Free and Open Indo-Pacific/FOIPKey IssuesNortheast AsiaRegionalTop Stories

PLA aggression in Taiwan Strait could wreak havoc on global economy

FORUM Staff

The Chinese Communist Party’s (CCP) People’s Liberation Army (PLA) flew a record 18 nuclear-capable bombers over the Taiwan Strait in mid-December 2022, yet another attempt to pressure the democratically governed island that the People’s Republic of China (PRC) claims as its own. The PLA has routinely crossed the median line — once considered an unofficial border between Taiwan and the PRC — since launching live-fire drills in August 2022 that encircled Taiwan. The aggression, seen by some as rehearsal for a blockade or attack, heightens tensions in one of the world’s most crucial shipping lanes.

Nearly half of the world’s container ships passed through the Taiwan Strait in 2022, including almost 90% of the largest ships by tonnage, according to financial news publisher Bloomberg. The 180-kilometer-wide waterway is a primary route for cargo such as vital semiconductors, crude oil and consumer products from manufacturing hubs in East Asia to Europe, the United States and markets elsewhere.

An alternative route takes ships to the east of Taiwan and through the Luzon Strait in the Philippine Sea. But typhoon season makes that course risky for shipping. No region in the world sees more tropical cyclones than the area surrounding the Philippines.

The PRC contributes to anxiety surrounding the Taiwan Strait not only with aggressive military displays but also with unfounded claims of sovereignty. China’s Foreign Ministry declared in June 2022 that the Taiwan Strait is not international waters, but “are China’s internal waters, territorial sea, contiguous zone and exclusive economic zone in that order.” Under the United Nations Convention on the Law of the Sea, to which the PRC is a party, the strait contains international waters and airspace beyond any state’s territory, guaranteeing freedoms of navigation and overflight.

Beijing’s threats to the status quo risk wreaking havoc on global supply chains still reeling from COVID-19 disruptions that have helped fuel record inflation worldwide. A million barrels of crude oil and related products transit the Taiwan Strait daily, analyst Anoop Singh of Braemar Shipping Services told The Financial Times newspaper in August 2022. (Pictured: Container ships transit the Taiwan Strait near Pingtan Island in the People’s Republic of China.)

Taiwan produces most of the world’s semiconductors, which are essential to products from smartphones to washing machines, vehicles and medical equipment, and experts say manufacturers across the globe would struggle to find alternative suppliers should the island’s chip industry be disrupted for a prolonged period. “Many firms would have to halt production,” wrote Gareth Leather, senior Asia economist at Capital Economics. “Given the size of the electronics industry in parts of Asia and motor industry in parts of Europe, the economies are particularly vulnerable.”

Escalation of cross-strait tensions could also mean higher prices worldwide on a wide range of goods and digital services. “A major escalation over Taiwan would constitute yet another supply shock, keeping inflation high for even longer,” Leather wrote in August 2022. Other analysts point to more dire outcomes of PRC aggression toward Taiwan. “In the event of a disaster that actually shut down Taiwan for a period of time, really I don’t know how the global supply chain for the tech industry could survive,” Dan Nystedt, vice president at TriOrient Investments, told The Financial Times.

IMAGE CREDIT: REUTERS

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button