Taiwan, China flag Taiwan, China: Investing in Taiwan, China

Foreign direct investment (FDI) in Taiwan, China

FDI in Figures

Global foreign direct investment (FDI) flows in the first half of 2021 reached an estimated USD 852 billion, showing stronger than expected rebound momentum, with an increase of 78% of the partial-year growth rate on the previous year according to UNCTAD’s Investment Trends Monitor released on October 2021. The global FDI outlook for the full year 2021 has also improved from earlier projections. The current momentum and the growth of international project finance are likely to bring FDI flows back beyond pre-pandemic levels. Nevertheless, the duration of the health crisis and the pace of vaccinations, especially in developing countries, as well as the speed of implementation of infrastructure investment stimulus, remain important factors of uncertainty. Other important risk factors, including labour and supply chain bottlenecks, energy prices and inflationary pressures, will also affect final year results. (UNCTAD, October 2021). Covid’s impact on developing markets and shifting investment from China are major trends that will impact foreign investment in 2022.

According to UNCTAD's World Investment Report 2021, FDI flows to Taiwan stood at USD 8.8 billion in 2020, unchanged from the 2019 level. In 2020, the stock of FDI was about USD 110 billion. In an uncertain global environment due to the outbreak of the Covid-19 pandemic, Taiwan's FDI performance was impressive. According to Taiwan's official statistics, 1,313 foreign direct investment (FDI) projects totaling USD 2.3 billion were approved from January to June 2021. As for inbound investment from mainland China, 20 cases were approved with an amount of USD 2.7 million from January to June 2021 (Ministry of Economic Affairs, Taiwan, 2021). The Netherlands, the British Virgin Islands and Japan are the largest investors in the country (excluding investment from Mainland China). Manufacturing, financial services, and IT attract most foreign investment.

Taiwan is an attractive destination for foreign direct investment (FDI) as its economy benefits from regional economic dynamism, a population with high purchasing power and the prominence of high-tech. However, the global economic crisis, the subsequent Eurozone crisis and the slowdown in China have negatively impacted FDI flows. Speculative activities, rising house prices, excessive bureaucracy and the rigidity of the legislative framework are all obstacles to investment. Nonetheless, Taiwan's business environment remains very attractive, as the World Bank ranks its economy 15th out of 190 in its last Doing Business 2020 ranking, losing two spots compared to the previous year. Taiwan has one of the world’s best regulatory system for protecting minority investors (transparency). In 2019, Taiwan made paying taxes costlier by increasing the corporate income tax rate, explaining the loss of points in the ranking. Moreover, Taiwan also re-entered the AT Kearney Foreign Direct Investment Index 2019 after a two-year hiatus, being ranked as the 22nd most attractive economy for foreign investment in the world.

The latest United Nation Asia-Pacific Trade and Investment Trends Report provides additional information on FDI in Asia-Pacific in 2021 and 2022.

 
Foreign Direct Investment 201820192020
FDI Inward Flow (million USD) 7,1148,2408,802
FDI Stock (million USD) 84,109100,800109,602
Number of Greenfield Investments* 888171
Value of Greenfield Investments (million USD) 7,6063,7112,595

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 
Country Comparison For the Protection of Investors Taiwan, China East Asia & Pacific United States Germany
Index of Transaction Transparency* 9.0 5.9 7.0 5.0
Index of Manager’s Responsibility** 5.0 5.2 9.0 5.0
Index of Shareholders’ Power*** 7.0 6.7 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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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.

Find out more about Investment Service Providers in Taiwan, China on GlobalTrade.net, the Directory for International Trade Service Providers.

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Latest Update: June 2022

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