While less disruptive than an invasion, a blockade or embargo of Taiwan would have dire ramifications not just for all nations involved, but for supply chains and the global economy.
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April 11, 2024 INSIDE THIS ARTICLE, YOU'LL FIND: |
Over the past eight years, the People’s Republic of China (PRC or China) has telegraphed its gray zone strategy for how it approaches cross-Strait relations with the Republic of China (RoC or Taiwan). China claims Taiwan as its territory — with “reunification” a top goal for President Xi Jinping — while Taiwan continues to operate as a democratic self-ruling polity.
Though there are many possible actions China could take as it pursues what Xi calls “great rejuvenation of the Chinese nation,” all things being equal, Xi is more likely to achieve his goal of “reunifying” Taiwan with the mainland without eliciting a major war. Rather than an invasion, many expect that a blockade would be China’s most likely course of action.
Unfortunately, while less disruptive than a traditional conflict, a blockade or embargo of Taiwan would have dire ramifications for Taiwan, supply chains, and the global economy.
If China does blockade Taiwan, what would be the repercussions for Taiwan, China, and the world?
This analysis of China’s potential options to blockade Taiwan is adapted from Global Guardian’s 2024 Worldwide Threat Assessment. For more information on this topic and additional analysis on the emerging geopolitical threats facing travelers and organizations today, download the latest Worldwide Threat Assessment.
To invade or blockade Taiwan?
A full-scale invasion of Taiwan by China would be a risky military endeavor, requiring extensive resources. An invasion would almost certainly trigger American military involvement, risking intense economic harm and loss of life. The Taiwan Strait, spanning over 145 kilometers (90 miles), experiences two monsoon seasons and various extreme weather conditions, making a seaborne invasion only possible during a limited number of months. Having witnessed the effectiveness of modern area denial weapons and sea drones in Ukraine against Russia’s Black Sea fleet, an invasion, while practicable, would be challenging for China.
A costly invasion can only be justified if all other options are exhausted. A better option for reunification plays to China’s strengths and Taiwan’s weaknesses.
Taiwan, as a series of islands, is uniquely vulnerable to blockade. While Taiwan does have an estimated food storage capacity of around one million tons and locally produces fruit, vegetables, and rice, it could only subsist for six to 10 months without food imports. Similarly, Taiwan’s current energy inventories can only support Taipei’s needs for a limited time — five months of oil, 40 days of coal and 10 days of natural gas.
Thus, a formal or de facto blockade of Taiwan is the logical continuation of the status quo: China’s People’s Liberation Army (PLA) has conducted live fire exercises and violated Taiwan’s Air Defence Identification Zone (ADIZ) with increasing frequency over the last several years (see the graphic below for more detail). The costs for Beijing would be much lower than going to war and it gives decision makers the ability to calibrate, escalating or deescalating the situation depending on Taipei and Washington’s diplomatic and military moves. In turn, a blockade puts China in the driver’s seat to control its negotiating position and places the responsibility for escalation on the U.S. or Taiwan.
A Chinese blockade of Taiwan: Four scenarios
China’s policy towards Taiwanese reunification is a carrot and stick approach, whereby Beijing rewards Taipei’s alignment with economic incentives and more collegial rhetoric, and punishes non-alignment with economic sanctions, military intimidation, and more bellicose rhetoric.
The logical conclusion of China’s “carrots and sticks strategy” is to set the stage for a formal or informal blockade. There are four possible scenarios that naturally flow from one to the next.
Gray Zone Embargo
A gray zone embargo represents a continuation of the status quo. China boasts the world’s largest coast guard, the Chinese Coast Guard (CCG), and the Chinese Maritime Militia (CMM) that commands over 1000 vessels, which acts as its gray zone fleet. In this scenario, China would use a combination of kinetic and nonkinetic means to create uncertainty, promote its psychological warfare campaign against Taiwan, and to drive a wedge into the U.S.-led security architecture of the Asia-Pacific region.
Here, the CMM would sporadically cut undersea cables (never more than a few at a time); the PLA would conduct live fire drills more frequently, closing off Taiwan’s airspace and sea lanes for longer and longer durations; and the CCG would sporadically and arbitrarily start to harass Taiwan-bound merchant ships. In turn, this would create political pressure within Taiwan, spook investors, and drive risk premiums up. By leveraging economics and Taiwanese domestic politics in this way, China could both further isolate the island and promote divestment away from Taipei. In doing so, they could better control the Taiwanese political discourse in favor of reunification.
QUARANTINE
In a quarantine scenario, the CGC or CMM would inspect merchant ships leaving or entering Taiwan or force them to divert to the mainland. The goal here would not be to lay siege and prevent food and other critical supplies from entering Taiwan, rather to demonstrate to both Taiwan and the international community that China maintains sovereignty over Taiwanese territory.
Beijing could call this embargo a quarantine and convey its “peaceful” intent to block movement of certain “contraband” products — ostensibly weapons but it could search and seize anything — rather than a blockade which is a casus belli for war. China would frame this activity as a police action to prevent a domestic “rebellion,” leveraging its ties to the Global South and United Nations Security Council (UNSC) membership to shield it from blowback at intergovernmental fora. The CMM would also destroy some of the undersea cables with fishing nets “accidentally” to slowly throttle Taiwan’s communication access in an incremental fashion. The People's Liberation Army Navy (PLAN) could lay sea mines in certain corridors to channel traffic into areas for interdiction with the additional benefit of raising risk premiums on goods to and from Taiwan.
BLOCKADE
This scenario is one rung above the embargo on the escalation ladder and would leverage the CMM, CCG, and possibly the PLAN, to interdict all inbound shipping to Taiwan. The goal would be to erode Taiwan’s and the West’s resolve to combat the blockade. This would act as the next step following a quarantine and could follow the pretense of military materials or dual-use materials being found on Taiwan-destined shipments.
KINETIC BLOCKADE
The kinetic option, a prima facie act of war, would be the most escalatory option, and the likeliest to lead to war. In the scenario, the PRC would declare a formal blockade, deploy sea mines, and attack any merchant ship bound for Taiwan. A kinetic blockade could induce the U.S. — and its partners to include Japan and others — to “break” the blockade with freedom of navigation missions that could lead to a high-stakes game of chicken that would force China to fire on an American vessel to maintain the blockade. The economic consequences of any of the above scenarios would be global and severe.
The impact of a blockade
The Taiwan Strait is one of the most vital shipping lanes on the planet, acting as the main artery for trade originating from East Asia. Half the world’s container ships and 80% of large container ships pass through the strait, which is home to China’s largest ports: Shanghai, Dalian, and Tianjin.
Taiwan is the most important node of the strategically and economically critical semiconductor supply chain. Taiwan holds a 20% share of global semiconductor fabrication (production) capacity, 37% of the world’s logic chip fabrication, and 92% of the world’s advanced logic chip production capacity. Even a partial blockade would have dire effects on semiconductors given the vast number of inputs required for production and the world’s dependance on cutting-edge chips.
The Institute for Economics and Peace conservatively estimates that a Chinese blockade of Taiwan would lead to a drop in global economic output of USD $2.7 trillion in the first year, amounting to a 2.8% decline in global GDP. Similarly, Bloomberg’s model, which shares assumptions with the kinetic blockade scenario, predicts that a blockade would lead to a global GDP contraction of 5%, with U.S. GDP dropping by 3.3%, Taiwan by 12.2% and China by 8.9%.
Two second-order effects are certain: the blows to both trade finance and to insurance risk premiums. Financial institutions annually provide between six to eight trillion dollars in trade finance to exporters and importers around the world. Following a blockade, these institutions would be wary of exposure to lending projects in East and Southeast Asia, as blockade-related shipping delays could lead to defaults by importers and exporters. In case of a blockade, vessels may need to divert around the eastern side of Formosa (Taiwan’s main island) rather than through the strait, resulting in delays. After the Chinese military closed off six zones in the Taiwan Strait in August 2022, the number of ships operating there decreased from about 250 per day to just 15-20 ships. Trade insurance premiums would skyrocket fearing exposure to war risks and the risk of being caught up in Western sanctions.
Finally, Taiwan functions as a key node in the Asia-Pacific communications system with 14 undersea cables linking Taiwan to the global communications architecture. Undersea cables either originating in or passing through Taiwan connect the countries in the region to the internet. The cutting or damaging of these lines could cause serious communication disruptions in other countries in the region, especially in countries where telecom ownership is a monopoly. Once disrupted, these lines would probably not be repaired until the conclusion of a blockade.
The bottom line: Taiwan is the epicenter of Cold War 2.0. and the window for Chinese reunification is now open. While an invasion is possible, a blockade is the most likely method Beijing will deploy to take control of Taiwan. A blockade could have immense global economic impacts and could also, depending on its reception, be a precursor to an invasion of Taiwan.
Organizations need to consider how a blockade would impact their operations before one happens. Performing tabletop exercises, creating business continuity plans, and identifying emerging risks should be at the top of every business’s to-do list when it comes to preparing for this potential outcome.
Want more analysis of the geopolitical threats facing organizations and international travelers over the next 12-36 months? Read the 2024 Worldwide Threat Assessment now.
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