As Companies withdrew from Russia due to its Invasion of Ukraine, will the same Occur if China Invades Taiwan?
Think Piece/Open Discussion
Just as the world is getting over the humps of the Covid Pandemic and just now accepting the fact that Russia has invaded Ukraine (in a war that is going fairly well in Ukraine’s favor as well as the West), we all thought these would be the last events to occur in 2022. However, new tensions have sparked in China as Nancy Pelosi visited Taiwan after being warned of military intervention by the Chinese government.
Since Nancy Pelosi’s step in a controversial direction, businesses are now beginning to weigh the option that they had to weigh in Russia: Will they now have to pull out of China? Chances are no, however, it isn’t something to completely leave out of the discussion with the possibility of a United States-China conflict.
The rising potential of a conflict has left companies facing a shift in mindset. We must remember that business was first implemented with China not only because of its consumer size but also due to the fact that in 2001 after China was admitted into the World Trade Organization, the hope was that trade with the West would push China to be a more liberal world. Western governments are now seeing it as a priority to establish trade and supply chains that don’t depend so much on China and are more established around the allies.
Outside of the potential of a China-United States conflict, many companies — regardless of size — have begun questioning the Chinese dependency a while ago. These companies began doing so based on the human rights abuses China has made against the Uyghurs in Xinjiang, the Pandemic and its struggles created, the lack of Democracy (specifically in Hong Kong), and the Trump-era trade tariffs. After its assault on Ukraine, many companies felt the obligation to pull their operations out of Russia. This brings the same exact situation to question if China invades Taiwan.
One thing we must consider after dismantling the Chinese economy (considering they invade Taiwan and their fate is similar to Russia’s) is that when combined with Taiwan, the two countries provide 90% of the world’s semiconductors. Not general ones either, but the most advanced semiconductors. This makes the countries a vital production spot as well as a vital market. It is genuinely difficult to replace China — literally in any industry, sadly.
Simple products involve global inputs. It is completely undesirable to wholesale western companies from China for fear of conflict. It would also push up costs and weaken all of the Western economies. Companies that are focusing and relying so heavily on China for revenues and profits need to find other ways to edge away from the Chinese market. It isn’t a quick fix, and people should not just jump to limiting exposure to Chinese markets, but seeing how fast Russia jumped the gun on invading Ukraine, we see how wishful thinking plays out.
Maybe there is room to really dive into the geopolitical risk associated with companies and maybe the implementation of contingency planning. As mentioned, the Ukrainian-Russian war shows that not only can the “impossible” occur, but it can happen in the blink of an eye — which companies need to prepare for…