MARY LOUISE KELLY, HOST:
President Joe Biden and Chinese leader Xi Jinping held their last official meeting over the weekend outside a summit in Peru. Once again, the issue of Taiwan came up. The Chinese government has long claimed the self-governed Asian island as its own territory and long said it will never renounce the use of force to resolve that issue if necessary. Well, in Taiwan, business leaders are finding ways to reduce their exposure in China. NPR's Emily Feng reports from the island.
EMILY FENG, BYLINE: If you're a fan of bubble tea, well, it was invented here in Taiwan, and a lot of the tapioca starch bubbles are still made here.
CHOU CHIAH-YU: (Speaking Chinese).
FENG: Including in this factory belonging to the Ditiantai company in southern Taiwan.
It smells like brown sugar.
Chou Chiah-yu, one of the managers, shows me around his bubble tea factory...
CHOU: (Speaking Chinese).
FENG: ...Which processes and rolls enough tapioca to make more than 600,000 pounds' worth of bubble tea bubbles a day. Ditiantai sells brown sugar-flavored bubbles to Japan, Europe, the U.S. and China. But that's starting to change.
CHOU: (Speaking Chinese).
FENG: Chou says Thailand is now their big focus...
CHOU: (Speaking Chinese).
FENG: ...Where labor costs are way lower and risks, in his view, are also lower.
(Speaking Chinese).
Unlike the previous generation of Taiwanese entrepreneurs, Chou is among the new generation, who sees opportunities outside China's gigantic consumer market. This is in part because of warnings from other entrepreneurs, or Taishang, as they're called locally.
CHOU: (Speaking Chinese).
FENG: Chou tells me other Taishang have warned him Chinese capital control laws make it very difficult to get money out of the country. It's a place with no guarantees.
CHOU: (Speaking Chinese).
FENG: Then Chou says, rather euphemistically, there are the political problems with China, meaning the risk of China seizing Taiwanese assets, blocking their imports or even invading Taiwan. Taiwanese firms are reacting to this risk. They slashed investment into China last year to the lowest in nearly a quarter century. Spending in China by Taiwan companies dropped nearly 40%, though this year it rebounded somewhat.
SCOTT KENNEDY: Taiwanese companies can be the canary in the mine.
FENG: This is Scott Kennedy, a China and Taiwan expert at the Washington-based think tank Center for Strategic and International Studies. He and his colleagues now do a survey each year of Taiwanese firms. This year, they found about over a third of firms had already moved some of their operations out of China.
KENNEDY: Uncertainty that comes with growing U.S.-China tensions, whether it's around tariffs or export controls.
FENG: But Kennedy stresses Taiwan is not decoupling from China entirely. Taiwanese manufacturers are only moving part of their businesses.
KENNEDY: They're moving somewhere between 11- and 25% of their business, so they are keeping a lot of their operations in China, but moving some of them to new locales - Southeast Asia, India, back to Taiwan.
FENG: Chen Chern-Chyi, Taiwan's deputy economic affairs minister, says since 2016, Taiwan has been actively incentivizing the shift to South and Southeast Asia.
CHEN CHERN-CHYI: With respect to investment, it's like 130% compared to 2016. So we are of the view this is quite successful.
FENG: He says Taiwanese EMS, or electronics manufacturing companies...
CHEN: Almost all the major Taiwan EMS companies now, they have investment in India. They have investment in Vietnam.
FENG: With South and Southeast Asia being the focus, the Taiwanese trade and investment leaving China is not necessarily coming back to Taiwan, however. Chou at the Ditiantai bubble tea factory, for example, says he is avoiding China, but also avoiding expansion in Taiwan.
CHOU: (Speaking Chinese).
FENG: He says their clients around the world are already asking them to have a backup plan should China invade Taiwan. They want to know, if there's a war, can they still get their tapioca bubble tea balls?
Emily Feng, NPR News, Pingtung, Taiwan. Transcript provided by NPR, Copyright NPR.
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