Cross-Strait Economic Ties: Interdependence and Leverage
How decades of economic integration between Taiwan and mainland China created both mutual dependence and asymmetric leverage.
Decades of Economic Integration
Despite political hostility, Taiwan and China developed deep economic ties after cross-strait trade restrictions were relaxed in the late 1980s. Taiwanese businesses were among the first foreign investors in China's special economic zones, drawn by cheap labor, geographic proximity, and shared language.
By the 2020s, China had become Taiwan's largest trading partner, accounting for approximately 35-40% of Taiwan's exports (including re-exports through Hong Kong). Taiwanese companies invested over $200 billion in the mainland, with major firms like Foxconn employing over a million workers in Chinese factories. The relationship was particularly intense in electronics — Taiwanese-owned factories in China assembled a large share of the world's consumer electronics, creating a supply chain deeply entangled across the strait.
Under President Ma Ying-jeou's KMT government (2008-2016), economic integration accelerated. The 2010 Economic Cooperation Framework Agreement (ECFA) reduced tariffs on hundreds of goods. Direct flights, shipping, and postal services between Taiwan and China were established for the first time since 1949. The KMT argued that economic engagement would reduce conflict risk; critics warned it was creating dangerous dependence.