Taiwan says China economic ties make more sanctions unlikely

China’s economic measures against Taiwan are unlikely to have a major impact on trade between the two economies given how closely they’re intertwined, a finance ministry official said.

The electronics industries in both economies are “highly dependent on each other”, and Taiwan is China’s biggest source of imported integrated circuits, Beatrice Tsai, the ministry’s chief statistician said on Monday (Aug 8).

Beijing-Taipei tensions worsened last week, with China firing missiles over Taiwan and slapping trade curbs on some agricultural goods and construction materials following US House Speaker Nancy Pelosi’s visit to the island.

“We expect very little chance of China imposing stricter economic sanctions on Taiwanese businesses due to our highly reliant economic relations,” said Tsai.

Taiwan on Monday reported stronger-than-expected trade data, with export growth rising 14.2 percent in July from a year ago.

Export growth to China has been sluggish this year as Beijing contends with Covid-19 outbreaks and lockdowns.

Shipments to China and Hong Kong increased just 3 percent year-on-year in July after contracting in June, compared with double-digit growth earlier in 2022. By contrast, shipments to the US surged 24.8 percent last month.

Even so, China and Hong Kong combined remain by far Taiwan’s largest export market. Shipments totaled more than US$16 billion in July, compared with nearly US$7 billion in total exports to the US.

Economists have said the risk for Taiwan would depend on whether Beijing widens restrictions to cover the manufacturing sector and semiconductors. Agricultural exports from Taiwan to China accounted for only 0.6 percent of total exports last year.

The import bans announced thus far “are manageable for overall trade”, economist Adrienne Lui, wrote in a research note. “But given the fluid geopolitical situation, there remain risks to other key export items to China” that enjoy no tariffs.

“There are some worrying signs on general global demand conditions,” economist Grace Ng wrote in a research note. “In particular, recent loss of momentum in Taiwan’s tech exports seems rather concerning, as the level of tech exports appears to have peaked” in the first quarter.

Exports of electronic product parts rose 15.6 percent from a year ago, the slowest rate of growth so far in 2022. On a month-on-month basis, semiconductor exports fell 1.8 percent.

SOURCE: NEWS AGENCIES