Taiwan Strait Conflict: Unraveling the Economic Doomsday Scenario | Digging into China

Hi, I'm Dong Shong. Welcome to Digging into China, where we explore China in depths to reveal unique perspectives. Today, we'll discuss the Taiwan Strait crisis. There's a possibility of war or military conflict breaking out in the Taiwan Strait. And this issue has recently regained attention, amplified by media coverage. Let's explore this topic. Naturally, if a crisis erupt in the Taiwan Strait, both China and Taiwan would suffer. However, from a global economic perspective, a war here would disrupt international trade and the broader economy. This subject has sparked extensive debate with the media and experts concluding that a war in the Taiwan Strait would exact a severe toll on the global economy, potentially causing its collapse. The consequences they argue would be dire. Yet I believe these claims are somewhat exaggerated. While the Taiwan trade crisis is a genuine concern, its severity is overstated and the likelihood of a fullscale war between China and Taiwan remains low. Why do I hold this view? Reading related articles can easily sway one to believe the situation is critical with the global economy tethering on the edge. These pieces often estimate astronomical economic losses from a Taiwan trade war. For instance, one article citing Bloomberg projects global economic losses exceeding $10 trillion over 10% of global GDP, surpassing the impacts of the Russia Ukraine conflict and the coid9 pandemic. China and its neighbors would face significant economic damage. An article in Taiwan's Business Today noted that in the event of war, capital in Taiwan would struggle to find safe havens. From January to May this year, foreign investors wary of this scenario withdrew nearly 11 billion from Taiwan's stock market. These articles and reports share an underlying perspective. Such a war must be avoided as it would lead to catastrophic economic collapse. This sounds alarming. But what underpins their arguments? Broadly, there are two key reasons. First, Taiwan's production capacity, particularly in microchips and semiconductors, is vital. According to Taiwan's Industrial Technology Research Institute, by the end of 2025, Taiwan's semiconductor production will account for 17% of global capacity with advanced production below 7 nanometers comprising 63% of the world's supply. If current trends persist, by 2030, Taiwan could dominate 80% of global semiconductor production. Given semiconductor's critical role in modern economies, war related disruptions to Taiwan's capacity could in theory deliver a crippling blow to the global economy. Second, the Taiwan Strait is a crucial trade route integral to global supply chains. A US Naval Institute report cited by Newsweek states that half of the world's 5,400 container ships traverse the Taiwan Strait. The cargo density here exceeds that of the Cape of Good Hope and the uh Switz Canal, underscoring the straits immense transport value. A study by Washington Center for Strategic and International Studies, CSIS, quantified the value of goods transiting the uh the Taiwan Strait. China's imports and exports through the strait exceeds $1.3 trillion. Japan's surpassed $440 billion. South Korea reached $350 billion and Taiwan's total $298 billion. These figures highlight Asian nations heavy reliance on this trade route with the US, Middle East, Australia, and others also partially dependent. The Taiwan straight role in global trade is undeniably significant. To summarize the prevailing view, Taiwan's production capacity and supply chain role are deemed critical, making a potential war too costly for humanity. However, while this reasoning holds some merit, it is overly alarmist. Media and think tanks portray the situation as catastrophic based on the premise of a prolonged allout war between China and Taiwan. This is a prerequisite for their dire predictions. If the conflict is less intense or short-lived, it would not fa fatally disrupt the global economy. In other words, only a large scale protracted war would have such devastating effects. Yet, this scenario is highly unlikely. I believe a smallcale friction or no conflict at all is far more probable between China and Taiwan. Any potential conflict would likely be shorter and less severe than the Russia Ukraine war. The outcome hinges on China's objectives. What motivates China to provoke such a dispute? This merits reflection. Beyond China, the international community's role is also significant. In the face of a potential China Taiwan conflict, global trade systems would seek solutions. This issue is not entirely intractable. Let's examine this further. Starting with a straightforward perspective, conflicts vary in scale, large, medium, small, or none. We'll exclude the no conflict scenario and focus on small to large scale conflicts and their impact on the Taiwan straight trade routes. First, such impacts are not irreparable. A practical solution is rerouting merchant fleets to avoid conflict zones. For example, the trade route from Singapore to Busousan, South Korea passes through the Taiwan Strait. In a smallcale conflict, merchant fleets could shift eastward, bypassing the Taiwan Strait to complete shipments from Singapore to South Korea. This approach addresses military tensions provided they remain limited and rerouting would not significantly raise transport costs. If a smallcale conflict escalates to a medium-scale one, expanding beyond the Taiwan straight to envelope Taiwan in a military blockade, even the Long Strait could become risky. In such cases, routes could be adjusted further, passing through the Philippines to avoid Taiwan entirely on route to South Korea. However, this detour is considerably longer, increasing costs noticeably. Regardless of the situation in the Taiwan Strait, trade routes can adapt to mitigate risks. My point is that potential military friction in the Taiwan's uh strait may temporarily elevate the logistic cost, but is unlikely to trigger a global economic collapse or halt international trade entirely. My analysis above covers small and mediumcale conflicts omitting large scale ones. A largecale conflict and allout war akin to World War II is in my view implausible. Even medium-scale conflicts seem unlikely. Only smallcale incidents carry some probability and the absence of conflict remains a strong possibility. Thus, I diverge from mainstream media narrative suggesting an imminent largecale war. I reject this notion as it stems from analyzing China's perspective. China's rationale and objectives for war warrant scrutiny. Why would they fight and what do they seek to achieve? Moreover, what external powers permit China to initiate conflict? These questions are critical. Let's first address sub uh subjective factors. Some online views such as Xi Jinping aim to seize Taiwan to challenge the US and cement his legacy are far-fetched. This idea may have held water a decade ago, but is now untenable. We can apply a psychological framework the five stages of grief by Elizabeth Kubaros which posits that individuals facing major challenges progress through denial, anger, bargaining, depression and acceptance. When Xiinping assumed power over a decade ago, he was ambitious and energetic. Confronting Taiwan's challenge, he likely exhibited denial and anger stages prone to conflict or extreme actions. However, with China's economy declining, diplomatic pressure mounting and she aging, his mindset has shifted toward depression and acceptance. His perspective now resembled Chongqai after retreating to Taiwan. Chong too traversed the five stages regarding retaking the mainland. Starting with ambition but ending in depression, accepting the impossibility of his goal and ruling Taiwan as a dictator. She is likely on a similar trajectory. As he ages, he prioritizes retaining tangible power over elucorary feats like conquering Taiwan. Securing his rule is the most pragmatic goal. Thus, an aging she is unlikely to genuinely pursue war with Taiwan. Even declaring war preparedness or martial law would likely serve to extend his tenure as a wartime leader. Subjectively, China's leader may faint conflict with Taiwan to consolidate internal control, addressing domestic stability before external challenges. Turning to objective factors, the Quincy Institute for Responsible for Responsible State Crafts June analysis outlines the three reasons China cannot invade Taiwan. First, China's heavy reliance on Taiwan's semiconductors. A large-scale war disrupting Taiwan's semiconductor production would severely damage China's economy. Second, a military blockade of the Taiwan Strict given Taiwan's pivotal trade role in Asia would harm East and Southeast Asian economies, alienating China's neighbors and leading to diplomatic isolation. Third, China's struggling economy cannot sustain a war, which ultimately depends on economic and logistical capacity. A declining economy undermines China's ability to endure conflict. These objective constraints make a Chinese attack on Taiwan unlikely. From the US perspective, America also opposes a Chinese assault largely because Taiwan's semiconductors have entangled US interests. This has been Taiwan's most astute strategy in recent decades, forging deep economic ties with the US through its semiconductor industry. A CSIS report highlights close US Taiwan semiconductor collaboration. Most US consumer tech products depend on Taiwan's chips and pro processes, critical components manufactured there. Taiwan is also the US's eighth largest import source and the 10th largest export market with bilateral trade exceeding $40 billion. When the US recognized this tax sector's dependence on Taiwan, it was too late. The strategic oversight, placing a vital supplier next to a rival was unwise. This explains why Trump once accused Taiwan of stealing US technology and vowed to relocate semiconductor production. acknowledging past strategic errors. However, the situation is irreversible in the short term despite US efforts such as TSMC65 billion investment in Arizona factories and initiatives to localize semiconductor production. Industrial relocation is gradual. The US remains reliant on Taiwan's semiconductors, compelling it to military deter Chinese aggression to safeguard its economic interests. This is Taiwan's strongest defense asset. Ultimately, Xiinping lacks the desire and capacity for war, and the US prohibits it. While Taiwan's media threats over an imminent attack, they recognize its unlikelihood. The dramatic war many anticipate is unrealistic. However, a staged conflict is plausible. A pretend war benefits both sides, allowing China and Taiwan to declare war preparedness or martial law. She could extend his rule as a wartime leader while Taiwan's like Ching Du could secure reelection as a wartime president. This alignment of interests, though absurd and ironic, reflects the reality of Chinese politics. Thank you so much for watching. If you find this video helpful, please like it, drop a comment below, and hit subscribe button right here. It really helps YouTube suggest my video to others. I'll be back with more content soon. Until then, be