Baoer Zhao Reprinted from: New York Times Chinese website：
In retaliation for U.S. House Speaker Nancy Pelosi's visit to Taiwan, China held large-scale military drills around the democratic and self-governing island and suspended some cross-strait trade.
Analysts said that while the military exercises caused some shipping disruptions, they did not affect maritime traffic at Taiwan or Chinese ports. The main attraction of the trade ban is what it doesn't target: Taiwan's increasingly influential semiconductor industry, a key supplier to Chinese manufacturers.
The bans imposed by the Chinese government, which include a ban on the export of natural sand to Taiwan and a ban on the import of all citrus fruits and two types of fish from Taiwan, pose little existential threat to the island off the southern coast of China that China claims as its territory.
"China's restrictions on citrus haven't affected us much," said Xu Man, manager of a fruit exporter in southern Taiwan that ships a type of pomelo to East Asia, with its main market being Japan. "We are not very dependent on the Chinese market."
China is Taiwan's largest trading partner, but Beijing's measures to punish Taiwan's economy are somewhat limited. That’s because the most extreme measures China could take—such as a ban on semiconductor imports or a complete blockade of Taiwan’s ports—would certainly have adverse consequences for its own economy.
Chung Wai-lun, a political expert at Singapore's Yusof Issa Institute of Southeast Asian Studies, said that despite Beijing's "venting" in response to Pelosi's visit, relations between China and Taiwan may return to normal within two or three months.
"China's punitive economic measures and sanctions against Taiwan will harm others and itself," he said.
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The trade ban announced last week is another reminder to Taiwanese exporters of the risks of doing business with China at a time of high geopolitical tensions. Previously, Taiwanese products such as pineapple, lotus root, and grouper have been listed as targets.
Still, for an economy roughly the size of Switzerland’s and with an advanced manufacturing base, China’s new round of measures is unlikely to be particularly painful.
“The political message (the ban) sends is greater than the economic impact,” said Chiao Jun, a former trade negotiator for the Taiwanese government.
Although about 90% of Taiwan's imported gravel and sand comes from China, much of it is man-made. According to data from Taiwan's Bureau of Mines, China accounted for only about 11% of natural sand imports in the first half of this year.
The total value of the two Taiwanese fish species that China banned from importing last week - chilled white hairtail and frozen horse mackerel - is about $22 million, less than half the trade value of Taiwanese grouper that was banned earlier this year. Both fish species are also less dependent on the Chinese market.
For Taiwan's US$500 million citrus industry, exports to China account for only 1.1% of Taiwan's total agricultural exports, according to the Taiwan Agriculture Council. One widely held theory is that Beijing chose citrus growers because most of the groves are in southern Taiwan, where the ruling Democratic Progressive Party, against which Beijing's ire has long been directed, is strong.
Thomas J. Shattuck, a Taiwan expert at the Perry Center for World Issues at the University of Pennsylvania, said that future Chinese bans may more specifically punish industries in counties that are strongholds of the Democratic Progressive Party. He also said China could retaliate less against counties controlled by the opposition Kuomintang "to try to influence local elections in Taiwan, or even island-wide elections."
wider sanctions
The import ban on citrus and fish is part of China's accelerated crackdown on Taiwan's food industry this year. According to official customs data reviewed by reporters, as of last week, Chinese customs had suspended the export licenses of about two-thirds of the more than 3,000 Taiwanese food manufacturers allowed to export to China. Several exporters said in interviews that many licenses were suspended in late June this year.
But not every one of these exporters is worried.
Taipei Jiade Pastry Co., Ltd., which has been affected by China's import restrictions, said it has never sent any products to the Chinese market. Another New Taipei City-based confectionery company, Huang Yuanxing, said its license to export products to China - including its signature five-nut shortbread - was recently suspended. But exports to China were already a small part of the company's profits, one staffer said, and that share has been declining during the coronavirus pandemic.
In the seafood industry, half of the 84 companies in the Taiwan Fisheries Industry Association have had their export licenses suspended by China since July, said Wu Zirong, the organization's secretary-general. She also said many of these companies apply for licenses on the mainland simply because they want to expand there at some point in the future.
“This does not mean they are dependent on the mainland Chinese market,” Ms. Wu said.
Calibrated pressure
China's decision not to ban imports of manufacturing products from Taiwan, especially semiconductor products, is consistent with a "highly selective" economic retaliation strategy, said Lai Runyao of the Institute of Political Science at Academia Sinica in Taiwan.
"So far, the nature of China's coercive measures appears to be symbolic," Lai Runyao said.
Semiconductors are indispensable for smartphones, cars and other modern life, and Taiwan's semiconductor industry is becoming increasingly indispensable in global supply chains. TSMC alone produces approximately 90% of the world's most advanced semiconductor products and sells them to China and the West.
Shan Xuexue, an analyst at the University of Pennsylvania, said the Chinese government has left the semiconductor industry "out of the loop" in future crises or rounds of economic retaliation for a simple reason: China needs Taiwan's semiconductor products as much as other countries.
"If Beijing truly believes it can force Taiwan to reunify with the mainland through military pressure rather than invasion, a strong, healthy Taiwanese semiconductor industry will play a role in driving the economy of an eventual 'unified' People's Republic of China," he said explain.
offshore options
The limits of China's economic pressure on Taiwan were revealed last week as China's military conducted a four-day simulated blockade exercise.
Chen Huazhu, an analyst at Linerlytica, a Singapore-based company that tracks container shipping industry data, said that although some of China's military exercises were conducted in the Taiwan Strait, an important waterway for international shipping, the exercises did not interrupt the entry of ships. Ports in Taiwan or southern China. He added that port congestion would only occur if the strait was completely blocked, port access was restricted, or port operations were hampered by labor or equipment shortages.
"None of those things are happening right now," he said.
Last week, ships that chose to avoid the Taiwan Strait due to the Chinese military's "show of strength" activities will face 12 to 18 hours of travel delays, which is usually regarded as a controllable inconvenience, said Ni Ni, chief shipping analyst at international shipping association Bimco. Lars Rasmussen said.
If Beijing escalates tensions in the future, that would mean Beijing is willing to put its own economy, as well as its trade and relations with Japan, South Korea, Europe and the United States, at risk, Rasmussen said at his office near Copenhagen. office said in a telephone interview.
"It's hard to imagine them making that decision," he added. "But then again, I didn't expect Russia to invade Ukraine."
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