The investment behaviour of Taiwanese in mainland China

Abstract

This thesis studies the patterns of Taiwanese investment behaviour in China. It also analyzes the implications on current economic, cultural and political trends and appraises the determinants influencing the Taiwanese direct investment (TDI) in China. As an active force in the economic development of the world, China is attractive to enterprises and producers from all over the world. Despite the complicated political environments between China and Taiwan, the Taiwanese have been investing in China for years. The increasing TDI in China is because of Taiwan's own depressed economic, political and social conditions, as well as FDI incentives offered by the Chinese government. Ethnical and language issues, as well as guanxi, also play important roles in this whole business process. Besides the above motives, this study also points out that an important motive for TDI in China is that Taiwanese industries are based on a 'subcontracting system', a unique international production/distribution network in East Asia, seen especially in Chinese regions. The motives of FDI from Taiwan into China are very different from the motives of FDI based on oligopolistic enterprises. TDI in China tends to involve an entire Taiwanese 'industrial migration', instead of the movement of firms due to the Taiwanese subcontracting system. This thesis aims to contribute to the study of FDI on Taiwanese firms which have mainland based ventures. This thesis attempts to provide an overall picture of T D I in China by exploring the investment motives, industries, and locations over a set time span. This thesis examines the determinants of locational choices o n T D I in China based on a conditional ๒git model. Similar to Hou and Zhang's study (2001), my empirical results Find that there is strong evidence of structural change on the determinants of locational choices of T D I in China over time, especially for infrastructure and labour costs. The factors behind this structural change include China's WTO entry and cultural links supported by the FDI policy. The results also show that the technology transfer from TDI into China has been significant for my sample period