Is Taiwan’s New Southbound Policy Effective in the Global Supply Chain?

The emergence of the international fragmentation of production has led to structural changes in world trade. Trade in intermediate goods has turned out to be an important part of world trade, with an emphasis on the information and communications technology (ICT) sector in particular. Economic interdependence within the East Asia region indicates that this region as a whole is gradually being transformed into a single trading bloc, with a pronounced increase in the intensity of intra-regional trade. In terms of the global supply chain, China is now the nexus of a production network involving most countries in Asia and a final export market for the East Asia region. Indeed, China has become a regional hub for supply chain trade. However, China’s position within the global supply chains is changing. China has become more competitive in intermediate goods due to industrial upgrading. The New Southbound Policy proposed by the Tsai administration is based on four principles, namely, economic cooperation, special talent exchange programs, resource sharing and regional integration, and is aimed at deepening economic and cultural links with 16 ASEAN and South Asian countries, as well as with Australia and New Zealand. In terms of the political and economic viewpoint, the goal of the New Southbound Policy is to keep Taiwan from becoming overly dependent on a single market (e.g., China), and to seek to establish bilateral economic partnerships with targeted countries to support a New Model for Economic Development.