Taiwan’s diplomacy has faced unique challenges, stretching all the way back to the 1970s. In 1971, Taiwan lost its seat at the United Nations, and in 1979 the United States switched its official diplomatic recognition from Taiwan (the Republic of China) to the People’s Republic of China (PRC). Following America’s decision, 45 countries cut ties with Taipei and recognized Beijing. Meanwhile, Beijing has made clear that every country establishing diplomatic relations with the PRC must unconditionally adhere to its One-China Principle, meaning that these countries cannot simultaneously maintain official diplomatic relations with Taiwan.
This isolation has forced Taipei to reinvent how it pursues diplomacy, even as most governments eschew formal diplomatic ties. For roughly two decades following its ouster from the UN, the solution was money. Taiwan competed for recognition by outspending Beijing in the small states of Latin America, the Caribbean, and the Pacific. In doing so, it traded foreign aid for the perpetuation of diplomatic relations. In recent years, however, this has no longer been the case. Taiwan’s central position in the global semiconductor supply chain, combined with its effective response to the COVID-19 pandemic through the Taiwan Can Help campaign, has resulted in a shift toward “technology diplomacy.” Leveraging its technological expertise and strategic economic position, Taiwan has strengthened its global standing and deepened international partnerships with more powerful countries than it has traditionally had access to. This article traces the transitions in Taiwan’s diplomatic strategies to examine how Taiwan achieved its current place and what technology diplomacy can and cannot deliver.
Dollar Diplomacy
Buying Recognition (1990s–2008)
Feeling the pressure of exclusion from the international community, Taiwan engaged in dollar diplomacy to maintain its formal diplomatic relations with small, developing nations, primarily in Latin America, the Caribbean, and the Pacific. This approach dominated Taiwan’s strategy from the 1990s to the early 2000s. Through generous foreign aid, development assistance, and financial investment, Taiwan sought to exchange money for recognition. From 1999 to 2008, the Ministry of Foreign Affairs’ (MOFA, 外交部) foreign aid budget accounted for one-third of its overall budget. In 2008, Taiwan’s official development assistance (ODA) totaled 430 million USD, representing 0.11 percent of gross national income (GNI). By contrast, in 2023, Taiwan allocated approximately 468 million USD to ODA— accounting for just 0.060 percent of GNI. These figures underscore the centrality of dollar diplomacy to Taiwan’s foreign policy during the 1990s and 2000s, when foreign aid was a primary instrument for preserving diplomatic recognition.
Under Chen Shui-bian’s (陳水扁) presidency from 2000-2008, Taiwan approached diplomacy in a manner framed as “beacon [or scorched-earth] diplomacy” (烽火外交). The phrase signified that Taiwan should not adopt a defensive stance in the face of China’s growing diplomatic, military, and economic advantages. Rather, Taiwan should “light up the fire” on the international stage in exchange for survival. Under this framework, President Chen frequently visited Taiwan’s diplomatic allies in Central America and Africa, despite pressure from China. In 1998, Taiwan established the Republic of China (Taiwan)-Central American Economic Development Fund (ROC-CAEDF, 中華民國–中美洲經濟發展基金) to provide diplomatic allies up to USD 240 million by 2010. Taiwan also supplied hundreds of millions of dollars in direct assistance to its diplomatic allies. For example, Costa Rica received over USD 340 million in aid between 2000 and 2005, much of it directed toward public works and hospital reconstruction. Similar infrastructure and school-building funds were extended to 12 other diplomatic allies in Central and South America under the Jung Pang Project (榮邦專案). In 2004, Taiwan’s MOFA budget peaked at NTD 27.9 billion (over USD 900 million). This approach, however, drew criticism from the opposition. Lawmakers from the Kuomintang (KMT, 國民黨) routinely condemned Chen’s foreign aid programs, accusing the government of wasting hundreds of millions of dollars in fruitless attempts to maintain diplomatic recognition from smaller nations. Although KMT critique is partisan, it identified a genuine structural flaw. Recognition purchased with money is only enjoyed by whomever is willing to pay more. By the early 2000s, Beijing’s economy was already several times the size of Taiwan’s and was continuing to grow. Dollar diplomacy could slow Taiwan’s diplomatic attrition, but it could not compete with China’s economic firepower in the long term.
Interim Period
Viable Diplomacy and Its Costs (2008 – 2016)
Recognizing these difficulties, Chen’s successor, President Ma Ying-jeou (馬英九), initiated the policy of “Viable Diplomacy” (活路外交). Its two pillars were the “Diplomatic Truce” (外交休兵) and “Proactive Diplomacy” (積極外交). The former called for refraining from cutthroat competition with China and pursuing shared prosperity, while the latter referred to actively seeking cooperation with economies in the Asia-Pacific and participating in international organizations. Under this approach, Taiwan refrained from dollar diplomacy and did not pursue dual recognition in a zero-sum contest with China. This restraint was, to some degree, reciprocated by Beijing; only one country severed diplomatic relations with Taiwan during Ma’s eight-year tenure. Taiwan was also permitted to participate in some international organizations, such as joining the World Health Assembly as an observer under the name “Chinese Taipei.” Despite these achievements, most of these gains were secured through tacit adherence to Beijing’s “One-China Principle” (一個中國原則) which drew criticism from the then-opposition Democratic Progressive Party (DPP, 民進黨) as a form of self-debasement before Beijing. Although the truce delivered relative stability, its price should not be underrated. Eight years of restraint rendered Taiwan’s international space reliant on Beijing’s discretion, rather than any capability Taipei itself controlled. When that restraint ended, so did the gains.
Steadfast Diplomacy (2016 – 2020)
These concerns were validated as Taiwan’s diplomatic position worsened when the DPP returned to power in 2016. Recognizing that it could no longer compete with China through foreign aid, Taiwan sought to build a coalition of democracies that shares its values of peace, democracy, human rights, and freedom under a new concept: “steadfast diplomacy” (踏實外交). Taiwan emphasized substantive engagement in technology and economics to secure bilateral relations with partners such as the United States and European states. Nevertheless, Taiwan lost 10 diplomatic allies between 2016 and 2024, largely because Beijing wielded its economic leverage and “dollar diplomacy” to pressure and induce Taiwan’s former diplomatic allies to switch recognition under its “One-China Principle.” Taipei correctly concluded that it could no longer compete on aid, and shared democratic values gave partners reasons to sympathize with Taiwan. Yet, what was still missing was leverage—something Taiwan held that other states needed.
The Rise of Tech Diplomacy
The Pandemic Turn: Masks, Chips, and Vaccines (2020 – 2021)
Taiwan finally gained diplomatic leverage during the pandemic, and the government seized its chance. When the COVID-19 pandemic hit the rest of the world in 2020, the Taiwanese government’s early detection and swift restrictions on travel from Wuhan allowed the island to remain largely unaffected. Watching the world suffer from a shortage of medical equipment, Taiwan launched the “Taiwan Can Help” campaign. In total, Taiwan donated more than 54 million medical masks to over 80 countries worldwide, along with other medical equipment and supplies. The campaign became a diplomatic success story, highlighting Taiwan’s capacity and willingness to contribute to the international community, despite its exclusion from major international organizations.
The COVID-19 pandemic also exposed a significant global shortage of semiconductor chips. For several years since 2018, sales of chip-hungry autos had been declining, and the pandemic initially worsened this trend. However, demand for autos rebounded sharply in the fourth quarter of 2020, at which point supply could no longer keep pace with the surge. Concurrently, the pandemic triggered a dramatic increase in demand for consumer electronics chips—used in cellphones, computers, and digital communications. Since consumer electronics chips yield higher profit margins than automotive chips, manufacturers prioritized them, ultimately producing a severe shortfall in automotive chip supply.
In 2020, Taiwanese chipmakers, including the Taiwan Semiconductor Manufacturing Company (TSMC, 台灣積體電路製造公司), United Microelectronics Corporation (UMC, 聯華電子), and Powerchip (力積電), accounted for 63 percent of global chip production. As a result, many countries, including Japan, Germany, and the United States, turned to the Taiwanese government for assistance, expecting these companies to ramp up automotive chip production.
At the same time, Taiwan was struggling with a vaccine shortage. By mid-2021, only seven percent of Taiwan’s population had been vaccinated, as Taiwan had struggled to purchase vaccines due to international political barriers. China’s Fosun Pharma (复星医药) held the distribution rights to the BioNTech-Pfizer vaccine that was developed in Germany for mainland China, Hong Kong, Macau, and Taiwan. Fosun Pharma requested that the word “country” be removed from Taiwan’s purchase announcement. Although the Taiwanese government agreed, the deal for five million doses ultimately fell through. Why it collapsed remains contested. Taiwan accused Beijing of intervening to block the agreement, while China’s government denied any obstruction. Whatever the proximate cause, the episode showed that Taiwan’s exclusion from the international system was not merely symbolic, but could translate directly into national crises during public health emergencies.
Nonetheless, the “Taiwan Can Help” campaign yielded returns. Japan donated 1.24 million AstraZeneca doses to Taiwan, while the United States shipped 2.5 million COVID-19 vaccine doses. In this episode, Japan assisted Taiwan by acting as a diplomatic bridge. To bypass potential political interference from China, Japan allowed a batch of AstraZeneca vaccines specifically produced for Taiwan to be routed through Japan and delivered as an official donation. These actions demonstrated how Taiwan’s pandemic diplomacy could translate humanitarian assistance and international goodwill into concrete diplomatic support.
Domestically, there was also debate over whether Taiwan should trade its chips for vaccines. In one prominent example, German Minister for Economic Affairs and Energy Peter Altmaier contacted Taiwan’s Ministry of Economic Affairs (MOEA, 經濟部) to express hope that TSMC could prioritize German orders to support its automotive industry. Taiwan’s then-Economic Minister Wang Mei-hua (王美花) confirmed that she had met with the German representative to Taiwan, Thomas Prinz, to ask for help in procuring vaccines, and that Prinz had agreed to relay the request to the German government. In the end, Germany backed away from the chips-for-vaccines talks, for fear of provoking China.
Inducement & Investment for Engagement (2020 – Present)
Although the negotiations with Germany failed, the episode prompted Taiwan to consider using its technological strength as a tool of diplomatic engagement. For instance, in spite of economic coercion and diplomatic pressure from China, a “Taiwanese Representative Office” (駐立陶宛台灣代表處) was opened in Vilnius, Lithuania in 2021. Unlike other European offices, which use the name “Taipei,” this office uses “Taiwanese,” signaling Lithuania’s support for Taiwan’s international status. Building on this breakthrough in relations, the Taiwanese government invested in three Lithuanian companies in the fields of semiconductors, renewable energy, and artificial intelligence in 2023. Meanwhile, Taiwan launched a USD 200 million investment fund to bolster the semiconductor, laser, and biotechnology sectors of the European country. However, in February 2026, Lithuanian Prime Minister Inga Ruginienė shared in an interview her view that it had been a mistake to establish the Taiwanese office. Critics attributed the change in Lithuania’s attitude to the country’s desire to revise relations with China and disappointment in the scale of Taiwan’s investment in Lithuania’s semiconductor industry. In response, Taiwan’s MOFA stated that Taiwan had invested a higher-than-reported figure EUR 16.8 billion (USD 19.3 billion) and that there had been no set target for investment during the initial negotiations. While the new Lithuanian government that came to power in July 2026 claimed that the country’s stance toward Taiwan remained unchanged and that Vilnius would continue the economic partnership, the case showcases the extent to which Taiwan’s diplomatic relations revolve around technology cooperation.
Meanwhile, the Czech Republic is now one of Taiwan’s closest and most outspoken partners in the European Union (EU). In 2020, President of the Senate of the Czech Republic Miloš Vystrčil visited Taiwan and declared “I am Taiwanese” during his speech in the Legislative Yuan. Vystrčil sought to demonstrate the Czech Republic’s support for Taiwan despite pressure from China. Since then, officials from the Czech Republic have frequently visited Taiwan and have developed partnerships in drones, artificial intelligence, and smart cities. This year, Taiwan’s National Development Council (NDC, 國發會) announced an EUR 50 million (USD 57.6 million) investment in the Czech Republic’s semiconductor and AI sectors.
To further promote economic and industrial cooperation between Taiwan and Central and Eastern European (CEE) countries—including Lithuania, Slovakia, and the Czech Republic—Taiwan’s NDC launched two complementary financial initiatives in 2022. These initiatives consist of a USD 200 million investment fund focusing on direct equity stakes in strategic high-tech sectors, alongside a USD 1 billion credit fund aimed at providing low-cost loans for Taiwanese firms to invest in Eastern European countries, including Poland, Serbia, and Romania. In parallel, Taiwan also actively participated in European technology exhibitions in Poland and Italy to deepen cooperation with European partners on semiconductors and artificial intelligence (AI), promoting an image of a “Trusted Technology Taiwan.”
This tech diplomacy has yielded broader success. Semiconductor giants such as TSMC and its suppliers are rapidly establishing manufacturing hubs across the United States, Japan, Germany, and Singapore, earning preferential treatment from host governments. Concurrently, nations across Central and Eastern Europe and Central and Latin America are pushing to collaborate with Taiwan on talent cultivation, technology research and development (R&D), and testing and packaging infrastructure. This kind of economic and security cooperation has given Taiwan more opportunities for diplomatic engagement without the need for formal diplomatic relations.
Technology Power as Leverage (2025 – Present)
In the recent past, Taiwan has notably turned chip exports into leverage when facing discriminatory treatment. In 2025, under pressure from Beijing, South Africa requested that Taiwan move its liaison office out of its capital city, Pretoria—and further demanded that it be rebranded as a commercial office. In response, Taiwan’s Ministry of Economic Affairs imposed unprecedented restrictions on semiconductor and technology exports to South Africa, leveraging its chip supply chain as a tool of statecraft for the first time. Taiwan’s foreign minister ultimately did not enact the restrictions, after receiving a request to negotiate from South Africa. Even though export restrictions were suspended, Taiwan’s total exports to South Africa have dropped by 32.9 percent since 2023. This episode demonstrates Taiwan’s ability to wield technological power as leverage in diplomatic impasses.
What the Shift Means
Taiwan’s shift toward tech diplomacy has implications. First, it highlights that simply using the number of formal diplomatic allies as a measure of Taiwan’s diplomatic strength is anachronistic. Counting how many diplomatic countries Taiwan might lose (in, for example, Latin America) ignores the density of Taiwan’s deeper engagements with European countries, Japan, and the United States—which are arguably more critical to Taiwan’s security and economic priorities.
However, tech diplomacy also comes with vulnerabilities. The strategy transfers a substantial share of diplomatic initiative to private actors in Taiwan, such as semiconductor manufacturers. As corporations, their main priority is to generate profit, and it is thus unfair to expect these companies to prioritize diplomatic responsibilities over market logic. Where TSMC decides to build foreign chip fabs is essentially now a facet of Taiwan’s foreign policy. This places new burdens on Taiwan’s MOFA and MOEA to work closely with private firms in order to balance national interests with corporate profit.
Lastly, although Taiwan’s tech power has been employed as a deterrent in the South Africa case, it is still largely untested as an instrument of sustained leverage. If Taiwan begins to liberally employ the threat of export restrictions of semiconductors, other countries may view Taiwan as an unreliable partner and may begin to diversify away from the island in order to offset exposure. This would ultimately undermine Taiwan’s leverage and render it more isolated internationally. In the near term, Taipei must focus its efforts on converting transactional interest into durable commitments—such as trade agreements, security dialogues, and institutional memberships—thereby delivering a lasting impact to Taiwan’s security and diplomacy.
The main point: Taiwan’s diplomacy has shifted from “dollar diplomacy” towards a “technology diplomacy” derived from its dominance in semiconductors. As its pool of formal allies shrinks, Taipei is increasingly using its indispensable role in global chip supply chains to deepen unofficial partnerships and defend its international space, both through inducements and hard leverage.
