Taiwan says China is unlikely to impose ‘stricter economic sanctions.’ Here’s why

Immediately following House Speaker Nancy Pelosi’s historic and highly publicized visit to Taiwan, China responded with a series of military drills around the island and imposed several trade restrictions, including import bans on fish and fruit.  

Tensions between China and Taiwan have long simmered amid China’s assertion that Taiwan is in fact a breakaway territory that will eventually be reunited with the mainland. Taiwan maintains that it is a sovereign nation.  

On Monday, Beatrice Tsia, the chief statistician at Taiwan’s Ministry of Finance, said the restrictions imposed by China are unlikely to have a major impact on Taiwan because of how closely connected the two economies are. 

“We expect very little chance of China imposing stricter economic sanctions on Taiwanese businesses due to our highly reliant economic relations,” Tsai said in Taipei, Bloomberg reported.  

The two economies are major trading partners for crucial goods. Taiwan produces semiconductor chips that China needs for smartphones and electronics production. And the largest chip manufacturer in the world, Taiwan Semiconductor Manufacturing (TSMC), also operates in mainland China.  

China is on the receiving end of 37% of all of Taiwan’s exports, according to the Taiwanese Ministry of Finance, and exports overall are up about 14.2% this year. China received around $16 billion worth of shipments from Taiwan in July 2022, compared to its second largest trading partner, listed as the Association of Southeast Asian Nations, which includes Indonesia, Thailand and Singapore, receiving nearly $7.5 billion worth. 

And Taiwanese imports overall rose 19.4% to $38.3 billion in July 2022 compared to the same time last year. Of that, 19.7% of those imports come from China, a 9.5% increase from the previous year. 

China conducted military drills in both the airspace and waters of Taiwan last week in response to Pelosi’s visit to the island. On Monday, China announced it would hold new drills around Taiwan.

And although it banned some imports, it targeted ones that would have little effect on the overall economic relationship between the two areas. Taiwan’s agriculture exports accounted for only 0.6% of total exports last year, Bloomberg reported, citing DBS Group Holdings.  

“What needs to be watched is whether Beijing will broaden the trade bans into the manufacturing sector,” Ma Tieying, a senior economist at DBS, told Bloomberg. “Particularly semiconductors [and] electronics going forward.”