On the heels of House Speaker Nancy Pelosi’s historic Taiwan visit last week, FGS Global teams in Shanghai, Beijing, Hong Kong, Washington and Berlin offer their outlook on its ramifications for global tensions and the business environment at large.
- Our assessment is a U.S.-China military conflict over Taiwan is unlikely in the near future, but the next few years – some say the next 1,000 days – will continue to generate uncertainty.
- China announced large-scale military exercises surrounding Taiwan in response to the visit.
- Despite these actions and associated warnings from each side, the U.S. and China are demonstrating they want to avoid a serious conflict over Taiwan.
- Nonetheless, the visit heightened the sense of distrust and strategic competition that now frames the U.S.-China relationship. Taiwan will remain an issue that could lead to conflicts between the two countries, both deliberate and accidental.
- Pelosi’s visit will reinforce Chinese suspicions of U.S. intentions towards Taiwan. And China’s military activities will strengthen the U.S.’s doubts that China’s intends to unify with Taiwan by “peaceful” means.
- Looking ahead, tensions over Taiwan will intensify as each side moves to test the other and defend its red lines. Actions by either side—coupled with charged rhetoric—will cast uncertainty over the investment climate in both Taiwan and China.
- Companies should:
- Closely consider the geopolitical environment shaping the business environment
- Understand the risks to their value chains in both Taiwan and mainland China (and for Chinese companies, their U.S. investments) and
- Engage in scenario planning.
The investment climate for foreign companies will remain officially unchanged, though less positive and welcoming in the immediate future. But the cost of getting it wrong will be exceptionally high.
Read the full analysis here.