Yet China and Taiwan Need Each Other: Trade Relations and the Risk of Invasion

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New escalation in the Taiwan Straits – What the figures of the two countries show about their economies

The tension in the Taiwan Straits started after her visit Nancy Pelosi, head of the US House of Representatives, last week and he is not saying to calm down. In a rather unexpected development the Chinese armed forces are extending military high schools for a second week that began a few days ago, continuously violating the airspace of Taiwan, which for its part decided to “respond” with its own military exercise which ends on Thursday, barring the unexpected.

Moreover, China is resorting to the weapon of financial penalties, in an attempt to bring to its knees the economy of neighboring Taiwan, which it does not recognize as an independent country. From last week the importation of a hundred different kinds of food is prohibited from Taiwan to mainland China. Now there is a ban on exports…sand from China, which is considered essential for the manufacturing sector in Taiwan. But will Beijing proceed with the decisive move to impose restrictions on imports of semiconductors and electronic devices as well?This would probably not benefit China itself either.

Small, but miraculous Taiwan

In size, but also in population, Taiwan of 23 million inhabitants seems … a dwarf in front of the vast mainland of China. The total area of ​​the country does not exceed a quarter of the Greek territory and is roughly equivalent to the southwestern German state of Baden-Württemberg. And like Baden-Württemberg, Taiwan has evolved into one dynamic, outward-looking economy based on exports. The semiconductor industry (microchips) is as important to Taiwan as the automobile industry is to Germany. 70% of the economy is based on exports. In 2021, the per capita national income in Taiwan reached $33,775an amount almost three times that of the equivalent in China.

Today Taiwan’s most important trading partner is not the US, but China. 42% of its exports go there, 22% of imports come from there. In total, in 2020, goods and services worth $166 billion changed hands between China and Taiwan. It should be noted that the Taiwan is also one of the biggest foreign investors for Beijing. From 1992 to 2021, Taiwanese enterprises have implemented 44,577 investment projects with a total value of 194 billion dollars in mainland China. One of the most important investments is considered to be that of the technological giant Foxconn, which manufactures in China iPhones for Apple, but also Galaxy mobile phones for Samsung, as well as consoles for Sony. The fact that 50% of Taiwan’s exports are semiconductors and other high-tech products proves how important Taiwan is to the whole world, including China.

Mainland China for its part exports to Taiwan rare earths and other precious raw materials, to then import high-tech industrial products for which it has no expertise. Not yet, actually. Because the goal of the centrally directed Chinese economy, expressed explicitly in multi-year economic programs such as Made in China 2025, is for the country to acquire the necessary know-how as soon as possible so that it does not need imports from Taiwan.

A military invasion is not ruled out

Analysts fear that once this happens, China it will no longer have any qualms about proceeding with the violent “reunification” with the island of Taiwan. After all, “reunification” is a declared goal of Beijing, with the prospect of being realized by 2049, when the 100th anniversary of the founding of the People’s Republic of China is celebrated. Roderich Kiesewetter, a member of parliament for the Christian Democratic Party of Germany (CDU) and a security expert, as well as a member of the parliamentary committee for intelligence surveillance, believes that an aggressive move by Beijing could be made sooner.

Until now we thought that China might attack when they are able to manufacture semiconductors with the same precision, speed and quantity as Taiwan and this is not expected to happen before 2027“, he says Kieseweter on the television program of the German newspaper Die Welt. “On the other hand, some believe that especially now, at a time when the West has focused its interest on Ukraine and the sanctions against Russia, the situation may favor China.” Kieseweter himself does not believe that an immediate Chinese invasion is imminent. He believes that “we must be prepared for a future escalation, although not necessarily in the coming months.”

“The Chinese are not ideologues”

The professor expresses a similar prediction Kishore Mabubani, former representative of Singapore to the UN and author of the book “Has China Won Already? China’s Emergence as a New Superpower”. In my opinion “the Chinese move more with the logic of the merchant and not the ideologue” and realize that at this stage “the risks far outweigh the opportunities» of a military engagement. On the other hand, warns Kishore Mabubani, “they think in terms of decades, not years. When they feel strong, then they will take revenge for all the humiliations they suffered in the past».

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