(Bloomberg) -- Taiwanese firms slashed investment into China last year to the lowest since 2001, a sign the companies are moving to protect themselves as tech disputes between Washington and Beijing escalate. 

New spending into China by Taiwan companies declined 39.8% year-on-year to $3.04 billion, the Ministry of Economic Affairs in Taipei said in a statement. 

The data show the island’s businesses have “adapted to the restructuring of global supply chains, are adjusting their overseas exposure,” and are boosting investment in the US, Europe, Japan and other countries to diversify production risks, the ministry said on Monday.

Taiwanese companies have traditionally been among the biggest investors in China but have been cutting new capital expenditure in the world’s second-largest economy since investment peaked at $14.6 billion in 2010. 

The US is curbing China’s access to leading technologies, saying they could provide a military edge. The value of China’s chip imports suffered their steepest drop on record last year, partly due to the US’s export controls.

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The regular release of the investment data comes just after Taiwan elected Vice-President Lai Ching-te of the ruling Democratic Progressive Party as its new leader. Lai said on the campaign trail that he wouldn’t stop Taiwan Semiconductor Manufacturing Co., the world’s leading chipmaker, from building more fabs in the US or other countries if he was elected.

He viewed this as part of his efforts to deepen engagement and cooperation with countries around the world, a broad strategy pursued by the current president, Tsai Ing-wen, that has angered Beijing. China has vowed to bring Taiwan under its control, by force if necessary.

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China accounted for 11% of Taiwan’s total outbound investment last year, lower than 34% a year earlier, the ministry said. It said that 2023 was the second year China accounted for a smaller percentage of Taiwan’s outbound investment than the overall figure for spending in New Southbound countries.

Taiwan’s launched the New Southbound initiative under Tsai to better coordinate with nations including Singapore, Thailand and Vietnam.

Investment by Taiwan’s companies surged elsewhere in 2023. The total ex-China figure rose 136.7% on-year to a record $23.6 billion, driven mainly by TSMC’s investment in a plant in the US state of Arizona plant and another in a facility in Germany, the ministry said. 

--With assistance from James Mayger.

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