Risk of Blockade – Manila Standard
The global trade supply chain is once again at the mercy of geopolitical tensions.
As the Russian-Ukrainian war wreaks havoc on commodity trade and pushes oil and wheat prices to unprecedented levels, consumers could face further supply disruptions amid Chinese military drills around Taiwan.
China is conducting military exercises near the Taiwan Strait, one of the world’s busiest shipping lanes, in response to US House Speaker Nancy Pelosi’s visit to Taiwan – which Beijing sees as a renegade island.
Cargo ships cross this sea lane to deliver semiconductors and key electronic equipment to global markets. These electronic parts and components are manufactured in factories in this part of the world.
Re-routing cargo and cargo shipments from the main seaway to alternative crossings will increase transportation costs and extend the delivery time of raw materials. Nearly half of the world’s container ships passed through the narrow Taiwan Strait that separates the island from the Chinese mainland in the first seven months of this year, according to a Bloomberg estimate.
A maritime blockade by China will make matters worse. The critical sea lane is often used by Japan and South Korea and the rest of Southeast Asian countries to ship goods and cargo.
Air travel may also suffer from Chinese military exercises.
More than 400 flights have already been canceled at major airports in Fujian province, near Taiwan. Airlines from Southeast Asian countries using airspace over the Taiwan Strait may do the same as a precaution.
China is unlikely to step up its swordplay in the region.
A blockade in the region will only hurt the world’s second-largest economy which is still reeling from the damage caused by the rigid COVID-19 rules.
But China’s show of force may have already hurt Taiwan’s economy.
It is a reminder that Taiwan is living on borrowed time and that its future economic success will depend on a peaceful settlement with China.
Foreign investors in Taiwan also realize that the geopolitical conflict will hamper the island’s economic growth in the medium to long term.
They should start looking for more stable foreign investment sites in the region.