Businesses are wary of Chinese military activity around Taiwan

As China’s military exercises around Taiwan become the new normal, foreign companies are reassessing the risks and costs of doing business in Taiwan and the supply chains that run through the self-governing island that China chooses to rule.

Neil Thomas, senior China analyst at political risk consultancy Eurasia Group, told VOA Mandarin that the People’s Liberation Army’s expanded exercises in the Taiwan area increase the risk of an accident or miscalculation that could lead to a protracted military conflict or some other form of international security crisis. .

In an emailed response, Thomas said the military exercises after U.S. House Speaker Nancy Pelosi’s visit to Taiwan would increase operating costs for foreign businesses “because it increased the time involved in exclusion zones that forced aircraft and ships in the area to take longer routes to avoid these areas.” Increasing supply chain and business costs.”

The Wall Street Journal He reported that insurers are reluctant to issue new policies to cover Taiwan-related political risk. He quoted an insurance broker who said they are not offering policies to new customers “at least until things stabilize somewhat.”

Pelosi visited Taiwan on August 2, protesting threats from China, which she has long criticized for its record on human rights and democracy. In response, China has launched military exercises in seven waters around the self-governed island, Taiwanese officials said.

Rupert Hammond Chambers, president of the US-Taiwan Business Council, told VOA Mandarin that if things don’t stabilize soon, most global companies will reconsider what it means to invest in Taiwan.

Christina Lai, a professor and assistant researcher at Taipei Academy Sinica’s Institute of Political Science, told VOA Mandarin that recent events clearly show China’s coercive measures against Taiwan.

She warned that the escalating military conflict would have a negative impact on Taiwan’s economy.

“For example, last week, hundreds of flights were canceled due to PLA exercises,” she told VOA Mandarin in an email. “If China’s navy steps up its efforts… to block, the trade route connecting the northeast and southeast [Asia] It quickly disturbs him. This is a worst-case scenario that could have a significant impact on Taiwan’s trade volume and economic growth.

Others suggest that China is not immune to supply chain disruptions of its own making.

In a recent article, David Uren, a senior fellow at Australia’s Strategic Policy Institute, argued that disruption of Taiwan’s sea lanes to the east and west would hurt China’s economy, “starting with its major ports in Shanghai.” Dalian, Tianjin and others depend on waters near Taiwan.

The Taiwan Strait, which separates Taiwan and mainland Asia, is one of the world’s most important trade routes between China, Japan and South Korea and ships transporting goods between the rest of the world.

According to Taiwan’s Ministry of National Defense every day this week More than 15 People’s Liberation Army was found (PLA) warplanes and at least five ships in the Taiwan Strait.

China’s new round of drills comes in response to a visit Monday by a US delegation led by Democratic Senator Ed Markey of Massachusetts.

On Tuesday, Vice Admiral Carl Thomas, commander of the US 7th Fleet, described China as the “gorilla in the classroom” ahead of the Southeast Asia Cooperation and Training naval exercise, commonly known as SEACAT.

“It’s very important to compete with something like this. I know the gorilla in the room is launching missiles at Taiwan,” he said, calling it irresponsible for China to launch missiles at Taiwan into international waters.

Dale Buckner, CEO of Virginia-headquartered Global Guardian Security Solutions, said some of its largest clients are concerned about operating in Taiwan.

Companies should begin examining their essential personnel in the region, their hard and soft assets, and if there are financial assets that are stuck in the Chinese or Taiwanese system, he said.

I think if you’re a leader and you’re thinking about the horizon — not just the next 12, 18 months, but the next decade — you have to think about these things. I don’t think my clients are in a panic right now, but I think they are taking it very, very seriously. And they don’t want to repeat what happened between Russia and Ukraine on a higher level,” he told VOA Mandarin by phone.