U.S. companies with Taiwan-based operations are panicking about the impact of possible Chinese military aggression toward the self-governing island.
Fortune 500 companies and small and medium enterprises alike are seeking the advice of corporate security experts to develop contingency plans to protect staff and assets if conflict erupts across the Taiwan Strait. The corporate nightmare: that a war could result in the loss or seizure of assets in Taiwan.
That anxiety reflects concerns that potential Chinese military action against Taiwan — fueled by the surge in military intimidation linked to House Speaker NANCY PELOSI’s visit this week — is already posing a threat to the island’s long-term economic viability.
“I have seven fortune 500 companies asking me to pre-plan and build an outline of triggers for them to start moving people, infrastructure, and assets [outside of Taiwan]. That's real. It's happening,” said DALE BUCKNER , chief executive officer of international security firm Global Guardian. “There are some companies that are taking this very seriously [because] they don't want to happen what just happened in Russia where they lost billions of dollars’ worth of assets, both financial and hard, so they are already looking to disperse people and assets [to other countries.”
Ukraine invasion feeds fears. Buckner wouldn’t reveal the names of those companies due to contractual restrictions. But he says that corporate interest in such contingency planning has surged in the wake of Russia’s Ukraine invasion.
"[We've had] an unprecedented surge in requests following the start of conflict in Ukraine — basically, while we’ve consistently said there’s no direct impact or 'trigger' in terms of increased Taiwan war risk, the 'Ukraine effect' has made companies vastly more aware of and sensitive to geopolitical risk," ANDREW GILHOLM , director of analysis on China and Korea at Control Risks, told China Watcher in a statement. "Client leadership are basically saying 'OK, we didn’t really see this coming, what else could turn our world upside down!?' and the first thing they think of is the Greater China/North Asia region."
Foreign corporations aren’t alone in readying for the worst. War fears prompted the island’s most famous cultural attraction, the National Palace Museum, to initiate “ wartime response” preparations earlier this month. They include safety precautions for staff as well as measures to safeguard and, if necessary, evacuate the museum’s treasures.
The Taiwanese government says it’s unaware of any foreign corporate concerns over the safety of their Taiwan operations. “We have not received any information on this matter. Taiwan remains a safe, stable, and reliable partner for doing business,” a spokesperson for the Taipei Economic and Cultural Representative office in Washington, D.C. told China Watcher in a statement.
The American Chamber of Commerce in Taiwan declined to comment; the European Chamber of Commerce Taiwan didn’t respond to a request for comment.
Pelosi visit incites backlash. Corporate concerns have soared amid Chinese saber-rattling over Pelosi’s visit. Within hours of the speaker’s arrival on the island, the Chinese military responded with violations of Taiwan’s air defense identification zone and the announcement of live fire military drills around the island from today until Sunday. That looks like a dress rehearsal for an eventual blockade of the island, or worse, and has seriously spooked business executives with Taiwan-based operations.
“The level of C-suite angst at the moment within the supply chain of which Taiwan is pretty much at the center globally — I personally have not seen it this high in my professional career,” said RUPERT J. HAMMOND-CHAMBERS, president of the Washington, D.C.-based US-Taiwan Business Council. “The catalyst for that anxiety is the ever-present threat from China.”
Multiple corporate metrics of the potential for conflict across the Strait provide cold comfort. The German financial services firm Allianz gave Taiwan an A1 “low risk for enterprise” rating in its country risk assessment in February, but warned of an “increasingly tense (geo) political relationship with mainland China.”
The BlackRock Investment Institute earlier this month rated “ U.S.-China Strategic competition ,” including “military action to accelerate reunification with Taiwan” as sixth out of the world’s 10 most serious geopolitical risks. “The risk will increase as the decade wears on,” the Institute advised.
Slow motion exodus. U.S. companies in Taiwan are taking proactive measures to insulate themselves from that risk by beginning the process of relocating infrastructure — including production facilities — and personnel to safer locations in the region.
“We have manufacturers that can simply build a new manufacturing facility in South Korea or Japan or in the Philippines and some are doing that [while] some are moving those manufacturing facilities to Europe or the United States,” Buckner said. “I don't think that you're seeing boatloads of materials leave the island or people evacuating at scale — this will be a very drip-drip slow over time transition that won’t be noticeable unless there is some level of attack or blockade of some kind.”
But corporate insecurities over potential Chinese aggression pose a threat to Taiwan’s economic viability. And that reflects a deliberate strategy that renders multiple benefits for Beijing. “It’s inherently in the interest of the PRC to maintain a high shrill tone with Taiwan to dampen the interest of companies to invest in Taiwan,” Hammond-Chambers said. “That reduces the attractiveness of Taiwan as an investment location and raises the attractiveness of China as an economic partner to offset that.”
Can Washington help? There are multiple initiatives in the U.S. legislative pipeline designed to bolster Taiwan’s military defense capabilities. They include Sen. BOB MENENDEZ’s (D-N.J.) Taiwan Policy Act of 2022 and Rep. AMI BERA’s (D-Calif.), Taiwan Peace and Stability Act . But there are no similar initiatives to insulate Taiwan’s economy from the impact of Chinese military intimidation on foreign investor confidence.
“A [U.S.-Taiwan] bilateral trade agreement would smooth out some of the significant areas of economic disruption … [and provide] a framework and template for other friends and allies to do the same including the Japanese and the Aussies,” Hammond-Chambers said. “The problem we're running into here is that there's just no appetite on the left or right for trade agreements. It's not a Taiwan issue, it’s a trade issue.”