Taiwan halts flights as China holds military drills nearby
BEIJING — Taiwan canceled airline flights Thursday as China fired missiles near the self-ruled island in retaliation for a top American lawmaker’s visit, adding to the risk of disruptions in the flow of Taiwanese-made processor chips needed by global telecom and auto industries.
China ordered ships and planes to avoid military drills that encircled Taiwan, which the mainland’s ruling Communist Party claims as part of its territory. The Hong Kong newspaper The South China Morning Post called the drills an “effective Taiwan blockade.”
Beijing announced “livefire exercises” after House Speaker Nancy Pelosi, D-Calif., arrived Tuesday for a one-day visit, defying warnings from Beijing. On Wednesday, Beijing banned imports of hundreds of Taiwanese food items including fish, fruit and cookies.
So far, China has not ordered a halt to the flow of chips and other industrial components, a step that would send shock waves through the shaky global economy.
The two sides, which split in 1949 after a civil war, have no official ties but one of the world’s busiest technology and manufacturing relationships.
Two-way trade soared 26% last year to $328.3 billion. Taiwan, which produces half the world’s processor chips and has technology the mainland can’t match, said sales to Chinese factories rose 24.4% to $104.3 billion.
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 to work, some recruited by Chinese chipmakers and other companies that want to catch up with Taiwan.
Taiwan plays an outsized role in the chip industry for an island of 24.5 million people, accounting for more than half the global supply.
Its producers make the most advanced processors for smartphones, tablet computers, medical devices and other products.
Chips are China’s biggest import at more than $400 billion a year, ahead of crude oil.
Taiwanese companies are preparing for Chinese shows of force and possible trade disruptions beyond the four days Beijing says its drills will last, said economist Alicia Garcia Herrero of Natixis CIB, who was meeting businesspeople in the island’s capital, Taipei.
“If ports can’t operate normally, we can see the consequences,” she said.
On Thursday, at least 40 flights to and from Taiwan were canceled, according to the China Times newspaper. It cited Taoyuan Airport in the capital, Taipei, as saying cancellations were “not necessarily” related to the military drills.
There was no immediate indication of the possible impact on shipping, which has the potential to jolt the global economy.
Taiwan produces more than half the processor chips used in smartphones, autos, tablet computers and other electronics. Chip sales to Chinese factories that assemble most of the world’s consumer electronics rose 24.4% last year to $104.3 billion.