As China drafts its 15th five-year plan – the next entry in a line of expansive blueprints that have set the tone for the country’s development over more than seven decades – we examine the implications and opportunities for industrial collaboration across the Taiwan Strait.
Last month on the outskirts of Beijing, a delegation of Taiwanese executives inspected gleaming new electric vehicles at a leading mainland Chinese manufacturer as they explored potential collaborations.
The delegation included representatives from major companies such as Delta Electronics, which supplies components to companies such as Apple and Tesla, as well as smaller businesses such as Voyager Technology, which supplies electric car manufacturers.
Taiwanese firms have been investing in mainland China for decades, but the recent trip highlights one of the ways that the relationship has evolved, with many companies from the island now supplying specialised components and parts to leading mainland firms across a range of hi-tech sectors, including the EV industry.
Now, as Beijing starts finalising its latest five-year plan – which is expected to focus on innovation and the mainland’s domestic market – Taiwanese firms are positioning themselves to take advantage of whatever opportunities it presents.
Analysts say the plan, which will run from 2026 to 2030, will seek to deepen economic integration between the mainland and Taiwan, with a focus on sectors such as electric vehicles and artificial intelligence (AI).
They also expect the plan to encourage further social and cultural exchanges – seen by Beijing as laying the groundwork for peaceful reunification.
However, there are a number of challenges to overcome, particularly in the semiconductor sector, the island’s main industry, where US export controls and Taiwan’s alignment with them complicate collaboration.
Mainland China’s five-year plans have guided its economic and social development since 1953, a few years after the founding of the People’s Republic.
Relations between Taiwan and the mainland remained in the deep freeze for decades after that, but cross-strait family visits resumed in 1987 at a time when Beijing was seeking investment and technology from the island.
Then in 1991, Beijing issued a combined 10-year plan and five-year plan that, for the first time, called for stronger economic ties with Taiwan and encouraged Taiwanese investment.
Since then, every plan has carried some reference to Taiwan. The most recent one, which runs until the end of this year, emphasised the importance of “integration” in the coastal province of Fujian, policies to benefit Taiwanese who moved to the mainland, industrial cooperation and a “cross-strait common market”.
It also included an explicit warning against support for Taiwanese independence, and a brief outline of Beijing’s defence policy, which is also closely watched for its signals towards Taiwan.
There are both political and economic considerations behind the inclusion of Taiwan in these plans, with Beijing looking to cross-strait integration and closer people-to-people ties to promote peaceful reunification.
Taiwan also matters economically: not only is the mainland one of Taiwan’s top trading partners, but decades of Taiwanese investment, especially in electronics and manufacturing, have also brought capital, supply chain infrastructure and expertise that fuelled the mainland’s rapid industrial and export growth.
Beijing regards Taiwan as a breakaway province and has never ruled out the use of force to reunify it with the mainland. Most countries, including the island’s main international partner, the United States, do not recognise Taiwan as an independent state, but Washington opposes the use of force and is legally bound to supply weapons to the island.
Max Lo, executive director of the Taiwan International Strategic Study Society, a think tank in Taipei, said that although the next five-year plan was likely to promote cross-strait economic and social integration, preferential “supernational treatment” for Taiwanese investors was unlikely to continue.
“China’s economy has grown, its companies have developed their own capital and technology, and domestic firms increasingly see the preferential treatment for Taiwanese businesses as an unfair privilege,” Lo said.
As a result, many Taiwanese businesses have already pulled out due to rising land and labour costs. Yet those who remained were deeply rooted and competitive against mainland Chinese rivals, he added. “They are not weaker, nor are they necessarily dependent on special privileges,” Lo said.
He also argued that it would be difficult for the government in Taipei to pressure the remaining firms to withdraw, since most of those had become much more localised in the areas where they operated compared with their mainland competitors.
Formal recommendations for the five-year plan are expected to be released after a major Communist Party meeting later this month known as the fourth plenum, with the final version expected to be approved at the annual legislative session in March.
However, the party leadership has already signalled that it is likely to focus on improving economic resilience, boosting domestic consumption and strengthening China’s technology and innovation capabilities amid intensifying geopolitical tensions, particularly the trade war with the US.
“China’s consumer market is expected to grow at an accelerating pace over the next five to 10 years. No company in the world can afford to lose access to this enormous market,” said one Beijing-based economic analyst, speaking on condition of anonymity.
“The advances driven by new productive forces – in industries, technology and production methods – present opportunities, especially for Taiwanese businesses, and even more so for small and medium-sized enterprises.”
Wang Jianmin, from Minnan Normal University in Fujian, said sectors including artificial intelligence, semiconductors, healthcare, and electric vehicles were the most promising areas for cross-strait cooperation.
Mainland China now produces more than 70 per cent of EVs worldwide, with BYD overtaking Tesla as the global market leader. Meanwhile, Taiwan’s main strengths are widely seen as producing high-quality components and hardware for car makers.
Those benefiting from such an arrangement include Chen Hung-chin, the chief executive of Wieson Technologies, who said the company supplied a range of components – ranging from in-car phone charging systems to speed limiters – to 15 mainland carmakers, including BYD and Dongfeng Motor.
“Whether it’s AI, new energy, automobiles, healthcare or biotech, Taiwanese businesses will naturally shift from their traditional export-oriented model towards greater cooperation and development in the domestic market,” Chen said.
“In AI, Taiwan has hardware advantages that can complement the mainland’s strengths in algorithms and application markets. Linking the two sides will create massive opportunities over the next five years.”
Meanwhile, Woody Duh, a former Taiwanese vice-premier, has been working to promote cross-strait EV integration. He told a technology forum held in Beijing during last month’s visit by Taiwanese executives that “we can certainly build a globally leading new energy vehicle industry chain” through a combination of Taiwanese expertise and mainland production scale.
However, some Taiwanese businesses find themselves increasingly caught up in the US-China rivalry, particularly firms that are affected by US President Donald Trump’s tariffs or facing growing competition from mainland companies.
Liu Meng-chun, research fellow and director of the mainland China division at the Chung-Hua Institution for Economic Research in Taipei, said: “In the past, companies could re-export through [the Association of Southeast Asian Nations] and other states.
“With that route now blocked, they face yet another obstacle as the mainland launches its new five-year plan next year.”
He said the new plan would also leave Taiwanese firms at risk from stronger competition and local protectionism.
Official figures show that Taiwanese investment in mainland China has fallen sharply. Last year, just over 7 per cent of Taiwan’s overseas investment went to the mainland compared with 80 per cent in 2010.
The president of a major Taiwan-based textile firm, speaking on condition of anonymity, said: “It’s clear that the mainland Chinese government is not encouraging traditional industries, especially those that are labour-intensive and highly polluting.
“For Taiwanese firms, this means challenges ahead unless they can pivot towards innovation-driven sectors. At the same time, mainland Chinese factories have caught up in both technology and scale, squeezing the space that Taiwanese firms once relied on for survival.”
He also pointed to the impact of tariffs, saying a lot of clothes manufacturing had already shifted to Southeast Asia or Bangladesh as a result.
Meanwhile US policies, including the push to restrict access to hi-tech products, are also having an impact on Beijing’s policies towards Taiwan.
Beijing has accused the island of colluding with the US in suppressing mainland China’s technological development, particularly with the addition of leading mainland tech companies such as Huawei Technologies and SMIC to a Taiwan trade blacklist.
Taipei has also pledged to deepen economic ties with Washington and support efforts to reindustrialise the US and develop its AI industry. Leading Taiwanese chipmaker TSMC has also pledged to invest up to US$165 billion in the US despite concerns on the island about the impact on its own chip industry.
A mainland analyst specialising in cross-strait economic issues, who requested anonymity, said: “US restrictions are the main obstacle limiting Taiwan companies from supplying advanced AI chips to the mainland.”
He added that this was likely to remain a challenge over the next five years, but while Taiwan was expected to continue leading the way in making cutting-edge advanced nodes – the most sophisticated chips used for high-performance AI and computing – the mainland had already expanded its ability to make mature nodes, an older but widely used technology.
“As a result, competition in these mature technologies between the two sides of the strait will be increasing. But overall, the two sides remain complementary, with potential areas for cooperation such as server hardware,” he said. - SOUTH CHINA MORNING POST
