At the beginning of this century, both FAW-Volkswagen and Shanghai-Volkswagen were interested in producing the Volkswagen Transporter. In the end, it didn’t happen. This is how, and why.
A 1998 Taiwan-made Volkswagen T4 in Guangdong Province. Photo via Weibo.
Volkswagen assembled the T4 at the Qinzhong facility in Taiyuan, Taiwan, from 1994 until 2004. Some of these Taiwan-made cars eventually ended up in China, mostly in Guangdong Province.
A 2000 Taiwan-made Volkswagen T4 in Shanghai. Photo via Weibo.
Production in Germany had ended in 2003, to make way for the next generation, the Transporter T5. The assembly contract with Qinzhong Motors would end in 2004. At that time, Volkswagen came up with the idea to move production of the T4 to China.
SAIC-VW

At that moment, Shanghai-Volkswagen already had a shortage of production capacity. It produced the Gol, Polo, Santana, Santana 3000, and Passat in Shanghai. Production of the new Touran MPV was scheduled to start soon. So, SAIC-VW didn’t go for the T4; the company simply couldn’t add another vehicle to its lineup.
FAW / FAW-VW

The other Volkswagen partner, FAW, showed more interest. But it didn’t want to produce the T4 at the FAW-VW joint venture. Instead, FAW wanted to launch the T4 under its own name. The T4 would be a good replacement for the aging Jiefang CA6440, which was over 10 years in production. Volkswagen agreed, and FAW started a testprogram with the T4 in China

The test cars had FAW badges on the grille. FAW planned to make two versions of the T4:

A luxury version, equipped with the Volkswagen AET 2.5L 5-cylinder petrol engine, 2461cc, delivering 115 hp.

And a basic version, equipped with the FAW CA488 engine (the old Chrysler engine).

But nothing came of it. There are different stories why. One is that there was much obstruction within the Volkswagen joint ventures to start ‘commercial vehicle’ production activities in China. Volkswagen was a ‘passenger car’ company.
The second is that the political situation between Taiwan and China, the so-called cross-strait relations, always was tense and that was a reason to block the negotiations of sending a complete assembly line to China.
A third is that EV development and the development of newer ICE models got priority. Remember that the design of the T4 was already more than 13 years old.
thanks Tycho for your corrections and additions!
sources: BiliBili, AutoNet, PCauto.