For many years, Taiwan has prospered as a vital link in the global supply chain. Its electronics companies, which account for 40 per cent of exports and 15 per cent of gross domestic product, have assembled phones, computers and other gadgets for successful western brands such as Apple.
More recently, they have done even better by expanding into China, both as a market and as a base for their factories — combining Taiwanese manufacturing efficiency with the mainland’s low labour costs.
Now that model is unravelling. Chinese demand is slowing along with the economy and Beijing is rapidly building up a domestic electronics industry, turning itself from a customer into a competitor. While this is a threat to all of Asia’s regional economies, Taiwan is uniquely exposed because of its dependence on the technology sector and the closeness of its cross-straits ties.