September 27, 2022


China has blocked citrus and fish imports from Taiwan in retaliation for a visit to the self-ruled island by Nancy Pelosi, a top US lawmaker, but avoided disrupting one of the world’s most important technology and manufacturing relationships.

The two sides, separated in 1949 after a civil war, have no official relationship but multibillion-dollar business ties, especially in the flow of Taiwan-made processor chips needed by Chinese factories that assemble the world’s smartphones and other electronics.

They built this operation while Beijing threatened for decades to enforce the ruling Communist Party’s claim on the island with attacks.

Two-way trade rose 26 percent last year to $328.3 billion. Taiwan, which makes half the world’s processor chips and has technology the mainland can’t match, said sales at Chinese factories rose 24.4 percent to $104.3 billion.

“The global economy cannot function without brands made in either Taiwan or China,” Carl B. Weinberg of High-Frequency Economics said in a report.

On Wednesday, Beijing blocked imports of citrus fruits and frozen mackerel from Taiwan after Pelosi, the speaker of the House of Representatives, arrived in Taiwan late Tuesday. But the ruling party has avoided disrupting the flow of chips and other industrial components, a step that would send shockwaves through the faltering global economy.

Beijing also announced four days of military drills with artillery fire in waters around Taiwan. This could delay or disrupt shipping to and from the island, one of the world’s largest traders.

The potential disruption is fueling worries about weakening global economic growth, but Asian stocks rose on Wednesday after there was no immediate sign of Chinese military action.

The Communist Party says Pelosi’s visit may encourage Taiwan to make permanent its decades-long de facto independence. Beijing says this will lead to war.

US President Joe Biden’s administration has tried to play down the scale of the visit, insisting there is no change to America’s longstanding “one China policy”, which recognizes Beijing but allows informal relations and defense ties with Taipei.

Meeting leaders in Taiwan, Pelosi said she and other members of Congress in a visiting delegation were showing they would not abandon their commitment to the self-ruled island.

“America’s resolve to preserve democracy, here in Taiwan and around the world, remains ironclad,” Pelosi said in a brief speech during a meeting with Taiwanese President Tsai Ing-wen.

“Faced with deliberately increased military threats, Taiwan will not back down,” Tsai said.

A ban on citrus and frozen mackerel imports will hurt suppliers seen as supporters of Tsai.

Taiwan plays a huge role in the chip industry for an island of 15 million people, accounting for more than half of the world’s supply.

Its producers, including Taiwan Semiconductor Manufacturing Corp., make the most advanced processors for smartphones, tablet computers, medical devices and other products. Taiwan says chip sales to factories in China rose 24.4 percent last year to $104.3 billion.

Beijing has invested billions of dollars in developing its own industry, which supplies low-end chips for cars and appliances, but cannot support the latest smartphones, tablet computers, medical devices and other products.

Chips are China’s biggest import at more than $400 billion a year, ahead of crude oil.

This concentration has fueled concern in the United States and Europe about their over-reliance on supplies that could be disrupted by conflict. The US government is trying to expand domestic chip manufacturing capacity.

Overall, China is Taiwan’s largest trading partner, receiving more than double its exports from the United States, the island’s No. 2 foreign market.

Beijing has sought to use its market access to undermine Tsai and other Taiwanese leaders it accuses of seeking independence.

The customs service blocked imports of cookies and other food products from more than 100 Taiwanese suppliers on Monday ahead of Pelosi’s visit, according to the Global Times and other Chinese news outlets. There was no official announcement.

The Communist Party has also used military action in the past to try to harm Taiwan’s leaders by disrupting the island’s economy.

The mainland tried to turn voters away from then-President Lee Teng-hui ahead of the island’s first direct presidential election in 1996 by firing missiles into shipping lanes.

This forced shippers to cancel trips and raised insurance costs, but backfired allowing Lee to brag about standing in Beijing in front of cheering supporters. Lee won the quadruple election with 54% of the vote.



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