Memo #98
By David Edgington – david.edgington [at] ubc.ca
Joint ventures between Taiwanese and Japanese firms in China survive longer than companies formed only with Japanese capital. Research shows that Japanese firms have a better chance of success in China through alliances with their Taiwanese partners. The survival rate (which measures firms or joint ventures started in the 1990s up to the year 2005) in China has been around 68 per cent when Japanese companies entered the market alone. But the rate is 10 per cent higher if they worked with Taiwanese corporations. Taiwan can play a critical role in trilateral relations and create a win-win-win environment.
In June 2010, Taipei and Beijing signed the Economic Cooperation Framework Agreement (ECFA), which is seen as enhancing the Taiwanese economy’s competitiveness. The ECFA works roughly the same way as a free trade agreement to reduce and eliminate trade barriers. The pact is also reshaping the political and economic landscape of East Asia as it enables Taipei and Tokyo to recast their special relations in a new light. While the ECFA is already changing relations between Taiwan and China, it will open up greater opportunities for Taiwan to act as a conduit for Japanese businesses looking to access the mainland market.
Japanese companies are now aggressively seeking Taiwanese partners to make inroads into China’s market. Cooperative ventures have been launched in the electronics industry, publishing, logistics, and food sectors. Indeed, cooperating with Japanese firms in China following the ECFA is almost a natural evolution, because every phase in Taiwan’s industrial development, from export processing and industrial upgrading, to the nurturing of its semiconductor and video display industries, has in some way been tied to Japan.
Taiwan is finally being recognized in Tokyo for something other than a cog in the supply chain. Its strongest suit is not technology but its ability to gain a foothold in the world’s second largest economy – China. That is something that Japanese companies, especially the smaller and medium-sized firms, who have the technology but little foreign market experience, are eager to learn.
Growing industries for both Taiwan and Japan include sustainable energy, information technology, biotechnology and medical services, and optoelectronics. Both countries could take this great opportunity to cooperate and expand in the massive Chinese market in order to produce twice the result with half the effort.
About the Author:
David W. Edgington – Associate Professor, Department of Geography, The University of British Columbia. He teaches courses on Japan and the Pacific Rim.
Links:
- New Relationships Between Japanese and Taiwanese Electronics Firms, Environment and Planning A, 2011 (in press, by David Edgington and R. Hayter)
- World Eye Reports: Taiwan, The Japan Times, February 2011
- David Edgington’s research blog
Related Memos:
- Analysis of the Cross-Strait Economic Cooperation Framework Agreement between Taiwan and China, by Ted Chen (Memo #19)