China is flexing its muscles against Taiwan. The Beijing government reacted to the visit to Taiwan of the speaker of the US House of Representatives, Nancy Pelosi, with military exercises and missile launches.
Now China has imposed sanctions on the autonomous island. Initially, only citrus fruits, mackerel fillets and other fish products were affected. Even before Pelosi’s visit, Beijing had canceled imports from more than a hundred Taiwanese food producers.
In addition, Taiwan can no longer import sand from China, on which the construction industry depends. Later, China even imposed sanctions on Pelosi herself. One important industry was left out of the dispute: electronic components, such as microchips and optical components, which the Chinese economy cannot afford to do without. How integrated are the two economies?
A powerhouse off the coast of China
Taiwan is slightly larger than the US state of Maryland, or about half the size of Scotland, and has a population of 23 million people, which is just over a quarter of the population of Germany. And just like Germany, Taiwan is known around the world for its manufactured industrial products.
Its highly developed semiconductor industry is as important to Taiwan as the auto industry is to the German economy. And a comparison with Germany shows how dependent Taiwan is on exports. About 70 percent of Taiwan’s economic output is attributed to its exports. In Germany it was 47 percent in 2021.
But while China’s 2021 gross domestic product (GDP) per capita was $12,259, in Taiwan it was almost three times as high, at $33,775, according to data from the International Monetary Fund.
Trading mass products for semiconductors
Overall, China is Taiwan’s most important trading partner, followed by the United States. More than 42 percent of Taiwan’s exports go to China, from which Taiwan gets about 22 percent of its imports. In 2020, $166 billion worth of goods and services were exchanged between the two countries.
Taiwan is also among the main investors on the mainland. According to the Taipei government, between 1991 and the end of May 2021, Taiwanese companies invested around $194 billion in a total of 44,577 Chinese projects. The factories of chipmaker Foxconn are one of the best-known examples. The manufacturer makes iPhones for Apple, Galaxy smartphones for Samsung and game consoles for Sony in plants across China.
And the fact that semiconductors and other computer technologies account for more than half of all Taiwan’s exports shows how important the country is to the rest of the world, including China.
Put simply: China supplies key raw materials such as rare earths and mass-produced low-end electronic components, while Taiwan exports high-tech semiconductors and optical components to the mainland to compensate for China’s lack of know-how.
China’s central goal is to achieve the ability to produce high-end chips. Party leaders have repeatedly emphasized this in projects such as Made in China 2025. However, so far they have been unable to catch up.
Industrial parks like the one in Hsinchu are centers of research and technological knowledge.
Is an invasion imminent?
However, once that goal is reached, some experts believe things could get tough for Taiwan. Chinese President Xi Jinping could finally act to reunite the island with the mainland. China has repeatedly stated its goal of uniting Taiwan with the mainland by the 100th anniversary of the republic’s founding in 2049 at the latest, by force if necessary.
But it will probably happen much sooner, according to Roderich Kiesewetter, chairman of the German Parliament’s Foreign Affairs Committee and deputy chairman of the Parliamentary Oversight Panel, which is responsible for monitoring the German intelligence agency.
Kiesewetter made his opinion clear in a recent television interview. “Until now, our parameters were such that we were saying, ‘If China is capable of producing semiconductors with the same precision, speed and quantity, and that probably won’t be until 2027, then an attack is likely,'” he said. But there are schools of thought in China that say the West is very busy right now with the war against Russia and supporting Ukraine,” he added.
According to Beijing, the Americans do not have the strength to wage two wars on two fronts. Kiesewetter believes that China is not ready for an invasion. However, there are warning signs. “We have to prepare for escalation more quickly, but not in the next few months,” he said.
Taiwanese chipmaking giants like TSMC still hold a technological edge over their Chinese rivals.
Business is China’s first priority
Kishore Mahbubani said it was clear that China would assert its interests in an increasingly ruthless manner in the future. Your book Did China win? explores what will happen when China overtakes the United States as the world’s largest economy.
Mahbubani doesn’t think Beijing will use military force to take over Taiwan just yet. The Chinese are much more interested in business than in ideologies. For decision-makers in Beijing, the risks clearly outweigh the opportunities, the political scientist, diplomat and former president of the UN Security Council emphasized in an interview with Bloomberg TV.
Chinese officials don’t think in terms of years, according to Mahbubani, but in terms of decades. The Chinese are making sure they have a bigger economy than the United States and they will remember everything that happened in the past. “That’s when all the real retaliation, the real answers, will come,” he warned, “when China finally becomes the number one economy in the world.” (Rr/dzc)