By AFP and Focus | 2025-06-25

KUNSHAN, China -- Bustling Taipei-style shopping streets, majestic temples to the island's deities and thriving factories have long dotted the eastern Chinese city of Kunshan -- for years a vibrant hub for Taiwanese businesses.

However, these firms are now grappling with escalating cross-strait tensions that have stoked profound safety fears among companies.

Taiwanese entrepreneurs, known as "Taishang" in Mandarin, poured billions into China since ties began improving in the 1990s, playing a pivotal role in its ascent to become the world's second-largest economy.

Yet, their numbers have plummeted in recent years, with the estimated number of Taiwanese working in China dropping from 409,000 in 2009 to 177,000 in 2022, according to the Straits Exchange Foundation.

This dramatic retreat stems from a combination of political, economic and structural factors.

Foremost among them is the rising geopolitical risk stemming from the Chinese Communist Party's increasingly aggressive stance toward what it calls "Taiwan independence diehards."

New regulations encouraging citizens to report alleged pro-independence behavior -- paired with rhetoric supporting the death penalty for secession -- have cast a chilling shadow over Taiwanese operations on the mainland.

Safety fears

Industrialist James Lee, who shuttered his Guangdong factory in 2022, squarely blames "politics."

"We Taiwanese businessmen are afraid," he said. "We are not sending Taiwanese employees [to China] because we don't know how to guarantee their safety."

Luo Wen-jia, vice chairman of Taiwan's Straits Exchange Foundation, echoed this concern, noting that "the initial favorable conditions have disappeared, and now there are many additional risks."

The Chinese investigation into iPhone manufacturer Foxconn in October 2023 -- widely interpreted as political retaliation tied to founder Terry Gou's presidential run in Taiwan -- only reinforced how even major enterprises are vulnerable.

Beijing's political pressure now extends beyond direct actors, impacting their families and businesses.

In June, for example, China sanctioned Sicuens International Co., Ltd., an export company owned by the father of Taiwanese legislator Puma Shen of the ruling Democratic Progressive Party.

When asked about the sanctions, Zhu Fenglian, spokesperson for China's Taiwan Affairs Office, said that China "will never allow companies linked to diehard Taiwan independence separatists to profit from the mainland."

Shen, who has advocated strengthening Taiwan's national security, called the sanction a form of "implicating the whole clan," noting it was the third time in a year he had been targeted by Beijing.

His civil defense initiative, Kuma Academy, is also on China's list of "Taiwan independence diehards."

Economic slowdown

Compounding these political threats is China's economic slowdown.

Waning growth, combined with protracted US-China trade tensions, has discouraged further investment, Taiwan's Straits Exchange Foundation acknowledges.

In addition, the original draw of investing in China, its vast markets and low production costs, has lost its luster. Rising labor and manufacturing expenses have added to the challenges.

"When we first went there, we thought that China's economy would continue to improve because its market is so large and its population is so big," said Leon Chen, a Taiwanese businessman who previously operated in Jiangxi.

"We haven't seen this materialize because there are some issues -- there is the US-China trade war, and there was the pandemic," he said.

The failure of these opportunities to pan out has made many businesses reconsider their presence in China.

Faced with these layered pressures, Taiwanese companies are looking elsewhere. Some are shifting to Vietnam, Thailand, Indonesia and the Philippines, while others have returned home.

Between 2016 and 2024, Taiwanese investment in Vietnam jumped by 129%, while investment in China fell by 62%.

This decline is a blow to Beijing's long-standing "united front" strategy, which relied on the Taishang community to advance its goals of political integration with Taiwan.

As China escalates military drills and Taiwan tightens scrutiny over suspected Chinese espionage, Taishang are increasingly caught in the crossfire as they contemplate further exits from an environment that no longer offers security or promise.