By the early 16th century, there was a noticeable increase in the number of Chinese fishermen, traders, and pirates frequenting the southwestern part of Taiwan. Some Fujian merchants were even fluent in Formosan languages. As the century progressed, Taiwan became a strategic point for Chinese traders and pirates evading Ming authority, with some establishing brief settlements on the island. Names like Xiaodong dao and Dahui guo were used to refer to Taiwan during this period, with "Taiwan" being derived from the tribe Tayouan. Notable pirates like Lin Daoqian and Lin Feng also used Taiwan as a temporary base before facing opposition from indigenous groups and the Ming navy. In 1593, Ming officials began formally acknowledging the existing illegal trade in northern Taiwan by issuing licenses for Chinese junks to trade there.^[20]

Chinese merchants initially traded iron and textiles with the indigenous people of northern Taiwan in exchange for resources like coal, sulfur, gold, and venison. However, as time went on, the southwestern region of Taiwan became the primary focus for Chinese traders due to the abundance of mullet fish and deerskins. The latter was especially lucrative, as they were sold to the Japanese for significant profits.^[21] This trade boomed after 1567, serving as an indirect way for the Chinese to engage in Sino-Japanese trade despite bans. In 1603, Chen Di led an expedition to Taiwan to combat the Wokou pirates,^[20] during which he encountered and documented the local indigenous tribes and their lifestyles in "Dongfanji (An Account of the Eastern Barbarians)."