China has openly expressed its desire to harm Taiwan by damaging its own economy. Beijing can inflict significant damage without deploying troops to the island, with little direct cost. This has led to concerns among businesses about potential disruptions. However, Taiwan’s economy can be strengthened through partnerships with Western companies who can take on a significant share of their business in the event of a crisis. Such agreements will signal to the Chinese government that Taiwan is resilient and has many friends.
In April, after Taiwan’s President Tsai Ing-wen met Speaker of the House Kevin McCarthy in California, Beijing responded with military exercises featuring mock attacks on the islands. An inspection fleet was also dispatched, which would have caused significant disruption to the island’s economy. Such saber rattling has already led companies like Brompton to reduce their use of Taiwanese suppliers, while others have added dispute clauses to their contracts.
Despite facing significant risks from Chinese aggression, Taiwan’s economic model can build resilience with the help of international partners. According to recent surveys, a significant percentage of foreign multinational companies operating in Taiwan have plans to evacuate staff in case of a serious crisis. However, the survey also showed that most businesses plan to maintain or expand their investment in Taiwan in 2023.
Taiwan’s economy is focused on industry and services, with agriculture accounting for only 1.4% of its economy. This means that businesses can rely on international partners in times of crisis. To ensure economic continuity during a severe crisis, Taiwan could build a model similar to Sweden and Finland’s economic continuity plans.
By partnering with Western companies and spreading awareness about the importance of supporting Taiwan, the island can become less vulnerable to Chinese aggression. The Taiwan Economic Defense Alliance, backed by Western companies and governments, is a symbolic move that can help demonstrate resilience in the face of Chinese aggression.
Overall, Taiwan is not doomed to suffer from China’s gray zone aggression and threat of aggression. Instead, it can build resilience through partnerships with international companies and show that it has many friends willing to stand by its side.