Taiwan is discouraging its startups from making investments in China and is instead persuading them to set their sights on Japan.
The move is another step towards cutting China from the global supply chain, following efforts in the West, as ties between the United States and China continue to deteriorate and tensions between the self-governed island and the mainland escalate.
“We’ve contacted a lot of Japanese accelerators to come into the Taiwan market, and we’ll have start-ups go to them,” Jay Yang, deputy director general of the government-backed Market Intelligence & Consulting Institute in Taipei told the South China Morning Post. “It’s one of the new government policies.”
“We encourage Taiwanese start-ups to cooperate with the Japanese, and we’re working on that because it’s an aging country and needs a lot of fresh blood to work with them.”
Also part of the policy, according to Yang, the government doesn’t allow its agencies to fund company investments or to assist Taiwanese businesses on the mainland.
China has for over three decades has been a major destination for Taiwanese capital, and is currently home to around 4,200 Taiwan-invested companies. It’s been a top choice because of the lower prices and the lack of a language barrier. But analysts and proponents alike find plenty of sense in the shift toward Japan.
“First of all, Taiwan is very close to Japan in terms of trust, culture, and history,” John Allen Ku, director of Startup Island Taiwan, the government-funded agency that links startups to accelerators and firms abroad, told SCMP. “On the opposite side, Japan also feels that way about Taiwanese companies.”
Japan also has the advantage of a larger population without the market being as complex and diverse as it is in the US, according to Ku. The East Asian nation’s population of 125 million versus around only 23 million in Taiwan is ideal especially for tech startups looking for a wider user base. Consumers in Japan also generally have a higher purchasing power.
Tech startups also tend to favor Japan over China due to the latter’s highly restrictive internet infrastructure. China’s cyberspace is heavily and notoriously censored, with the world’s top social media sites banned. The country’s cloud environment is also unique, making developing programs in the mainland more complex and costly.
Taiwan approved $1.7 billion worth of investments in Japan last year, more than twice 2021’s $728.74 million, and almost twice 2020’s $964.37, according to data from the Ministry of Economic Affairs Investment Commission.
Information for this briefing was found via Nikkei Asia, South China Morning Post, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.