The following impact report is part of Global Guardian's 2024 Taiwan Shock Index. 

Sector Snapshot: Consumer Goods

Sectors Impacted Upstream: Raw materials (fabric, wood, metals, precious metals), and semifinished goods (textiles, furniture components, plastics, electronics)

Sectors Impacted Downstream: Retail, ecommerce, transportation and logistics

A decoupling with China would cause a major shock to the consumer goods sector hitting supply and demand and opening firms up to a number of legal, regulatory, and supply chain risks. The long-term impact of a Taiwan Strait Crisis largely depends on the policy response of the world’s major economies,  but major opportunities would exist for firms who enter markets previously dominated by Chinese manufacturers.

Short-Term Impact: HIghly Adverse

• Firms operating in China will likely face intense legal, regulatory, and logistical pressure to reshore or “friendshore” their production to other countries. There would likely be high up-front capital costs involved in relocating production and rebuilding institutional knowledge.
• Firms selling in the Chinese market would be impacted by sinking demand.
  • China’s unemployment problem — and overall economic rut — will be exacerbated by a Taiwan Strait Crisis, leading to a massive decrease in discretionary spending. China’s youth are both reliant on the medium-skill manufacturing jobs that would be lost and are the largest buyers of foreign consumer goods.
• Firms that rely on China for both production and consumption — such as cosmetics, over-the-counter medications, and packaged food products — may find themselves squeezed between increased production and capital costs and decreasing revenues simultaneously.

Medium to Long-Term Impact: Moderately Adverse

• The long-term impact largely depends on the policy response of the world’s major economies, particularly concerning sanctions and continued decoupling. It is possible — if sanctions and decoupling are maintained — that the situation never returns to the status quo ante-conflagration.
• No country has the infrastructure, labor pool, and middle-class growth at the scale necessary to replace China’s role in maintaining the availability of cheap consumer goods and demand for middle-range and luxury products.
• A long-term decoupling of the Chinese and global economies would result in a long-term elevation of the price equilibrium for most consumer goods.
• The permanent price elevation could allow firms to profitably enter markets previously cornered by Chinese manufacturers.
  • Certain Chinese-made consumer products may not face direct sanctions, but through supply chain disruptions, domestic and non-Chinese foreign consumer goods may become newly competitive.

The following impact report is part of Global Guardian's 2024 Taiwan Shock Index. 

Sector Snapshot: Mining

Sectors Impacted Upstream: Equipment manufacturers, energy, and transportation

Sectors Impacted Downstream: Metals, green energy, heavy industry, construction, and electronics

A decoupling with China would result in a supply shock in commodities that China imports, extracts, and refines. In the long term, higher prices and opportunities to expand domestic and African operations may arise.

Short-Term Impact: Moderately Adverse

• Companies that are engaged in joint ventures with Chinese firms will have to navigate a narrow path to avoid the legal consequences of sanctions and the economic consequences of divestment.
• A rapid decoupling would result in an immediate, extreme supply shock in commodities that China extracts and refines. China’s market dominance in rare earths mining and processing cannot be quickly substituted.
  • China is the world’s largest producer of more than 20 different metals and minerals, including zinc, gold, aluminum, lead, and most significantly, rare earths.
• Companies engaged in the mining of cobalt and lithium would likely see sustained price increases for those elements. The price increase for inputs such as mining equipment from China would not match or negate the increase in revenue from lost Chinese competition.  
• Firms with logistical or other services that could be offered to mining companies in Central and East Africa may be able to capitalize on the increased access Western companies may gain to important mineral deposits concentrated in these areas.  
• Companies engaged in the production or sale of consumer electronics, batteries (including electric vehicles) and green energy generation will be hurt in the short term by the decreased supply of precursor components and materials.
  • China conducts roughly 63% of all rare earth mining, 85% of rare earth processing, and 92% of rare earth magnet production.
  • Rare earths and their derivatives are critical in the production of semiconductors, small magnets, and other necessary components for batteries, smartphones, electronic controllers, communications equipment, etc.
  • China manufactures 80% of the world’s solar PVs.

Medium to Long-Term Impact: Neutral

• Chinese capital and logistical constraints and challenges may open the door for Western companies to expand in the African market.
• This shock could result in Western governments loosening environmental regulations to allow for more domestic mining operations.
•  Opportunities exist for companies to capitalize on potential Chinese exits from certain competitive metal markets.
• Decoupling could create sticky higher prices for rare earth metals.
  • The current affordability of these minerals and their downstream products rests on an effort by the Chinese state to capture the market. Prices will approach a new higher equilibrium in a decoupled environment.
• Commodities like copper, zinc, and nickel will see price fluctuations, as both supply and demand dynamics will be altered.
  • The new equilibrium price for these metals will depend largely on future trade, regulatory and environmental policy responses, and China’s ability to evade sanctions.

The following impact report is part of Global Guardian's 2024 Taiwan Shock Index.

Sector Snapshot: Advanced Manufacturing

Sectors Impacted Upstream: Raw materials, software, energy, semiconductors, metallurgy, chemicals

Sectors Impacted Downstream: Aerospace, construction, transportation and logistics, automotive, medical, electronics

A decoupling with China would cause a major shock to the advanced manufacturing sector impacting supply chains, market size, and open up firms to a number of thorny legal, compliance, and possibly expropriation risks. China’s near monopoly on the primary stages of the semiconductor value chain could create catastrophic disruption to the production and supply of microchips,  photovoltaic solar panels, and batteries.

Short-Term Impact: HIghly Adverse

• Advanced manufacturers would be faced with diminished access to the Chinese market due to a combination of export controls, reciprocal Chinese sanctions, and logistical disruptions in the Taiwan Strait and South China Sea.
• Firms producing strategically valuable or dual use products in China — including semiconductors, complex machine parts, or certain chemicals — would likely be forced to divest from China or face legal sanctions directly.
  • These firms would also have to increase spending on compliance to minimize the legal risks associated with export controls and sanctions.
  • Firms engaged in the production of goods that contain sanctioned components could also face supply chain risks due to sanctions.
• Companies with assets in China may face expropriation risks.
• Manufacturers with production outside of China would likely see increased costs for Chinese-supplied components and raw materials. The procurement of these inputs could become extremely challenging.
  • Most personal electronics use components and materials produced and processed in China. While some of the raw materials, such as cobalt and lithium, are produced abroad, Chinese capital, labor, and technology are highly involved in their extraction.
  • Other raw materials, including rare earths, are largely extracted and processed in China.
  • Chipmakers, firms in the green energy sector, as well as electric vehicle manufacturers, would be highly affected by the increased costs of many of these materials.

Medium to Long-Term Impact: Moderately Adverse

• This sector may see increased costs and tighter margins in the long term.
  
  • The profitability of advanced manufacturing in developed economies has been driven in part by several macroeconomic trends dependent on Chinese growth and integration into the world economy. A hard decoupling would slow, end, or reverse some of these trends.
  • China subsidized the development of strategic upstream sectors like rare earths processing for market capture. The economies of scale that China added to the supply chain reduced costs for both Chinese and Western firms downstream.
  • However, the extent of cost increases for firms is largely dependent on future governmental policy on subsidies and trade.
• In some cases, the loss of access to Chinese markets by foreign firms may be partially offset by reduced competition from Chinese-subsidized competitors.
  
  • As China often prioritizes revenue over profit in its state-owned companies, Chinese companies can operate at price levels that foreign companies cannot. The electric vehicle market is a prime example. With strict reciprocal sanctions and trade restrictions in place, the loss of access to Chinese customers by foreign automakers may be offset — to a degree — by the removal of Chinese automakers from certain foreign markets.

US and Iran Risk Being Drawn Into 'Multi-Front Conflict'

"There's definitely the potential for this becoming a regional conflict, and that's our biggest concern."

Global Guardian Senior Intelligence Analyst Zev Faintuch sat down with Brendan Cole of Newsweek to provide up-to-date analysis of the conflict between Israel and Hamas. Our Intelligence Team is closely monitoring the ongoing situation, drawing on insight from our on-the-ground teams, as Global Guardian actively works to evacuate its clients in the region.

The conflict between Israel and Hamas continues with clashes along the Gaza border and multiple IDF airstrikes targeting Hamas positions. Israel's defense minister ordered the complete closure of the Gaza Strip for the first time, cutting off food, fuel, water, and electricity. Prime Minister Netanyahu has ordered the military to evacuate residents around the Gaza and Lebanon borders in advance of further activity. At the same time, cross-border exchanges of mortar and artillery continue between the IDF and Hezbollah in the north, setting the stage for a major conflict that could embroil the entire region.

CONFLICT IN ISRAEL

At approximately 06:30 local time, Hamas launched a multifaceted surprise attack on Israel, with a massive rocket barrage and a mass infiltration of hit squads into Southern Israel. Dozens of Israeli civilians have been kidnapped and taken to Gaza as hostages, as Hamas terrorists took control over several townships and military installations. Over 2,200 rockets (Palestinian sources claim 5,000) were fired into Israel, with more than one-third of the Israel population impacted, including Tel-Aviv and Central Israel. Israel has declared a State of War and is mobilizing its reserves as it attempts to regain control over the communities around the Gaza Strip. The situation is rife with escalation potential with regional implications.

China Is Becoming a No-Go Zone for Executives

“It feels very Hollywood-ish, but it is unnerving.”

In The Wall Street Journal, Global Guardian CEO Dale Buckner weighs in on the complexities of business travel to China amid reports of Beijing barring executives from leaving the country—and discusses the factors that might put a traveler at greater risk of detention.

China Watcher: Taiwan shivers over Ukraine funding freeze

“It is now a calculated decision to put an expat in mainland China.”

Global Guardian CEO Dale Buckner weighs in on the growing corporate concerns in China and how businesses are taking action to mitigate the risk of exit bans in Politico's China Watcher newsletter.

'We're pretty much done': 'Unwavering' support for Ukraine starts to waver

"Should strategic gains not be secured by Ukraine soon, time will be her greatest enemy as the probability of this turning into a frozen conflict increases."

In USA Today, Global Guardian Senior Intelligence Analyst Zev Faintuch discusses the current state of the Russia-Ukraine war and why Ukraine's strategic gains are important to overall support from its allies.

Ukraine strikes deep inside Crimea, cuts through Surovikin Line

“When [countries] see Ukraine moving forward, that strengthens their righteous position on the world stage to say, ‘You need to back us’. If the Russians were blowing through Ukraine, a lot of midrange countries might say, ‘We’re going to hedge our bets on this.’”

In a recent interview with Al Jazeera, Global Guardian Vice President of Client Risk Management Seth Krummrich sheds light on Ukraine's progress on the southern front and the influence it has on President Zelenskyy's plea for increased support from Western nations.