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Taiwanese elections’ impact on global economy

Taiwan occupies a key position in the global economy, especially in the chip industry

By: N. Peter Kramer - Posted: Friday, January 12, 2024

The Taiwanese themselves will probably hardly think about that in the polling stations.
The Taiwanese themselves will probably hardly think about that in the polling stations.

By N. Peter Kramer

Taiwan occupies a key position in the global economy, especially in the chip industry. It currently produces about 60% of all semiconductors made and more than 90 percent of the most advanced computer chips needed for the latest applications such as Artificial Intelligence (AI). TSMC, one of the most strategically important corporations in the world, is the purveyor of almost all major Western chip designers such as Apple, Qualcomm, Broadcom and AMD.

In addition, Taiwan is also a major producer of many other crucial components in the high-tech production chain, ranging from printed circuit boards to advanced camera lenses. Taiwanese production is indispensable in the supply chain of a wide range of electronic products from Chinese cars and smartphone to American fighter jets.

Tensions with China have risen in recent years. According to Beijing, Taiwan is a renegade province that must return to Chinese control. Despite close, especially commercial, ties and verbal support, the rest of the world feeds that approach by not recognising Taiwan as a full dressed state. A membership of the United Nations, even granted to the smallest independent mini state, looks impossible.

After an 8 years period of detente (2008-2016), when Taiwanese President Ma met his Chinese colleague Xi Jinping, resigning President Tsai Ing-wen’s (2016-2024) Democratic Progressive Party (DPP) has consciously steered towards reducing Taiwan’s high economic dependence of China. The result is that the share of Taiwanese exports to China fell to just over 35 percent in 2023, the lowest level in 21 years. Much to the dissatisfaction of the nationalist party Kuomintang (KMT), which wants to improve economic relations with China. DPP’s political attitude towards China has resulted in a growing military threat by China. President Xi is quite clear on that point.

In the Wall Street Journal former Yale professor Water Russell Mead warned that “War in Taiwan would be catastrophic for the economies of Asia and the world (…). It would be the biggest economic shock since World War II.” The computer models of Bloomberg Economics predicted in that case a global GDP decline of as much as 10.2 percent.

The Taiwanese themselves will probably hardly think about that in the polling stations…

 

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