China / Taiwan Tensions
Heightened tensions between China and the island territory of Taiwan have the world fearing war. Taiwan is a democratic, independently functioning state, which mainland China views as its territory. This has been a source of contention since the 1950s. Taiwan’s interest in independence from China has generated significant public support on the island during the last year. The Chinese government has responded with a series of intimidation tactics. Flying military jets into Taiwan air space, positioning warships off the coast, and making taunting media remarks are all signals that China will use force to prevent Taiwanese independence if necessary.
What This Means For Global Supply Chains
With about 65% of global port-container cargo handling concentrated in Southeast Asia, any war in Asia would result in global supply chain devastation. China may not even need to go to war to dismantle supply chains in Taiwan – a simple shipping blockade of the South China Sea would do the trick. Although a blockade could also disrupt Chinese ports in Guangzhou, Xiamen, Hong Kong, and Fuzhou.
While the threat of war is real, it’s likely not imminent. After all, China and Taiwan have been at odds for over 70 years. However, continued intimidation tactics could bring heavy economic sanctions from the US and western allies. In July, the US imposed financial sanctions on seven Chinese officials over Beijing’s crackdown on democracy in Hong Kong, indicating their willingness to exert economic pressure. The threat of war could also push foreign businesses currently operating in China to seek stability in neighboring Asian nations. These actions could severely stunt China’s economic growth. This is a risk China is probably not willing to take.
BUT those with supply chains in Taiwan need to stay alert. It doesn’t hurt to have a backup supply chain plan for a worst-case scenario. After all, nothing can kill a product company faster than having no product to sell.
Your Back Up Plan
Fortunately, there are several Asian nations nearby that could serve as a backup to your current supply chain. At Blacksmith International, we have relationships with factories all over Asia. We’ve found Vietnam, Bangladesh, and India to be excellent alternatives to manufacturing in China or Taiwan. In fact, Vietnam is quickly becoming a global manufacturing hub and has often been referred to as “The New China.” Check out our manufacturing guides for a more detailed look at producing in these countries.
Blacksmith International will continue to monitor the China / Taiwan conflict closely and provide solutions to our clients as needed. If you have any questions, please contact us today.