China’s reliance on Taiwan would make trade retaliation costly

China’s military drills after US House Speaker Nancy Pelosi visited Taiwan sparked alarm around the region, although its trade retaliation barely made a dent. That is mostly because of the low value of trade restrictions imposed by Beijing, and the chance of China hurting itself given how its economy is intertwined with Taiwan’s, analysts say.

The value of trade targeted by China’s sanctions contributes a tiny amount of less than 1 percent to Taiwan’s gross domestic product, according to economists, taking the sting out of China’s announcements.

Beijing could ramp up actions by targeting more food products, wood or minerals. But levies on any big-ticket items that would cause real damage to Taipei, such as semiconductors, are near-unthinkable, given China’s reliance on the island for cutting-edge technology.

“The chance remains relatively low” for China to target Taiwanese tech, said Ma Tieying, an economist at DBS Group. “If you look at Taiwan’s role in global semiconductor supply, it’s very much dominant. It would be very difficult for China to find the alternative supply if it bans the Taiwan-made semiconductors.”

Beijing still has a few tools it could deploy to pressure Taipei. China and Hong Kong account for around 40 percent of Taiwan’s total exports, though Taipei has made efforts to reduce its economic dependence on China in recent years.

More restrictions would be an economic headache for Taiwan, which is already grappling with slowing global demand for electronics and high inflation, cooling its growth outlook.

SOURCE: NEWS AGENCIES