Taïwan, the narrow path

 In Economy

Taiwan finds itself in the global economic and diplomatic spotlight. A rather uncomfortable situation.

She masterfully defeated the COVID-19 pandemic. The Island is at the heart of some of the world’s tightest value chains, thanks to its mastery of microprocessors production. The beautiful island of Taiwan (formerly known as Formosa), with its democratic government and prosperous society, emerges from the recent crisis as a model of “another China”, to which many investors are turning. But with the rise in trade tensions between mainland China and the United States, is not its future in jeopardy?

Taiwan’s economic recovery in 2020 marks a “V” shaped growth, faster than China’s, for the first time in more than 30 years. The Taipei Stock Exchange’s TAIEX index – heavily weighted by semiconductor stocks – is up more than 45% year-on-year and is already up nearly 8% this year (in dollars). The Island’s major producers are taking full advantage of the global manufacturing rebound and the accelerated conversion of the automotive sector to electric power. TSMC1 alone has grown by more than 150% over the past year and is under pressure from all sides to ramp up its production.

Taipei is in a hurry to step up its efforts on behalf of its allies. 

Taiwan thus finds itself at the center of industrial competition heightened by the recent economic conditions and the growing trade tensions between China and its main trading partners, starting with the United States, which threaten the still fragile balance of its position. Behind the screen of isolation and abandonment, Taiwan has over the years forged intense cooperation and even co-development with the Mainland, by far its main trading partner. In addition, the bridgehead for American and European industries in China and supplier of their microprocessors, Taipei is in a hurry to step up its efforts in favor of its allies.

On February 5, Taiwan and Washington held their first “economic dialogue”, confirming the importance of the Island to Joe Biden’s United States, by continuing to warm relations between the two countries and this, on all plans.

However, this more openly assumed support – which began under the previous administration – is as reassuring as it can be, if it were to translate for local industrialists into irreversible choices between one side or the other. China is also experiencing tensions on its production chains and still needs Taiwanese technologies. But for how long? A partition of the two blocs risks above all encouraging the two major powers to accelerate the development of their technologies, even of their own standards, which would end up in the long term for both doing without Taiwan.

Taiwan, the “scale-up nation”, is turning, among others, to Israel, the “start-up nation”.   

Therefore, the challenge is as much political as it is economic and technological. Nicknamed the “scale-up nation”, Taiwan intends to take the lead. Blocked in its diplomacy of alliances – Guyana has just yielded to Beijing’s injunctions and renounced its agreements with Taiwan – it is turning to Israel, the “start-up nation”, among others, on the lookout for new talents and partnerships development in the field of artificial intelligence.

Since 1971 and its exclusion from the UN in favor of the People’s Republic of China, almost universally recognized as the sole representative of all of China, Taiwan has cultivated the art of ignoring and challenging its neighbour without really threatening itself. The same is true for the rest of the world – except for few rare countries that still officially recognize the Island – which come to terms with this “funny” relationship. This is how the two countries practice to the highest degree, the centuries-old art of Cloisonne.

Could the subduing of Hong Kong, a growing demand for independence from Taiwan people, and heightened American pressure break this fragile balance? For Taipei, the way is certainly narrow and its leaders must often remember how much to live happily, it is better to live in hiding.

1 TSMC: Taiwan semiconductor manufacting co


Original french version article in allnews.ch Dated Feb 9th 2021Cartoon Barret




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