Chinese military exercises around Taiwan threaten to disrupt global trade

On Thursday, China launched exercises involving the navy, air force and other military forces in the seas and airspace surrounding Taiwan. The exercises — unprecedented in number — are a direct show of force in response to The visit of US House Speaker Nancy Pelosi to the self-governing island, which Beijing has repeatedly warned against.
The Chinese Ministry of Defense on Tuesday released a map of six areas around the island where he said he would conduct air and sea exercises as well as long-range live-fire exercises that will last until Sunday. Ships and planes have been warned to stay out of the areas during the drills.

Taiwan said the military exercises amounted to a “sea and air blockade” and had “violated Taiwan’s territorial waters and its contiguous zone”.

They are also threatening to disrupt trade flows in one of the busiest shipping lanes in the world.

The Taiwan Strait, a 110-mile-wide artery separating the island of Taiwan and mainland Asia, is a key trade route for ships carrying goods between major Northeast Asian economies such as China , Japan and South Korea, and the rest of the world. .

The London-based maritime consultancy VesselsValue said there are currently 256 container ships and other vessels in Taiwanese territorial waters, and another 60 are expected to arrive between Thursday and Sunday when the drills will be conducted.

“There is potential for substantial disruption to trade in the region,” said Peter Williams, trade flow analyst at VesselsValue.

Closing trade routes around Taiwan, even temporarily, “raises concerns about whether China might succeed in doing so again, and what that might mean not just for future trade, travel and economic models, but also for potentially defensive and security scenarios,” said Nick Marro, chief global trade analyst at the Economist Intelligence Unit.

Future impacts

It’s not yet known what the long-term impact will be, but shippers expect delays due to rerouting, potential lost sales and higher costs for workers working longer hours.

Figure 1: Container ships, tankers and bulk carriers currently in Taiwanese territorial waters

Global supply chains have already been rocked by the pandemic and the war in Ukraine, which disrupted the flow of goods and drove up inflation in many parts of the world.

Any conflict in Taiwan, which dominates the semiconductor industry, could exacerbate the global shortage of computer chips, which are vital components for virtually all modern electronic devices.

Taiwan has seven main ports. The port of Kaohsiung, located on the southwest coast, is the largest port in Taiwan and the 15th in the world, according to the World Shipping Council.

Taiwan’s Maritime and Port Bureau on Wednesday issued three notices asking ships to use alternative routes to ports in Keelung, Taipei, Kaohsiung and other cities.

China hits Taiwan with trade restrictions after Pelosi visit

Taiwan hijacks international flights

Taiwan has also diverted 18 international flight routes following negotiations with Japan and the Philippines. About 300 flights would be affected as a result of the rerouting, Taiwan’s Transport Minister Wang Kwo-tsai said on Wednesday.

“It’s not over, the repercussions, because they’re just beginning,” said Clifford Bennett, chief economist at ACY Securities, an Australian brokerage firm.

“Far worse will be any economic delay in Taiwan-China relations following Pelosi’s visit,” he said.

China has already hit Taiwan with trade restrictions since Wednesday, including suspending some fruit and fish imports from Taiwan and exports of natural sand to the island.

The whole event could “continue to reverberate, causing further damage for months or even years to Taiwan and the United States’ relationship with mainland China,” Bennett said.

Wayne Chang of CNN Hong Kong, Shawn Deng, Brad Lendon, Beijing Bureau and Hannah Ritchie contributed to this report.


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