Gaemi, expected to be the strongest storm to hit Taiwan in eight years, is set to cross the northeast coast on Wednesday night.
The island's weather authorities upgraded its status to a strong typhoon, packing gusts up to 227km/h near its centre.
After crossing the Taiwan Strait, it is likely to hit the southeastern Chinese province of Fujian late on Thursday afternoon.
In rural Yilan county, where the typhoon will first hit land, wind and rain gathered strength, shutting eateries as most roads emptied out.
"This could be the biggest typhoon in recent years," fishing boat captain Hung Chun told Reuters, adding Yilan's harbour of Suao was packed with boats seeking shelter.
"It's charging directly towards the east coast and if it makes landfall here the damage would be enormous."
Work and school were suspended across Taiwan, with streets almost deserted in its capital, Taipei, during rush hour, amid squally rain.
The government said more than 2000 people had been moved from sparsely populated mountain areas at high risk of landslides from the "extremely torrential rain".
Gaemi and a monsoon brought heavy rain to the Philippine capital region and northern provinces. (EPA PHOTO)
Almost all domestic flights had been cancelled, along with more than 200 international flights, the transport ministry said.
All rail operations will stop from midday, with an abbreviated schedule for high-speed links between north and south Taiwan that will continue to operate.
However, TSMC, the world's largest contract chip maker and a major supplier to Apple, said it expected its factories to maintain normal production during the typhoon, after it activated routine preparations.
The typhoon was expected to bring up to 1800 millimetres of rain to mountainous counties in central and southern Taiwan, weather officials said.
Taiwan's defence ministry said it had put 29,000 soldiers on stand-by for disaster relief efforts.
The typhoon has severely curtailed this year's annual Han Kuang war games, but they have not been cancelled, with scheduled live fire drills held on the Penghu islands in the Taiwan Strait on Wednesday.
Gaemi is expected to bring heavy to very intense rains over vast swathes of China from Thursday, the water resources ministry warned.
These are areas between the Pearl River basin in the south and the Songhua and Liao River basins on the northeastern border with Russia and North Korea, it said on Wednesday.
The rains are expected to last until July 31, fuelled by the typhoon's abundant moisture, it said.
Gaemi and a southwest monsoon brought heavy rain on Wednesday to the Philippine capital region and northern provinces, bringing work and education to a halt, leaving 12 people dead.
While typhoons can be very destructive, Taiwan relies on them to replenish reservoirs after traditionally drier winters, especially in its south.
