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China’s war games in Taiwan threaten another disruption to the global supply chain

#Chinas #war #games #Taiwan #threaten #disruption #global #supply #chain

Chinese military exercises around Taiwan will disrupt one of the world’s busiest shipping zones, analysts told AFP, stressing the island’s critical position in already congested global supply chains.

The drills – China’s biggest yet around Taiwan – are a major show of force after US House Speaker Nancy Pelosi enraged Beijing by visiting the island.

The maneuvers began Thursday and will take place along some of the world’s busiest shipping lanes, which serve to ship vital semiconductors and electronic equipment made in East Asian factory centers to global markets.

The routes are also a key artery for natural gas.

Almost half of all container ships in the world passed through the narrow Taiwan Strait, which separates the island from mainland China, in the first seven months of this year, according to data from Bloomberg.

“Given that much of the world’s container fleet transits this waterway, there will inevitably be disruptions to global supply chains due to the diversion,” said James Char, Associate Research Fellow at the S. Rajaratnam School of International Studies in Singapore.

– ‘Incredibly busy waterway’ –

Even a small disruption to global supply chains, already battered by the Covid-19 pandemic and the Russian invasion of Ukraine, could prove costly.

“China’s planned live-fire exercises are taking place in an incredibly busy waterway,” Nick Marro, the Economist Intelligence Unit’s senior analyst for global trade, wrote in a note.

“The closure of these transport routes — even temporarily — has consequences not only for Taiwan, but also for trade flows linked to Japan and South Korea.”

Uncertainty dragged the Taiwan Taiex Shipping and Transportation Index, which tracks major shipping and airline stocks, down 1.05 percent on Thursday.

The index has lost 4.6 percent since the beginning of the week.

Taiwan’s Maritime and Port Bureau has warned ships in northern, eastern and southern areas to avoid the areas used for exercises.

But several shipping companies contacted by AFP said they were waiting to see the impact of the drills before rerouting the route.

The ongoing typhoon season made it riskier to divert ships on Taiwan’s east coast through the Philippine Sea, some added.

Others said they stick to their schedules.

“We see no impact during (this) time and have no plans to re-route our ships,” said Bonnie Huang, a spokeswoman for Maersk China.

The exercises also hit flight routes.

Over the past two days, more than 400 flights have been canceled at major airports in Fujian, the Chinese province closest to Taiwan, signaling the airspace could be used by the military.

Taiwan’s cabinet, meanwhile, has said the drills would disrupt 18 international routes that pass through its Flight Information Region (FIR).

– Aggressive demeanor –

During the previous cross-strait crisis in the 1990s, China conducted months of military drills, including launching missiles into waters off Taiwan and practicing amphibious assaults on the island.

“The Chinese undoubtedly wanted to demonstrate determination in a way that goes beyond what they did in 1996,” said Bonnie Glaser, director of the Asia program at the US-based think tank German Marshall Fund.

Chinese newspaper Global Times said on Wednesday the drills aimed to show China’s military “is capable of blockading the entire island”.

But China’s ongoing economic woes mean it’s unlikely to risk major disruption and would confine itself to aggressive posturing, analysts said.

“Closing traffic through the strait for a long time will also hurt the Chinese economy,” Char said.

“It is not in Beijing’s interest to disrupt civilian travel and trade in the region,” said Natasha Kassam of the Lowy Institute, an Australian think tank.

It remains to be seen to what extent China will escalate its response to the Pelosi visit – with military action, cyber attacks and economic sanctions.

Given its military advances, “China very likely has the ability to enforce an air and sea blockade against Taiwan,” said Thomas Shugart, an expert at the US think tank Center for a New American Security.

“Whether China will decide to attempt such a blockade … depends largely on how much political and economic risk Chinese Communist Party leaders are willing to take.”

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