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Realignment of Taiwan-China Economic Relation: foreign direct investment of Taiwan's petrochemical and integrated circuit industries in China

With Mr Keh-Her Frank Shih (London School of Economics)

Series:  London Taiwan Seminar|

Date: Thursday 23 November 2006, 6pm-8pm

Venue: Room 116, School of Oriental and African Studies (SOAS)

Chair: Dr Kent Deng (London School of Economics)


This paper aims to investigate the realignment of Taiwan-China economic relation by looking at the developments of two leading Taiwanese intermediate goods industries (petrochemical and integrated circuit industries) and their recent FDI to China in particular. On one hand, their FDI is an issue relating to the competition between two developmental states for strategic industries. On the other hand, it is an issue relating to the reorganisation process of regional production networks led by multinational enterprises. These two industries in question have similar domestic market structures, perform similar functions in national economy, and both face pressure for restructuring due to the rapid growth of China's economy. However, the dynamics of their developments are very different. The findings indicate that competitive capacity of Taiwanese leading petrochemical firms is based on vertical integration and diversification while competitive capacity of its leading integrated circuit firms is associated to vertical disintegration and specialisation. Tendencies toward diversification and specialisation also result in different operational, organisational and spatial rearrangements between these two industries. To a large extent, their cross-border productions have reshuffled existing input-output matrix of commodity flows and consequently reshaped Taiwan-China economic relation. In addition, their expansions have grown beyond state controls. States no longer have dominant power to organise their domestic industries. This paper concludes that in the new round of global economic integration there is still a clear division of labour between Taiwan and China. However, Taiwan's advantageous economic position over China depends less on state's protectionist regulations but more on active outward investments led by its multinational enterprises.

About the speaker

Mr Keh-Her Frank Shih, Research Student in Regional Planning Studies, Department of Geography and Environment, London School of Economics