The Banking Executive Magazine - September Issue 2022

Us-China Tension Over Taiwan IMPACT ON GLOBAL PROCUREMENT According to Chartered Institute of Procurement and Supply (CIPS), the threat of war between China and Tai- wan extends to reach procurement in supply chain. Procurement professionals are alerted as tension rise up between China and Taiwan as a result of the biggest-ever military drills around the island. The procurement industry should look into alternative sources of sup- ply as there will be a real impact on supply chains. Western politicians and western manufacturers should take into account impact on their supply chains. More disruptions in supply chains may be expected. CIPS is warning the global semicon- ductor industry, alerting that any sec- tor that relies on chips, is vulnerable to disruptions. With the automotive and tech indus- try already impacted by global short- ages of the chips following increased demand during the Covid-19 lock- downs, any disruption to Taiwanese supply chains would further place pressures on an already stretched in- dustry. Taiwan is fundamental in the semi- conductor industry, and has the po- tential for a massive impact on semiconductor supply chains and other high tech supply chains as well. The tensions between the west and China are growing and this threaten global supply chain. Research by Gartner revealed that supply chain teams are already look- ing to diversify away from China as political tensions rise. It has also found that 75% of supply chain lead- ers are evaluating or executing changes to their sourcing and manu- facturing strategy with China, and 55% of them had already acted on their plans. IMPACT ON LOGISTICS AND OPERATIONAL COSTS According to the Diplomat, there is a potential logistics and operational costs of China-Taiwan Conflict. Half of the global container fleet (ships and aircrafts) passed through the Tai- wan Strait in 2022, making it a criti- cal waterway for global supply chains. An increased conflict between China and Taiwan would result in a mas- sive disruption to global supply chains. During Pelosi’s visit, the Chinese Ministry of Defence warned ships and aircraft to remain out of six dif- ferent areas as China ran drills. Three areas in or near the Taiwan Strait were blocked off, causing ships and planes to cancel or reroute trans- portation. Importantly, most ships end up using the Taiwan Strait on the way from China and Japan to Europe, and even from the United States to Oceania and Asian nations. Taiwan itself is dependent on the strait for trade with China, which, along with Hong Kong, accounts for 40 percent of its exports. IMPACT ON GLOBAL SUPPLY CHAIN According to Australian news, China and Taiwan tensions threaten to im- pact global supply. This reveals how much the world relies on Taiwan and the narrow stretch of water between it and China. One of the world’s busiest shipping lanes sits right be- tween Taiwan and China, and the es- the BANKING EXECUTIVE 40 ISSUE 165 SEPTEMBER 2022