India Plans Labor-Supply Pact With Taiwan as Tensions With China Brew

India is forging closer economic ties with Taiwan with a plan to send tens of thousands of workers to the island as early as next month, according to senior officials familiar with the matter, potentially angering neighbor China.  

Taiwan could hire as many as 100,000 Indians to work at factories, farms and hospitals, the officials said, asking not to be identified as the discussions are private. The two sides are expected to sign an employment mobility agreement by as early as December, the people said.

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Taiwan’s aging society means it needs more workers, while in India, the economy isn’t growing fast enough to create enough jobs for the millions of young people who enter the labor market every year. Taiwan is projected to become a “super aged” society by 2025 with elderly people forecast to make up for more than a fifth of the population.

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However, the employment deal is likely to ramp up geopolitical tensions with China, which opposes any official exchange with Taiwan, a self-ruled island that Beijing claims as its own. China is separated from Taiwan by a narrow body of water and shares a Himalayan border with India. It’s also been India’s top source of imports for the past two decades.

A pact with Taiwan doesn’t suggest India is discarding the “One China Policy” — a position that recognizes the island as being a part of China. However, New Delhi hasn’t reiterated that position in public documents and has instead fostered an active unofficial relationship with Taiwan.

The India-Taiwan jobs pact is now in the final stages of negotiation, Arindam Bagchi, a spokesperson for India’s Ministry of External Affairs, told reporters on Thursday. Taiwan’s Ministry of Labor didn’t specifically comment on the India deal when contacted by Bloomberg News, but said it welcomes cooperation with countries that could provide it with workers.

A mechanism to certify the health of Indian workers willing to move to Taiwan is still being worked out, people familiar with the discussions said.

In Taiwan, where the unemployment rate dropped to the lowest levels since 2000, the government needs workers to keep the $790 billion economy going. Taiwan is offering the Indian workers pay parity with locals and insurance policies to sweeten the deal, unlike other countries that New Delhi has struck agreements with, the people said.

In India, which overtook China to become the world’s most populous country this year, the government is pushing employment pacts with developed countries facing aging workforces.

So far, India’s government has signed agreements with 13 countries, including Japan, France and the U.K., and is discussing similar arrangements with the Netherlands, Greece, Denmark and Switzerland, the people said.

Ties between India and China have been tense since a border clash in 2020, the worst-ever in four decades. Both countries have moved thousands of soldiers, artillery guns and tanks to the Himalayan region since then. Diplomatic talks have made little progress with China releasing a new map in August claiming some India-controlled territories. 

Three former Indian military chiefs, who stepped down last year, visited Taiwan for a security conference this year — a trip that drew objections from Beijing. Taiwan and India also have an investment promotion pact inked in 2018.