The Banking Executive Magazine - September Issue 2022

Us-China Tension Over Taiwan rise during the 2011 floods in Tai- wan. In case of any military aggres- sion, the demand for data center infrastructure would increase signifi- cantly, especially in the U.S., Europe, and the Asia Pacific as vendors would look forward to higher levels of inventory at their disposal. Personal Computing Taiwan and South Korea account for around 63 percent and 18 percent of semiconductor production in the en- tire world, respectively. Any military aggression in the South China sea will cripple around 80 percent of the production capacity, severely im- pacting personal computers that are facing order backlogs due to the ex- isting semiconductor shortage. It is possible that prices of personal computing devices, such as laptops and smartphones, would grow rap- idly. Aside from geopolitical uncertainty, the loss of production capacity, cou- pled with transportation delays in the South China sea region, might exac- erbate the situation. Energy A global shortage in Renewable En- ergy RE technologies in the short and medium term could be triggered. Price and supply risk of energy com- modities is already very high. Suppli- ers from different geographies should partner with new emerging suppliers for Renewable Energy (RE). Chemicals And Metals The price and supply risk for chemi- cals will be very high and periodic monitoring is needed. China accounts for over 60% of global supply for all known metals, and minerals. Hence the price and supply risk of metals may be high. IMPACT ON WORLD RELATIONSHIPS Us-Taiwan Relationship Under President Donald Trump, the United States deepened ties with Tai- wan over Chinese objections, by selling more than $18 billion worth of arms to the military and unveiling a $250 million complex for its de facto embassy in Taipei. The Biden administration has taken a similar approach, continuing arms sales and affirming the Trump admin- istration’s decision to allow US offi- cials to meet more freely with Taiwanese officials. Biden was the first US president to invite Taiwanese representatives to attend the presi- dential inauguration. The United States participates in military training and dialogues with Taiwan, regularly sails ships through the Taiwan Strait to demonstrate its military presence in the region, and has encouraged Taiwan to increase its defense spend- ing. Also, Taiwan has received bipartisan support in Congress over the years. The latest proposed legislation, the Taiwan Policy Act of 2022, desig- nates Taiwan as a major non–North Atlantic Treaty Organization (NATO) ally. According to the office of the United States Trade Representative, US-Tai- wan Trade Facts are: • US goods and services trade with Taiwan totalled an estimated $105.9 billion in 2020. Exports were $39.1 billion; imports were $66.7 billion. • Taiwan is currently the USA 9th largest goods trading partner with $90.6 billion in total (two way) goods trade during 2020. • Trade in services with Taiwan (ex- ports and imports) totalled an esti- mated $15.2 billion in 2020. • According to the Department of Commerce, U.S. exports of goods and services to Taiwan supported an estimated 188,000 jobs in 2019. • US foreign direct investment (FDI) in Taiwan (stock) was $31.5 billion in 2020. • Taiwan's Foreign Direct Investment FDI in the United States was $13.7 billion in 2020. • Sales of services in Taiwan by ma- jority U.S.-owned affiliates were $7.8 billion in 2018, while sales of services in the United States by majority Taiwan-owned firms were $9.5 billion. Us-China Relationship The US approach is governed by its One-China policy. The United States acknowledges the Chinese position that there is but one China and Tai- wan is part of China. The United States has for decades at- tempted to maintain a delicate bal- ance between supporting Taiwan and preventing a war with China. But President Joe Biden has seemingly rejected the policy, stating several times that the United States would come to Taiwan’s defense if China at- tacked. Taiwan International Relationships Relationship with Japan. If Japan fails to assist the US in sup- ISSUE 165 SEPTEMBER 2022 the BANKING EXECUTIVE 43