President Tsai Ing-wen's stance against the one-China policy has renewed a dispute between the two countries last year. She is establishing trade relations with other Southeast Asian nations and the United States.
China's Ministry of Commerce reported that trade with Taiwan decreased by 9.8 percent in the first half of 2016. The volume of trade only reached $95.5 million.
Taiwan has formal ties with only 22 countries. China was able to get Sao Tome and Principe to withdraw from their alliance from Taiwan last year.
The efforts of the Taiwanese leader are a major challenge since no Southeast Asian nation formally recognizes a trade partnership with Taiwan. American President Donald Trump expressed resistance against the one-China policy, which was met with much criticism.
Lo Chih-cheng, a member of the ruling Democratic Progressive Party and the head of the foreign affairs committee in Taiwan's legislature, admitted, "We're trying to diversify our trade and investment but countries are cautious and China always tries to block our relations with other nations."
China is the biggest market for Taiwanese products. Forty percent of the country's total exports are being shipped to the mainland.
Many Taiwanese manufacturers are holding production in Taiwan. Foxconn, a Taiwanese company which makes iPhones, is based in China.
John Chen, the representative of Taiwan's economic and trade office in Indonesia, said that the absence of bilateral relations with other countries is a "great challenge" for Taiwan.
He said that bilateral agreements help private companies in getting tax breaks and special operational permits.
He noted, "The hurdles can be quite big but even if the government cannot jump over them, the private sector can do it."
Taiwan has established trade relations with Indonesia even without a bilateral agreement. Smartphone manufacturers like HTC and Asus have production sites in Indonesia.