In view of recent development, it is very likely that the U.S. will delink its trade with China. Though the latter may finally back down under pressure, the former has in fact stridden over the tipping point and no leeway for slackening off has been spared. Perhaps the Taiwanese public has underestimated the economic impact of the Sino-U.S. de-linkage. And for sure, the ones who will be most badly hit are the Taiwan enterprises who are now still operating in mainland China.

When it comes to investing overseas, a precautious legal and market withdrawal mechanism is of utmost importance. Nevertheless, the majority of Taiwanese entrepreneurs tended to ignore it at the moments they started being engaged in the market across the Strait, partly because of the ambiguous political reality by that time, and partly because of their own inexperience in handling international operations.

Getting carried away by the “red carpet reception and extraordinarily compromising stance” of their China counterparts, most Taiwanese corporates quickly transformed themselves from “overseas investors” to localized operators. Deeply immersed and involved in complicated political and business relationships in China, they found it almost impossible to detach, not to mention to withdraw.

As far as I remember, when Taiwanese entrepreneurs asked for my opinion on the proper way of entering the China market, my advice has always been the same: Imagine you were now investing in other countries, say Europe or Indonesia, what would be the proper way then?

What I mean is that when investing in China, one should avoid acting rashly just because of the perceived cultural affiliation and the flattering and pleasing attitude of the counterparts. Just like entering markets in Europe, Indonesia or anywhere, one should make every move cautiously, prudently considering the related political risks, legal conditions and withdrawal mechanism.

Unfortunately, most Taiwanese entrepreneurs have rather been befuddled by the temptation of massive economic interests. Moreover, they relied too much on their traditional operation model of family businesses and tended to be over-confident in their experience in political norms of Taiwan. And by the time they finally get aware of the need of withdrawal, it will have been too late.

Under the current situation of Sino-U.S. de-linkage, the withdrawal of Taiwanese enterprises from China has become a necessity rather than a choice. Those going against this tide will risk alienating themselves from the trade frameworks of the U.S. as well as Taiwan, and ultimately become out-and-out China corporates.

If Taiwanese enterprises had started planning for withdrawal 5 years ago, they would be able to recoup 70% to 80% of their assets. But as they have been delaying the process till now, they must prepare for a significant discount on that. While the privately-owned companies' losses will be burdened by their shareholders, the situation of the publicly listed corporates will be more worrying. And this is an aspect that the Taiwan society has not really been aware of.

Of course, the adversity affects not only Taiwanese corporates, but also American companies, despite at a relatively lower risk level. Take Apple Inc. as an example, it is still unclear about how much the “China factor” counts in its overall value. Also, the extent of damages to its market share and manufacturing supply chain is yet to be accurately estimated.

Perhaps what is unique to Taiwanese entrepreneurs is that they are a “political orphan” in mainland China, and face a similar, though less acute, situation even in their own country. And they spare no legal and institutional buffers at all. As a result, they will inevitably suffer from “triple damages”. Firstly, it is the damage inflicted by the American sanction against China. What follows is the suffering caused by latter’s retaliation for their withdrawal. And lastly, they will be hurt even further by local Taiwanese who lack understanding of their difficult situation. And for the Taiwan public, they must get psychologically prepared for such multiple damages finally creating impact on the economy of the country.

Speaking of “Taiwanese entrepreneurs”, most of us tend to refer to those involved in manufacturing in China. But in reality, the group also includes many others who do not physically station there, such as financial services providers and those who invest indirectly via third countries. All of them will be equally exposed to the risk. Furthermore, we should take into account companies which do not hold assets in China but identify the place as their market, like exporters of industrial machineries, practitioners of digital design and so on.

Viewing from the fact that Taiwan’s trade sustains more than 40% relevancy with China, everyone involved in related activities in fact falls into the category of “Taiwanese entrepreneurs” in a broader sense. In other words, the size of the group and the extent of their association with you may just be well beyond your imagination.

Starting with the effect on Taiwanese corporates, the impact of Sino-U.S. de-linkage will unavoidably ripple through other aspects of our daily lives. After all, in terms of the course of development, the unexpected has become pretty expected.

(Fan Chou is a Taiwanese writer and entrepreneur.)

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