2. Sustaining Taiwan’s and South Korea’s Post-Industrial Economic Growth: The China Factor

Both Taiwan and South Korea shared similar investment evolution in China, including the investment from SMEs to large firms, from labor-intensive manufacturing to ICT sectors, and from regions close to the home countries to Shanghai and Jiangsu Province. In terms of trade relations, the greater exports to than import from China has allowed both countries to run a tremendous trade surplus vis-à-vis China. After China’s industrial catchup in recent years, the growth model based on exporting intermediate goods to China is no longer workable. However, both Taiwan and South Korea have not yet found an alternative to completely replace the role of China. Both countries are facing unprecedented challenges to their economic growth prospects.