Elections in Taiwan: crucial moment for the future of China-US relations
Certain, There's a US election next November. But just a few days after its start, 2024 is already preparing to experience another crucial political transition with a potentially significant impact on the stability of the Asia-Pacific and, consequently, global stability. Presidential and legislative elections are scheduled for Saturday 13 January Taiwan, which could have significant consequences on relations with mainland China, but also on the complex strategic competition between Beijing and the United States. As well as, in the event of a widespread crisis that flows from the political to the military field, with a serious impact on the global economy.
Let's start with the candidates, who all say in words that they support the status quo: therefore no to reunification but also no to a formal declaration of independence. THEDemocratic Progressive Party (DPP) in power since 2016 presents himself with Lai Ching-te, the current vice president. Beijing perceives him as a more “radical” figure than Tsai, given his past statements explicitly in favor of a formal declaration of independence. Lai has actually revised his rhetoric, putting himself in continuity with Tsai, but many remember a statement he made last July, when he said that one day the goal will be to enter the White House, which would only be possible in the presence of an official diplomatic recognition of Taipei by Washington and therefore the exit from the traditional “strategic ambiguity”.
If for Lai the status quo can only be maintained by strengthening the Taiwanese army and diplomatic relations with the United States, for the opposition candidates the priority is instead to restart dialogue with Beijing. The Kuomintang he chose Hou Yu-hee, former policeman and current mayor of New Taipei. But the big news of this election is the presence of a serious third wheel, viz Ko Wen-je. A former surgeon and former mayor of Taipei, Ko founded the Taiwan People's Party (TPP) and is proposed as a “third way” to overcome the historical political-identity polarization between the KMT and the DPP. Ko criticizes both parties for their “ideological” position to which he opposes a “pragmatic” approach, which would have convinced several young people. Defining the DPP as too hostile and the KMT too friendly with Beijing, Ko does not, however, move too far from the positions of the current opposition on intra-strait relations, so much so as to forcefully propose a rebalancing of Taipei's posture and the restart of dialogue with the Chinese Communist Party .
Lai appears to be the favorite but the result is not a given. Most importantly, there could be a divided parliament. The Legislative Yuan has 113 seats and it is considered rather difficult for the DPP to reach the 57 necessary for an absolute majority, even in the event of victory in the presidential elections, with a possible impact on the ability of the hypothetical Lai administration to pass some key reforms and approve the defense budget. A polarizing and probably contentious scenario that may not displease those around Beijing.
Tensions or worse conflict over Taiwan? Economic consequences potentially worse than Ukraine and Covid
If the DPP is confirmed in both the executive and legislative branches, tensions could increase compared to the already very high ones of recent years. A scenario of instability, or worse, conflict, could lead to very harsh consequences on a global economy already put to the test by other crisis theaters. Bloomberg Economics estimates a price of approximately 10 trillion (10 trillion) dollars, equal to approximately 10% of global GDP, a price that exceeds that of the war in Ukraine, the Covid pandemic and the global financial crisis.
In the event of war, according to Bloomberg data, Taiwan's economy would be decimated. Based on similar recent conflicts, Bloomberg Economics estimates a 40% hit to GDP. A population and industrial base concentrated on the coast would increase the human and economic cost. But also pay attention to the consequences for the two great powers. With the potential closure of relations with some major trading partners including the EU and the US, as well as the inability to access advanced semiconductors, China's GDP would take a hit 16.7%. For the United States, further away from the center of the action but still with important stakes, for example due to Apple's dependence on the Asian electronics supply chain, GDP would suffer a drop of 6.7%. For the world as a whole, GDP would decline by 10.2%.
Taiwan plays a crucial role especially on the manufacturing and assembly of microchip, of which its giants occupy over 60% of the global share. The importance of the Taiwanese semiconductor giants is not only quantitative, but also qualitative. For semiconductors, size matters: the smaller, the better. TSMC has started mass production of 3-nanometer chips at its Tainan plant. Soon, in Hsinshu, it will be produced at 2 nanometers. In the next few years it will reach up to 1 nanometer. Just to have a parameter, Chinese competitors have only recently broken down the 10 nanometer barrier. And TSMC itself does not take its most advanced technologies outside the territory. In Nanjing it manufactures 28 and 16 nanometer chips, in the USA it will manufacture 4 nanometer chips: when the Arizona plant opens in 2025 they will be effectively obsolete compared to what it produces in Taiwan.
The result of the elections will also be a result for the investors, which if the winds of crisis were to increase with a more muscular reaction from Beijing than expected, could start to sell. Or in any case the share prices of several giants could decrease. The test is probative. The global economy could hardly afford a new crisis (which in any case does not appear imminent or inevitable), especially one as delicate as the one over Taiwan, which in addition to economic risks would also entail military ones with the possible direct involvement of the two great powers.
#Taiwan #strategic #economic #crossroads #Postvote #conflict #Global #GDP
