Taiwan's economy is not being "destroyed" by China

China:  Cross-strait tensions are at their highest point in decades after US House Speaker Nancy Pelosi's visit to the island last week, experts said. Beijing may increase pressure on Taiwan but will carefully weigh the advantages and disadvantages of reunification by force.

According to analysts, Taiwan's economy is unlikely to crash from Mainland officials; Instead, they will target politicians and companies that support freedom while attempting to win over the masses.

A long-term military exercise by the People's Liberation Army (PLA) is fueling rumors in some markets that Beijing is considering a blockade of the island, which would have an impact on the international shipping and semiconductor industries. Because doing so would negatively impact the lives of regular people, mainland officials have no desire to destroy Taiwan's economy, according to Lu Jiang, a researcher at the Chinese Academy of Social Sciences, a government with offices in Beijing. think tank.

 

"Even if it gets to the point where pro-independence enthusiasts have to come out of their misery, [Beijing] will deal with it and restore economic and social order as quickly as possible." Beijing views Taiwan as a province that has separated from the mainland and should be united with it, possibly by force. However, any attack would be made more difficult by possible US military intervention.

Despite the fact that the US and most other nations do not recognize Taiwan as an independent state, Washington opposes any attempt to forcibly annex the island.

Additionally, it would force the mainland to make intense diplomatic efforts, stockpile strategic goods such as crude oil and prepare for the prospect of prolonged Western sanctions. Although China keeps track of its crude oil reserves, it is believed that its reserves, which include imports and domestic production, could last 40 to 50 days. In response to provocations from the United States and Taiwan questioning the One-China doctrine, Lu said the military exercise was a show of resolve and capability.

 

Due to the instability of US politics, the Taiwan card may be used frequently. He advised that we should be ready for war at all times. Taiwan is extremely vulnerable to geopolitical unrest and economic blockades; Last year, its foreign trade stood at US$830 billion, exceeding its GDP by US$773 billion.

When Beijing fired ballistic missiles into waters off Taiwan in 1996 during the Taiwan Strait Crisis in response to former President Li Teng-Visit Hui's US, the island experienced a loss of talent and investment, and its stock market crashed. Mainland Taiwan is particularly vulnerable to economic sanctions as 40% of its trade is with China and Hong Kong.

Taiwan's Minister of Economic Affairs Wang Mei-hua said earlier this month that the island's oil reserves could last up to 146 days and that its natural gas reserves were about ten. Last week, the Chinese Ministry of Commerce announced that it would stop importing processed foods, cold-chain fish and citrus fruits from Taiwan. Additionally, it outlawed the export of natural sand, an ingredient used by the island's important semiconducting sector.

When compared to the total value of bilateral trade, which stood at US$328 billion last year, targeted trade action is relatively modest.

Beijing relied heavily on trade, economic and people-to-people exchanges to keep ties with the island intact. The strategy worked well between 2008 and 2016 when the pro-Beijing Kuomintang was in power and the two sides signed more than 20 economic agreements, boosting bilateral trade. However, relations deteriorated after the pro-independence Democratic Progressive Party took office in 2016 and pushed for a New Southbound policy to cut back on cross-strait travel. Beijing stopped issuing personal travel authorizations to Taiwan in the summer of 2019. Prior to this, the island received over 2 million visitors annually from the mainland.

According to Alicia García Herrero, chief economist for Asia-Pacific at Natixis, "if the situation does not ease rapidly, the economic impact is set to be larger than the three major crises in the Taiwan Strait in the past."

She explained that a potential blockade would have costly effects on areas that rely heavily on semiconductors. This could result in delays in energy shipments to Asian economies, due to shipping woes or slow shipping in the region. In the medium term, she predicted, this will accelerate the current trend toward supply chain diversification among different economies and businesses. According to Goldman Sachs, the recent cross-strait trade sanctions will have a short-term impact on Taiwan's growth of less than 0.1% of GDP. However, persistent trade shocks could have serious economic implications for Taiwan, including the mainland.

 A government researcher who spoke on the record said that China's fundamental argument is that sovereignty is not negotiable. Reunification should have been accomplished ten years ago based on military strength, the person claimed.

However, there will be a lot to think about, such as how to stop US intervention and sanctions and how to revive the Taiwanese economy.

According to the researcher, if Beijing escalated the situation, a swift military operation would be the most likely course of action rather than a protracted economic blockade. Beijing's current economic policies are unlikely to have a significant impact on bilateral trade, according to Beatrice Tsai, chief statistician of Taiwan's finance ministry, who also noted that both countries' electronics industries are very reliant on one another. According to Bloomberg, she said, "We expect very little chance that China will impose stricter economic sanctions on Taiwanese businesses due to our highly dependent economic relations."

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