ANALYSIS – In the wake of the Ukraine war and as China effectively blockades Taiwan with war drills surrounding the island, American firms, both large and small, are assessing whether to exit Taiwan or take other less drastic security precautions.
Their concern: is that any significant conflict could result in the loss or seizure of assets on the island.
This is also one of Communist China’s goals in its ongoing military intimidation campaign – to damage Taiwan’s long-term economic viability.
Politico’s China Watcher newsletter:
“It’s inherently in the interest of the PRC to maintain a high shrill tone with Taiwan to dampen the interest of companies to invest in Taiwan,” [Rupert] Hammond-Chambers [president of the Washington, D.C.-based US-Taiwan Business Council], said. “That reduces the attractiveness of Taiwan as an investment location and raises the attractiveness of China as an economic partner to offset that.”
And “the ‘Ukraine effect’ has made companies vastly more aware of and sensitive to geopolitical risk….” It noted:
The BlackRock Investment Institute earlier this month rated “U.S.-China Strategic competition,” including “military action to accelerate reunification with Taiwan” as sixth out of the world’s 10 most serious geopolitical risks. “The risk will increase as the decade wears on,” the Institute advised.
China Watcher adds:
“I have seven fortune 500 companies asking me to pre-plan and build an outline of triggers for them to start moving people, infrastructure, and assets [outside of Taiwan]. That’s real. It’s happening,” said DALE BUCKNER, chief executive officer of international security firm Global Guardian. “There are some companies that are taking this very seriously [because] they don’t want to happen what just happened in Russia where they lost billions of dollars’ worth of assets, both financial and hard, so they are already looking to disperse people and assets [to other countries.”
Meanwhile, as Politico notes, there is a gradual move away from Taiwan:
Slow motion exodus. U.S. companies in Taiwan are taking proactive measures to insulate themselves from that risk by beginning the process of relocating infrastructure — including production facilities — and personnel to safer locations in the region.
“We have manufacturers that can simply build a new manufacturing facility in South Korea or Japan or in the Philippines and some are doing that [while] some are moving those manufacturing facilities to Europe or the United States,” Buckner said. “I don’t think that you’re seeing boatloads of materials leave the island or people evacuating at scale — this will be a very drip-drip slow over time transition that won’t be noticeable unless there is some level of attack or blockade of some kind.”
So what can the U.S. government do beyond the multiple initiatives in the U.S. designed to bolster Taiwan’s military defense?
“A [U.S.-Taiwan] bilateral trade agreement would smooth out some of the significant areas of economic disruption … [and provide] a framework and template for other friends and allies to do the same including the Japanese and the Aussies,” Hammond-Chambers said.
However, he adds: “The problem we’re running into here is that there’s just no appetite on the left or right for trade agreements. It’s not a Taiwan issue. It’s a trade issue.”
Let’s hope the U.S. can find ways to resolve this issue and keep Communist China from its goal of weakening Taiwan’s economy. ADN