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Global Economy

Separate and yet connected

In all disputes between the People's Republic and the democratically governed island of Taiwan: the economies of the two countries are closely linked. The People's Republic is Taiwan's largest trading partner. 40 percent of all Taiwanese exports go to China, including Hong Kong SAR.

China is also dependent on Taiwan

A high percentage, reports Lee Chun. He is a political adviser on Taiwan's trade negotiations with China and an expert on Taiwan's delegation to meetings with the World Trade Organization. But the small island nation of Taiwan is highly technological, number 22 of the major economies and also strongly intertwined with the global economy.

Even China, the world's second largest economy, is dependent on Taiwanese technology, according to Chun: "Currently, China still has to import 70 percent of the microchips it needs in total. About half of these chips come from Taiwan and the other half from South Korea. "

World leader in the semiconductor industry

Taiwan is the world's largest manufacturer of semiconductors, which are needed for the production of smartphones, computers and cars. Above all, the most modern microchips with structure sizes of seven nanometers and less come from the island. The chips are often processed in China, and the electronic devices are then exported all over the world.

Lee Chun is certain that Taiwan can use this technical advantage in the event of a dispute with China if Taiwan can actually find a substitute market for its exports: "China is not the only customer in the world." Then Taiwan will have some staying power, according to the expert.

Isolation of the island threatens

For six years, Taiwan has successfully expanded trade relations with countries in Southeast Asia. In 2021, the island state invested more in Southeast Asian countries than in China for the first time.

But challenges remain: Due to pressure from China that other countries should only maintain diplomatic relations with the People's Republic, it is difficult for Taiwan to conclude free trade agreements. The island is also threatened with isolation. If the shipping lanes are blocked, as the Chinese military has been trying to do in the past few days, trade will be severely affected – not only from Taiwan, but also from Japan and South Korea.

So far no migration tendencies

Around 250 German companies are active in Taiwan. According to the German Chamber of Commerce Abroad in Taiwan, they are monitoring the situation very closely – especially since economic sanctions have already been announced by the Chinese side. According to observers, however, they have more of a symbolic value. For example, China has banned the import of certain foods. And sand, an important raw material for the construction and semiconductor industries, is no longer sold to Taiwan.

There is still no tendency for German companies to emigrate – neither from Taiwan nor from China. The market is too big. In China, for example, the German car industry accounts for up to 40 percent of its sales.

But Achim Haug from the German Society for Foreign Trade and Location Marketing also confirms in the ARD podcast Welt.Macht.China: "The concerns in the German economy about a further escalation of the crisis in East Asia are very great, because very important trading partners will be affected." Because in addition to supply bottlenecks in the semiconductor industry, an escalation would also endanger the close economic relations with China.

"China is the world factory"

While experts in China promised talks with ARD about Taiwan a few months ago, they no longer want to talk to us. The topic is currently too sensitive in China. Lee Chun, a trade expert in Taiwan, sees serious difficulties for the People's Republic if the conflict escalates.

Sanctions by democratic countries could harm China significantly. The People's Republic is too dependent on exports to Europe and the USA. In addition, China would lack the necessary components from Taiwan in order to be able to export goods at all: "China is the world factory. No other country imports and exports more goods than the People's Republic. However, the key components for the production of goods come from Taiwan Assuming that China-Taiwan trade could be suspended altogether, China's status as a world factory would be seriously challenged," Lee Chun said.

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