Photo Credit: Jerome Favre
The commercial limitations Beijing has placed on Taiwan are seen by experts as more political than economic.
China made it crystal clear that they disapproved of the American officials’ choice of Nancy Pelosi, the speaker of the US Senate, to visit Taiwan. Pelosi, along with other US personnel, nonetheless entered Taiwan despite initial warnings from the Chinese government, to the joy and anxiety of several people.
China quickly responded by conducting increased military drills close to Taiwan’s territorial waters. Following the development, many observers claim that Taiwan will suffer more from China’s retaliation than the US.
The Chinese government then exerted economic pressure on Taiwan by halting shipments of frozen fish, candies, biscuits, and citrus. Beijing has also prohibited Taiwan from exporting natural sand as a result of the island nation’s defiance of the superpower.
Although China asserts its ownership of the tiny island, Taiwan declares itself a sovereign, democratic nation. The Chinese’s claim prompted its government to react differently to Pelosi’s visit because, in their viewpoint, Taiwan should not establish any diplomatic connections without their authorization.
What are the restrictions imposed by China
The value of the Taiwan-China export industry reached $113 billion last year, while Chinese imports were $82 million, according to a report by the Taiwanese Trade Bureau. Reimports and exports are not included in these data.
The major portion of the number provided by the trade bureau is made up of electrical machinery and technology components. China did not focus on these areas, even though it is the largest. A value of $82 billion is forecasted for Taiwan’s imports of electrical and technology equipment. Further, these products account for 65% of the nation’s exports all in all. The bottom line is that Taiwan benefits financially from these products.
Beijing may have targeted the wrong trade sector
Compared to other industries that account for most of Taiwan’s export and import business, the trade categories Beijing is targeting are minuscule.
Analysts claim that the export of natural sand is an area that represents a minor portion of China’s total exports, yet the country China has chosen to ban its exportation. According to all the data from the Taiwanese trade bureau, the trading region was valued at around $3.5 million. Value-wise, it is a “drop in the ocean” compared to natural sand exports from Vietnam and Australia.
The citrus industry, which achieved a value of $10 million last year, has also been subjected to restrictions by Chinese officials.
An expert from the Economist Intelligence Unit, Nick Marro, said, “It’s already had restrictions on Chinese visitors to Taiwan in place for a few years, which carry more economic significance; the agricultural products now in the headlines are only a fraction of Taiwan’s export basket. And so the headline impact on Taiwan won’t really be noticeable.”
Other trade limitations imposed by China cover the export of bread, cakes, pastries, and frozen fish, particularly large head hairtail and horse mackerel, valued at $50 million and $3 million, respectively, in the previous year.
“China’s economic retaliation against Taiwan is a long-standing strategy in its diplomatic playbook. That said, its decision to target relatively low-value trade items reflects the limits of its economic pressure toolbox,” Marro said.
Other impacts the restriction presents
Although the value of the limited trade zones only represents a minor fraction of Taiwan’s overall trade industry, many analysts think that the other aspect of China’s retaliation against Taiwan can have a detrimental impact on international commerce.
“China’s economic retaliation against Taiwan is a long-standing strategy in its diplomatic playbook. That said, its decision to target relatively low-value trade items reflects the limits of its economic pressure toolbox,” Marro further stated.
“It’s not just a story for Taiwan and China, but also for their neighbors, as well.”
A logistics firm called Container xChange warned that China’s military drills might slow down the flow of shipments along the waters between China and Taiwan as businesses get ready for the shipping season.
Opinions expressed by US Insider contributors are their own.