China's live-fire drills around Taiwan threaten trade, commercial travel

China's live-fire drills around Taiwan threaten trade, commercial travel

Hong Kong CNN Business China's live fire military drills around Taiwan are threatening to disrupt trade and commercial travel in East Asia, forcing vessels to reroute away from one of the world's busiest waterways. On Thursday, China kicked off drills involving the navy, air force and other military forces in the seas and airspace surrounding Taiwan. The drills — unprecedented in number — are a direct show of force in response to US House Speaker Nancy Pelosi's visit to the self-governed island, which Beijing has warned against.

The Chinese Defense Ministry has released a map of six zones around the island that it will conduct air and sea exercises, long-range live-fire exercises and long-range live-fire exercises that will last until Sunday. Ships and aircraft have been warned to stay out of the areas during the drills.

Taiwan has said military exercises are tantamount to a maritime and aerial blockade and have violated Taiwan's territorial waters and its contiguous zone. They threaten to disrupt trade flows in one of the world's busiest shipping lanes.

The Taiwan Strait, a 110 mile wide artery that separates the island of Taiwan and continental Asia, is a key trade route for vessels carrying goods between major economies in northeast Asia such as China, Japan, and South Korea, and the rest of the world.

There are currently 256 container ships and other vessels in Taiwanese territorial waters, with more than 60 estimated to arrive between Thursday and Sunday, according to London-based shipping consultancy VesselsValue.

There is potential for significant disruption to trade in the region, said Peter Williams, a trade flow analyst at VesselsValue.

The Shutting down of trade routes around Taiwan raises concerns about whether China will do this again, and what this could mean not only for future trade patterns, travel and economic patterns but potentially defensive and security scenarios as well, said Nick Marro, lead analyst for global trade at the Economist Intelligence Unit.

It's not yet clear what the long-term impact will be, but shippers expect delays due to rerouting, potential lost sales and higher costs for workers pulling longer hours.

Global supply chains have been rattled by the Pandemic and the war in Ukraine, which disrupted the flow of goods and caused inflation in many parts of the world.

Any conflict in Taiwan, which dominates the semiconductor industry, could lead to a shortage of computer chips, which are vital components for virtually all modern electronics.

Taiwan's Maritime and Port Bureau issued three notices on Wednesday, asking vessels to use alternative routes for ports in the cities of Keelung, Taipei, Kaohsiung and others.

Taiwan rerouted 18 international flight routes after negotiations with Japan and Philippines. Approximately 300 flights would be affected as a result of the rerouting, Taiwan Transportation Minister Wang Kwo-tsai said Wednesday.

Clifford Bennett, chief economist at ACY Securities, said the repercussions are only just beginning and that it is not over.

He said that there would be economic retardation in the relationship between Taiwan and China as a result of the Pelosi visit.

China has already hit Taiwan with some trade restrictions, including suspending some fruits and fish imports from Taiwan and exports of natural sand to the island.

The whole event may cause further damage to both the relationships of Taiwan and the USA with mainland China for months, even years, according to Bennett.