China Military Drills Around Taiwan Threaten Global Supply Chain Disruption

Military exercises in China around Taiwan threaten global supply chain disruption

China’s scheduled live fire drills are taking place in an incredibly busy waterway. (representative)

Beijing:

Chinese military exercises around Taiwan will disrupt one of the world’s busiest shipping zones, analysts told AFP, highlighting the island’s critical position in already stretched global supply chains.

The drills – the largest ever in China around Taiwan – are a major demonstration of strength after US House Speaker Nancy Pelosi infuriated Beijing by visiting the island.

The maneuvers kicked off on Thursday and will take place along some of the world’s busiest shipping routes, which are used to deliver vital semiconductors and electronic equipment manufactured in East Asian factory hubs to global markets.

The routes are also an important traffic artery for natural gas.

According to data collected by Bloomberg, in the first seven months of this year, nearly half of all container ships in the world passed through the narrow Taiwan Strait that separates the island from mainland China.

“Given that much of the world’s container fleet goes through that waterway, there will inevitably be disruptions in global supply chains as a result of the diversion,” said James Char, an associate research fellow at the S. Rajaratnam School of Science. International Studies in Singapore.

‘Incredibly busy waterway’

Even a minor disruption in global supply chains, already affected by the COVID-19 pandemic and the Russian invasion of Ukraine, can be costly.

“China’s planned live-fire exercises are taking place in an incredibly busy waterway,” Nick Marro, the chief analyst for the Economist Intelligence Unit on global trade, wrote in a note.

“Shutting down these transport routes – even temporarily – will affect not only Taiwan, but also trade flows linked to Japan and South Korea.”

Uncertainty dragged the Taiwan Taiex Shipping and Transportation Index, which tracks major shipping and aviation stocks, down 1.05 percent on Thursday.

The index has fallen 4.6 percent since the start of the week.

The Taiwan Maritime and Port Bureau has warned ships in the northern, eastern and southern areas to avoid the areas used for the exercises.

But several shipping companies contacted by AFP said they were waiting to see the impact of the exercises before taking another route.

The ongoing typhoon season made it more risky to divert ships along Taiwan’s east coast via the Philippine Sea, some added.

Others said they would stick to their schedule.

“We see no impact during (this) period and we have no plans to divert our ships,” said Bonnie Huang, a spokesman for Maersk China.

The exercises have also affected airways.

In the past two days, more than 400 flights were canceled at major airports in Fujian, China’s closest province to Taiwan, signaling that the airspace can be used by the military.

Taiwan’s cabinet, meanwhile, has said the exercises would disrupt 18 international routes passing through the Flight Information Region (FIR).

Aggressive attitude

During the previous crisis in the Taiwan Strait in the 1990s, China conducted military exercises for months, including launching missiles into waters off Taiwan and practicing amphibious assaults on the island.

“The Chinese undoubtedly wanted to show determination in ways beyond what they did in 1996,” said Bonnie Glaser, director of the Asia program at the US-based German think tank Marshall Fund.

The Chinese newspaper Global Times said on Wednesday that the exercises were designed to demonstrate that the Chinese military is “capable of blocking the entire island”.

But China’s ongoing economic challenges mean it’s unlikely to risk a major disruption and confine itself to aggressive stances, analysts say.

“Closing traffic through the Strait for an extended period of time will also hurt China’s economy,” Char said.

“It is not in Beijing’s interest to interrupt the travel and trade of citizens in the region,” said Natasha Kassam of the Lowy Institute, an Australian think tank.

The extent to which China will escalate its response to the visit to Pelosi – by increasing its military strength, cyber-attacks and economic sanctions – will be apparent.

Given its military advances, “China very likely has the ability to enforce an air and naval blockade against Taiwan,” said Thomas Shugart, an expert at the American think tank the Center for a New American Security.

“Whether China will opt for such a blockade … is largely a matter of how much political and economic risk the Chinese Communist Party leaders are willing to take.”

(Except for the headline, this story has not been edited by NDTV staff and has been published from a syndicated feed.)

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