Danger of a “chain reaction”
German economy fears Taiwan escalation
8/5/2022 8:36 am
According to economists, the increasing tensions in the Taiwan conflict are revealing the fragility of the German economy. Because Taiwanese companies play a central role in global supply chains. At the same time, China is Germany’s largest trading partner.
The global effects of an armed conflict over Taiwan are also threatening Germany’s economy. “A military conflict in Taiwan is probably the greatest threat to the close economic ties that have been built up between Germany and China over the past decades,” said Max Zenglein, chief economist at the Mercator Institute for China Studies.
“An escalation would result in a chain reaction with far-reaching negative economic consequences,” said Zenglein. Disruptions to important supply chains or possible sanctions would entail massive economic costs. Taiwanese companies play a “central role” in global supply chains due to their dominant position in semiconductors and other high-tech components for electrical engineering. “The increasing geopolitical risks are currently making it clear to us how fragile the globalized production processes are,” said Zenglein.
Chinese market has enormous importance
The executive board member of the German Chamber of Commerce in China, Jens Hildebrandt, emphasized the importance of the Chinese market for the German economy. “China is the center of production hubs for important preliminary and supplier products in a wide variety of industries,” said Hildebrandt. “Another loss of primary and intermediate products from China would give the German economy a bleak outlook.”
The week-long lockdowns caused by China’s zero-Covid strategy have already severely disrupted the supply chains. “The effects of this have been clearly felt by the German economy and German consumers,” said Hildebrandt. China has been Germany’s largest trading partner for six years.
Hildebrandt emphasized that China is also the largest German export market after the USA. At the same time, Germany is the most important export market for Chinese companies within the EU. “It is important to recognize that the German-Chinese economic relationship is one of mutual dependence.”