The Banking Executive Magazine - September Issue 2022

Us-China Tension Over Taiwan A report from Nikkei states that Apple has already requested all their suppliers from Taiwan to relabel goods with the source region of “Tai- wan, China” or other similar phrases that conform with the One China Principle. FUTURE SCENARIOS Bank Lombard Odier news, by Homin Lee, set out three scenarios for US-China tensions over Taiwan in the next 3 to 5 years. First scenario: China will make further military drill around Taiwan, causing intermittent disruptions for trade flows through the Taiwan Strait and the waters and air spaces in the vicinity, without any major direct military confrontation between China and Taiwan or be- tween China and the US. The costs for the global economy would be ad- ditional disruption in global supply chains. Second scenario: China will quarantine or even block- ade Taiwan, and China will decide who enters the area around Taiwan. In this scenario, the disruptions to global supply chains would be far more significant than the scenario of a prolonged one-off military drill. Third scenario: China attempting full political con- trol of Taiwan through military means. This scenario would send ex- tremely large shockwaves through the entire global economy as it would likely lead to the complete bi- furcation of global supply chains and the collapse of multilateral gover- nance frameworks. Different outcomes are possible due to the high level of uncertainty on the behaviours of both the US and China Short- and near-term implications for U.S.-China relations: Beijing repeatedly stressed that Pelosi’s visit is escalatory in itself. Chinese foreign minister Wang Yi stated that the US side claimed that China is escalating the situation, but the basic facts are that the United States first provoked China on the Taiwan question and violated China's sovereignty and territorial in- tegrity. The Biden administration ar- gued that sending short-range ballistic missiles over Taiwan, was a manufactured crisis and an overreac- tion by Beijing to a normal congres- sional delegation. While both sides argue that their ac- tions were measured and proportion- ate, it is clear that this event as well as Putin’s invasion of Ukraine have placed considerable tensions over the Taiwan Straits at the very centre of US-China relationship. TAIWAN IMPORTANCE IN THE WORLD Taiwan facts and figure According to Taiwan government data (https://www.taiwan.gov.tw/ ), important facts about Taiwan are: • Taiwan was the world’s 15th largest exporter of merchandise in 2020. • Under the New Southbound Pol- icy, Taiwan is deepening ties with 10 Association of Southeast Asian Nations member states, six South Asian countries, Australia and New Zealand. • Taiwan holds an important position in the global economy. It is a top player in the world’s information and communication technology industry as well as a major supplier of goods across the industrial spec- trum. • According to the World Trade Or- ganization, Taiwan was the 15th largest exporter and 18th largest importer of merchandise in 2020. It was also one of the largest hold- ers of foreign exchange reserves as of December 2020. • Annual surveys of the world’s economies, including those con- ducted by the World Economic Forum and Business Environment Risk Intelligence have ranked Tai- wan among the top nations year after year with respect to long-term growth and technological develop- ment. • Taiwan signed an economic coop- eration agreement with New Zealand and an economic partner- ship accord with Singapore. • Taiwan and the US launched the Taiwan-US Economic Prosperity Partnership Dialogue in November 2020 and resumed talks on the Trade and Investment Framework Agreement in June 2021. • Taiwan adopted the New Model for Economic Development. This seeks to boost growth by promot- ing innovation, increasing employ- ment and ensuring the equitable distribution of economic benefits. Under the model, Taiwan is striv- ing to strengthen global and re- gional connections through initiatives such as the New South- bound Policy, which aims to diver- sify the nation’s international markets by expanding links with ASEAN member states, as well as South Asia, Australia and New Zealand. • Taiwan will continue promoting its participation in regional and global economic integration processes. • Taiwan is promoting six core strate- gic industries. These comprise in- formation and digital technology; cybersecurity; biotech and medical technology; national defence; green and renewable energy; and strategic stockpile industries. • Taiwan government is also promot- ing the Forward-looking Infrastruc- ture Development Program to meet national infrastructure needs over the next 30 years. • As it works to advance innovative industries, Taiwan government is also committed to protecting the environment. Taiwan’s Democracy Taiwan’s democracy is relatively young. Despite Chinese threats, the Economist’s Democracy Index in 2020 labeled Taiwan a “full democ- racy” for the first time. In 2021, Tai- wan was ranked the world’s eighth-most-democratic country. An increasing number of Taiwanese the BANKING EXECUTIVE 38 ISSUE 165 SEPTEMBER 2022