China blocks some imports from Taiwan but avoids chip disruption

BEIJING (AP) – China has blocked imports of citrus fruits, fish and other foods from Taiwan in retaliation for a visit by a top US lawmaker, Nancy Pelosi, but avoided disrupting one of the world’s most important technology and manufacturing relationships.

The two sides, which split in 1949 after a civil war, have no formal relations but multibillion-dollar business ties, particularly in the flow of Taiwanese-made processor chips needed by Chinese factories that assemble smartphones and other electronic devices in the world.

They built this business as Beijing threatened for decades to enforce the Communist Party’s claim to power on the island by attacking.

Bilateral trade soared 26% last year to $328.3 billion. Taiwan, which produces half of the world’s processor chips and has technology the mainland cannot match, said sales to Chinese factories rose 24.4% to $104.3 billion.

“The global economy cannot function without chips made in Taiwan or China,” said Carl B. Weinberg of High-Frequency Economics in a report.

Beijing on Wednesday blocked imports of frozen citrus, hairtail and mackerel from Taiwan after House Speaker Pelosi arrived on the island. China has failed to disrupt the flow of chips and other industrial components, a step that would send shockwaves through the faltering global economy.

Also this week, China blocked imports of hundreds of other food items from Taiwan, including cookies and seafood, although the timing is unclear. The customs website showed that their import status had changed to “suspended”.

Fruit, fish and other foods make up only a small portion of Taiwan’s exports to China, but the ban is hurting regions seen as supporters of President Tsai Ing-wen.

Beijing has used import bans on bananas, wine, coal and other goods as leverage in disputes with Australia, the Philippines and other governments.

Beijing also announced four days of military exercises with artillery fire in the waters around Taiwan. This could delay or disrupt shipments to and from the island, one of the world’s biggest traders.

The potential disruption adds to concerns about weakening global economic growth, but Asian stock markets rose on Wednesday after there were no immediate signs of Chinese military action.

The communist party says Pelosi’s visit could encourage Taiwan to make its decades-old de facto independence permanent. Beijing says it would lead to war.

US President Joe Biden’s administration has tried to appease Beijing, saying there is no change in Washington’s “one China policy”. This means that the United States does not take a position on the status of the two parties but wants their dispute to be resolved peacefully.

Washington has no formal relations with Taiwan but maintains unofficial ties and is obligated by federal law to ensure the island has the means to defend itself.

Meeting with leaders in Taiwan, Pelosi said she and the members of Congress traveling with her were showing they would not let go of their commitment to island democracy.

“America’s resolve to preserve democracy, here in Taiwan and around the world, remains ironclad,” Pelosi said in a brief speech during a meeting with President Tsai. She left later that day for South Korea.

“In the face of deliberately increased military threats, Taiwan will not back down,” Tsai said.

Taiwanese companies have invested nearly $200 billion in the mainland over the past three decades, according to the island’s government. Entrepreneurs, engineers and others have migrated to the mainland for work, some recruited by Chinese chipmakers and other companies that want to catch up with Taiwan.

A 2020 census found that 158,000 Taiwanese lived on the mainland, according to the police ministry.

Taiwan plays an outsized role in the chip industry for an island of 24.5 million people, accounting for more than half of the world’s supply.

Its producers, including Taiwan Semiconductor Manufacturing Corp., make the most advanced processors for smartphones, tablets, medical devices and other products.

Beijing has invested billions of dollars in the development of its own industry, which provides low-end chips for automobiles and devices, but cannot support the latest smartphones, tablets, medical devices and other products.

Chips are China’s biggest import at more than $400 billion a year, ahead of crude oil.

This concentration has fueled concerns in the United States and Europe about an overreliance on supplies from East Asia. The US government is trying to increase America’s production capacity.

Overall, China is Taiwan’s largest trading partner, absorbing more than twice as much of its exports as the United States, the island’s second largest foreign market.

Beijing has tried to use access to its markets to undermine Tsai and other Taiwanese leaders whom it accuses of seeking independence.

The Communist Party has also used military action in the past attempt to hurt Taiwan’s rulers by disrupting the island’s economy.

The mainland tried to alienate then-President Lee Teng-hui’s voters ahead of the island’s first direct presidential elections in 1996 by firing missiles at shipping lanes.

It forced shippers to cancel trips and raise insurance costs, but backfired by allowing Lee to brag about standing up to Beijing in front of cheering fans. Lee won the election by four votes with 54% of the vote.