Buying Taiwan? The Limitations of Mainland Chinese Cross-Strait Direct Investments as a Tool of Economic Statecraft

Lee, Chun-Yi; Knoerich, Jan

Abstract

Chinese cross-border investments are often assumed to be state-driven and Beijing’s tool of economic statecraft. However, corresponding evidence remains inconclusive. This article examines mainland Chinese direct investments in Taiwan and finds that they have been comparatively ill-suited as instruments of economic statecraft. Their excessive politicisation and the sheer possibility that investments could be used for Beijing’s economic statecraft resulted in a considerable pushback by the Taiwanese government, bureaucrats and civil society against large and sensitive investments. This agency enjoyed by the Taiwanese hindered Beijing from utilising cross-Strait direct investments for political purposes, and Beijing has not openly promoted or supported such investments in Taiwan. Moreover, cross-border direct investments are by nature less exploitable for political purposes because they involve company-level commercial and entrepreneurial decisions. This sets them apart from other forms of economic statecraft, such as sanctions or trade restrictions, where the state has greater influence. Mainland Chinese companies have had limited commercial interests in Taiwan, and investments that have been made there do not appear to have triggered significant political or security externalities. These findings suggest more generally that foreign direct investment might not be particularly conducive for utilisation as a tool of economic statecraft.

Citation

Lee, C., & Knoerich, J. (2024). Buying Taiwan? The Limitations of Mainland Chinese Cross-Strait Direct Investments as a Tool of Economic Statecraft. China Quarterly, 257, 202-221. https://doi.org/10.1017/s0305741023001029

• Journal Article Type: Article
• Acceptance Date: Jan 10, 2023
• Online Publication Date: Aug 1, 2023
• Publication Date: 2024-03
• Deposit Date: Jan 16, 2023
• Publicly Available Date: Aug 1, 2023
• Journal: China Quarterly
• Print ISSN: 0305-7410
• Electronic ISSN: 1468-2648
• Publisher: Cambridge University Press
• Peer Reviewed: Peer Reviewed
• Volume: 257
• Pages: 202-221
• DOI: https://doi.org/10.1017/s0305741023001029
• Keywords: China, Taiwan, foreign direct investment (FDI), economic statecraft, multinational enterprise
• Public URL: https://nottingham-repository.worktribe.com/output/16218045
• Publisher URL: https://www.cambridge.org/core/journals/china-quarterly/article/buying-taiwan-the-limitations-of-mainland-chinese-crossstrait-direct-investments-as-a-tool-of-economic-statecraft/54060D70AE154BA64AC4B137B64EB528
• Additional Information: Copyright: Copyright © The Author(s), 2023. Published by Cambridge University Press on behalf of SOAS University of London; License: This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (https://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.; Free to read: This content has been made available to all.