Visible Fists: Political Risks and the Performance of Taiwanese Businesses in China, 1995–2022

Abstract This article explores the performance of Taiwanese business groups in China before and after Xi Jinping’s rule. It delves into the relationship between an authoritarian regime and foreign direct investment, an area where empirical research of firms in China is lacking. Utilising data from 1995 to 2022 encompassing 550 Taiwanese business groups and the top 5,000 firms, our analysis reveals that firms with higher pre-2012 investments in China experienced higher revenues and profits; however, companies investing in China experienced a significant decline under Xi’s leadership. Factors such as the US–China trade conflict, restricted political freedoms, and increased Chinese military spending further impacted Taiwanese firms negatively. These findings highlight how China’s aggressive foreign policies and repressive domestic measures, acting as ‘visible fists’, have adversely affected Taiwanese businesses.