Chinese military exercises in and around the Taiwan Strait are backing up supply chains and highlighting what could be a considerable additional burden to global shipping if hostilities broke out between China and Taiwan, according to France 24.
China launched its largest-ever military drills around Taiwan on Thursday in and around some of the world’s most vital shipping routes used to transport semiconductors, natural gas and other critical goods, France 24 reported. Almost half of the world’s container ships travel through the Taiwan Strait on an annual basis, including 90% of the world’s largest ships by tonnage, according to The Wall Street Journal.
“Given that much of the world’s container fleet passes through that waterway, there will inevitably be disruptions to global supply chains due to the rerouting,” James Char, an associate research fellow at Singapore’s S. Rajaratnam School of International Studies, told France 24.
??Chinese air and naval drills amounts to a blockade of ??Taiwan – causing havoc at ports and disrupting one of world’s busiest shipping lanes, further aggravating global supply chain issues. https://t.co/EyaZbcTl24 pic.twitter.com/V5gxkZ3V45
— Navy Lookout (@NavyLookout) August 4, 2022
The drills come as retaliation to U.S. Speaker of the House Nancy Pelosi’s visit to Taiwan earlier this week, and the Chinese military has directly warned ships to stay clear of the area in which its conducting exercises, according to the WSJ.
Disruptions are not limited to sea lanes, France 24 reported; 400 flights have been cancelled at Chinese airports near Taiwan, also forcing shippers to scramble. (RELATED: China’s Lockdowns Kneecapped One Of Its Biggest Tech Companies)
Analysts surveyed by the WSJ discounted the prospects of continued disruptions, because, according to the chief analyst of maritime data provider Xeneta, Peter Sand, “any major disruption will affect the Chinese merchant fleet as well.”
“It’s in no one’s interest to escalate the tension and the expectation is for a return to normal, starting next week,” Sand added.
But the flare-up has caused some commentators to consider the prospects of a long-term disruption, or even a Chinese takeover of Taiwan.
Taiwan is the leading exporter of chips worldwide.
A war with China could shut down much of the global supply chain for anything needing computer chips. pic.twitter.com/8LzrRuKsQo
— Wall Street Silver (@WallStreetSilv) August 2, 2022
Of particular concern is the continued supply of global semiconductors, since 90% of the world’s cutting-edge chip capacity comes from Taiwan, according to the Financial Times.
These chips are used for virtually all of the electronic devices that power the modern economy, including smartphones, radios, TVs, computers, video games and advanced medical diagnostic equipment, according to the Semiconductor Industry Association.
“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.
The global supply chain had reached historically high levels of stress since the start of the COVID-19 pandemic due to lockdowns, port closures and the war in Ukraine. The New York Federal Reserve’s Global Supply Chain Pressure Index suggests that supply chain stresses in July were down more than 50% from last December’s record high — though still elevated above pre-pandemic levels, according to Reuters.
The Department of Commerce’s International Trade Administration nor Taiwan’s largest chip producer, Taiwan Semiconductor Manufacturing Company, immediately responded to the Daily Caller News Foundation’s request for comment.
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