In retaliation for Chairman Nancy Pelosi’s visit to Taiwan last week, China has held large-scale military exercises around the island’s self-governing democracy and suspended any trade between the parties.
The exercises led to some interruptions to shipping, but they did not affect traffic in Taiwanese or Chinese ports, analysts say. And the trade bans were particularly notable for what they failed to target: Taiwan’s increasingly powerful semiconductor industry, a vital supplier to Chinese manufacturers.
The bans Beijing imposed — on the export of its natural sands to Taiwan and on the import of all Taiwanese citrus fruits and two types of fish — posed little of an existential threat to the island off the south coast it claims as Chinese territory.
“China’s ban on citrus hasn’t really affected us,” said Syu Man, manager of a fruit exporter in southern Taiwan that ships a type of pomelo through East Asia, mainly to Japan. “We are not dependent on the Chinese market.”
China is Taiwan’s largest trading partner, but Beijing’s ability to punish the island’s economy is somewhat limited. That’s because the most extreme measures it could take — such as a semiconductor ban or a complete blockade of Taiwanese ports — would certainly backfire on China’s economy.
Despite all of Pelosi’s “lightness” over Ms. Pelosi’s visit, China’s relations with Taiwan could return to normal in two or three months, said William Choong, a political scientist at the ISEAS-Yusof Ishak Institute in Singapore.
“If China imposes punitive economic measures and sanctions on Taiwan, it would be akin to cutting your nose to bully your face,” he said.
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The trade bans announced last week served as a reminder to Taiwanese exporters that doing business with China during periods of high geopolitical tensions carries risks. Recent bans have targeted Taiwanese pineapples, wax apples and grouper.
Still, the latest measures are unlikely to be particularly painful for an economy roughly the size of Switzerland and with an advanced manufacturing base.
Understand the tensions between China and Taiwan
Understand the tensions between China and Taiwan
What does China mean to Taiwan? China claims Taiwan, a self-governing island democracy of 23 million people, as its territory and has long vowed to take it back, by force if necessary. The island, to which Chiang Kai-shek’s Chinese troops withdrew after the communist revolution of 1949, has never been part of the People’s Republic of China.
“The political message is bigger than the economic blow,” said Chiao Chun, a former Taiwanese government trade negotiator.
While about 90 percent of Taiwan’s imported gravel and sand comes from China, most of it is manufactured. China accounted for only about 11 percent of Taiwan’s natural sand imports in the first half of this year, according to the Bureau of Mines.
The two types of Taiwanese fish exports that China restricted last week — refrigerated white-striped scabbard tail and frozen horse mackerel — together are worth about $22 million, less than half the value of Taiwan’s grouper trade that was banned earlier this year. They are also less dependent on the Chinese market.
As for Taiwan’s half-billion dollar citrus industry, exports to China account for just 1.1 percent of the island’s total agricultural exports, according to Taiwan’s Agriculture Council. One popular theory is that Beijing chose citrus growers because most of the orchards are in southern Taiwan, a stronghold of the ruling political party, the Democratic Progressive Party, a longtime target of Beijing’s wrath.
Future bans may focus more on punishing industries in counties that are DPP strongholds, said Thomas J. Shattuck, a Taiwan expert at the University of Pennsylvania’s Perry World House. There may also be less retaliation against provinces led by the Kuomintang opposition party “in an effort to put a finger on the balance for Taiwan’s local and even national elections,” he added.
A wider clamping
The ban on citrus fruits and fish is part of a Chinese approach to Taiwanese food products that has gained momentum this year. Last week, Chinese authorities suspended the export licenses of about two-thirds of the more than 3,000 Taiwanese food producers allowed to export to China, according to a review of official customs data. Several exporters said in interviews that many of the suspensions came at the end of June.
But not all of those companies are very concerned.
A company hit by China’s export restrictions, ChiaTe Pastry in Taipei, said it had never shipped products to that market in the first place. Another company, Huang Yuan Sing Pastry in New Taipei City, said its license to export products, including its signature five-nut cake, was one of the recently suspended. But China accounted for only a small fraction of its profits anyway, one employee said, and the stock has fallen during the pandemic.
In the seafood sector, the export licenses of half of the Taiwan Frozen Seafood Industries Association’s 84 companies have also been suspended since July, said Tzu-zung Wu, the group’s general secretary. But many of them had only registered on the mainland because they wanted the opportunity to expand their business there in the future, she added.
“It doesn’t mean they depend on the Chinese market,” said Ms. Wu.
China’s decision not to ban exports of Taiwanese manufacturing, especially semiconductors, is consistent with a “highly selective” strategy of economic retaliation, said Christina Lai, a research associate at Academia Sinica, Taiwan’s premier research academy.
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“As of now, China’s coercive measures seem symbolic in nature,” Ms Lai said.
The island’s semiconductor industry is an increasingly indispensable hub in global supply chains for smartphones, automobiles and other cornerstones of modern life. One producer, the Taiwan Semiconductor Manufacturing Company, makes about 90 percent of the world’s most advanced semiconductors and sells them to both China and the West.
University of Pennsylvania analyst Shattuck said Beijing would view that industry as “banned” during future crises or periods of economic retaliation for a simple reason: China needs Taiwanese semiconductors just as much as other countries.
“If Beijing truly believes it can force Taiwan into reunification through military pressure and without an invasion, then a strong and healthy Taiwanese semiconductor industry would boost the Chinese economy in an eventual ‘united’ PRC,” he said, referring to the People’s Republic of China. from China.
The maritime option
The limits of China’s economic pressure campaign became clear last week when the military held four days of exercises simulating a blockade of Taiwan.
While some drills took place in the Taiwan Strait, a major artery for international shipping, they did not disrupt access to ports in Taiwan or southern China, said Tan Hua Joo, an analyst at Linerlytica, a Singapore data tracking company. about container shipping. He added that port congestion would only increase if the strait was completely blocked, access to the port restricted or port operations hampered by a shortage of manpower or equipment.
“None of these are happening right now,” he said.
Ships that chose to avoid the Taiwan Strait last week because of Chinese military activities would have been delayed by 12 to 18 hours, an inconvenience generally considered manageable, said Niels Rasmussen, the chief shipping analyst at Bimco, an international shipping association.
If Beijing were to escalate tensions in the future, it would indicate that it was willing to jeopardize China’s own economy, its trade and relations with Japan, South Korea, Europe and the United States, the United States said. Mr Rasmussen by telephone from his office near Copenhagen.
“That’s just hard to accept that they would make that decision,” he added. “But again, I didn’t expect Russia to invade Ukraine.”