Massive economic and trade effects loom as Taiwan-China conflict escalates – report

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Philippine Strategic Associates (PSA), a private intelligence, business risk and security consulting firm, said tensions between China and Taiwan, as well as the ongoing dispute in the South China Sea, will lead to massive economic and trade consequences and potentially harmful. in the Phillippines.

Quoting Tim Moe, chief Asian equity strategist at Goldman, in an interview with the Financial Times, a Chinese attack on Taiwan is still considered a “tail risk” by investors.

However, growing concerns about an attack are underscored by a Goldman Sachs index that tracks tensions in the Taiwan Strait, which recently hit an all-time high.

PSA Chief Operating Officer Sam Ramos-Jones said: “While we do not currently believe there is a high likelihood of conflict breaking out over Taiwan in the near term, we are concerned about the possibility of unintended conflict resulting from maritime encounters in disputed areas of the South China Sea We believe it is important for both the public and private sectors to be aware of these dynamics and prepare for various eventualities.

He said the PSA report considers three scenarios and provides the potential impact of an unintended conflict, miscalculation or accident in the South China Sea between China and the Philippines, a war between China and Taiwan, with the Philippines remaining neutral for the conflict and the war between China and Taiwan with the Philippines drawn into the conflict.

PSA sees that for any issue involving an incident in the South China Sea between China and the Philippines, the impact will be a decrease in trade, investment and tourism flows between the two countries in the medium term.

For the second scenario, “We anticipate massive disruption to international trade and supply chains, potential food and energy shortages, and certain threats to internet stability for Filipino users,” said Greg Wyatt, Director of Business Intelligence at PSA.

And for the third scenario where the country is drawn to any conflict involving Taiwan and China, PSA sees increased disruption to air travel, increased internet disruption for Filipino users, and potential military targeting of certain airports, seaports and military installations in the Philippines.

The PSA report highlighted that the Philippine business community can begin to think about the impact of potential conflict in the region on business and could collectively consider how to make the business community more resilient.

Best practices for mitigating the potential impacts of conflict in the region have yet to be developed, and they can be developed collectively.

The PSA further stated that at the corporate level, if the propensity for conflict continues to escalate, the report predicts that it may become best practice for more companies to diversify their operations into more parts of the world. world outside of Asia.

Third, at the operational level, the PSA report further argues that having some sense of the risk of foreign conflict in the region is now relevant to business continuity managers in a way that was largely a distraction during previous decades.

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