China blocks some Taiwanese imports but avoids chip disruption

China has blocked imports of citrus and fish from Taiwan in retaliation for top U.S. lawmaker Nancy Pelosi’s visit to the self-governing island, but has avoided damaging one of the world’s most important technological and manufacturing ties.

The two sides, which split in 1949 after the civil war, have no official relationship but have multibillion-dollar business ties, especially in the circulation of Taiwan-made processor chips needed in Chinese factories that assemble the world’s smartphones and other electronics.

They built the business at a time Beijing has threatened for decades with attacks to enforce the ruling Communist Party’s claim to the island.

Two-way trade surged 26 percent last year to $328.3 billion. Taiwan, which produces half of the world’s processor chips and has technology unmatched by the mainland, said sales to Chinese factories rose 24.4 percent to $104.3 billion.

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

On Wednesday, Beijing banned the import of citrus fruit and frozen mackerel from Taiwan after House Speaker Nancy Pelosi arrived in Taiwan late on Tuesday. But the ruling party has avoided disrupting the flow of chips and other industrial components, a move that would send shockwaves through the faltering global economy.

Beijing also announced a four-day artillery military exercise in the waters surrounding Taiwan. This could delay or disrupt shipping to and from the island, which is one of the world’s largest traders.

The potential disruption added to fears of weaker global growth, but Asian shares rose on Wednesday after there was no immediate sign of Chinese military action.

The Communist Party said Pelosi’s visit could encourage Taiwan to perpetuate its decades-old de facto independence. Beijing says this will lead to war.

U.S. President Joe Biden’s administration has sought to dial down traffic, insisting there has been no change to the longstanding “One China policy” of the United States, which recognizes Beijing but allows for informal and defense ties with Taipei.

In a meeting with Taiwan’s leaders, Pelosi said she and other members of Congress made clear during the delegation that they would not abandon their commitment to the self-governing island.

“The determination of the United States to uphold democracy in Taiwan and around the world remains unwavering,” Pelosi said in a brief remarks at a meeting with Taiwan’s President Tsai Ing-wen.

“Taiwan will not back down in the face of deliberately intensified military threats,” Tsai Ing-wen said.

Import bans on citrus fruit and frozen mackerel will hurt suppliers seen as supporters of Tsai Ing-wen.

Taiwan plays a pivotal role in the chip industry on the island of 15 million people, which accounts for more than half of the global supply.

Its producers include TSMC, which makes state-of-the-art processors for smartphones, tablets, medical devices and other products. Taiwan said chip sales to Chinese factories rose 24.4 percent last year to $104.3 billion.

Beijing has invested billions of dollars to develop its own industry, which supplies low-end chips for cars and appliances but cannot support the latest smartphones, tablets, medical devices and other products.

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

The concentration has heightened U.S. and European concerns about overreliance on supplies that could be disrupted by conflict. The U.S. government is trying to expand its domestic chip production capacity.

Overall, China is Taiwan’s largest trading partner, and its exports are more than double that of the United States, Taiwan’s second-largest foreign market.

Beijing has sought to use its market access to undercut Tsai Ing-wen and other Taiwanese leaders whom she accuses of pursuing independence.

On Monday, ahead of Pelosi’s visit, customs authorities blocked more than 100 Taiwanese suppliers from importing biscuits and other food items, the Global Times and other Chinese news outlets reported. There is no official announcement.

The Communist Party has also used military operations in the past to try to harm Taiwan’s leaders by disrupting the island’s economy.

Before the island’s first direct presidential election in 1996, the mainland tried to drive voters away from then-President Lee Teng-hui by firing missiles into the airway.

This forced shippers to cancel voyages and raise insurance premiums, but it backfired as he made Li brag about standing in front of Beijing in front of cheering supporters. Lee won the Quartet with 54 percent of the vote.

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