th place in the World Bank's Doing Business 2020 report is a good indication of its strengths.

Weak Points

With an export-oriented economy, Taiwan is dependent on the global economy and is particularly vulnerable to the development of trade with China and the USA, its main trading partners. Some of the disadvatages for the FDI include :

• Lack of a direct channel of communication with Mainland China
• Reduced size of the domestic market, which considerably limits local opportunities
• Poorly protected intellectual property
• A lack of diversity in the economy (low competitiveness of the services sector for example)
• Delays of infrastructure projects compared to other advanced Asian economies.

Government Measures to Motivate or Restrict FDI

Taiwan welcomes and actively promotes foreign direct investment. Local authorities offer investment incentives and support to foreign investors in the form of tax incentives, tariff exemptions, low-interest loans, R&D subsidies and other favourable terms.

Current regulations provide preferential tax incentives to foreign professionals employed in Taiwan, and are aimed at improving the overall environment for recruiting and attracting professionals from other countries (Foreign Talent Retention Act). A network of science and industrial parks, export processing zones, and free trade zones has been developed. Furthermore, in 2019 Taiwan launched a reshoring incentive program to attract Taiwan firms operating in mainland China to return to Taiwan, receiving positive responses from ICT manufacturers.

The national agency Invest Taiwan is responsible for promoting investments and acts as a single-window service provider. For investments of over NTD 500 million (around USD 17 million), the authorities will assign a dedicated project manager to the investment process.

Bilateral investment conventions signed by Taiwan, China

To see the list of investment treaties signed by Taiwan, consult UNCTAD's International Investment Agreements Navigator.