China's government has an intense craving to take control of TSMC, reveals a report shared by Bloomberg today. The financial news organization has published some alarming quotes from Chen Wenling, chief economist at the government-run China Center for International Economic Exchanges. In brief, Chen called on Chinese authorities to "seize TSMC" if the US and the West begin to implement Russia-war style sanctions on China. She was speaking at the Chongyang Institute for Financial Studies at Renmin University at the end of May.
On the university stage, Chen told attendees, "If the US and the West impose destructive sanctions on China like sanctions against Russia, we must recover Taiwan." However, the reasoning contained within this sentence is clearly topsy-turvy. The US and other democratic powers only imposed severe sanctions on Russia after it invaded neighboring Ukraine and refused to withdraw. It is expected very similar sanctions would be applied on Chinese interests worldwide if China invades Taiwan, but not if it maintains the status quo. It is curious why Ms. Chen has put the cart before the horse.
TSMC Coveted by the CCP
In another segment of her speech, Chen claimed that the seizure of TSMC would be a great asset for China, to help it reconstruct its industrial and supply chains. This may be so, but her statement that "we must seize TSMC" sounds extremely aggressive.
Moreover, there were more comments in the senior economist's speech which appeared to encourage a Chinese military assault. Chen warned the audience at Renmin University that TSMC was quickly transferring technology to the US where it is building multiple factories. "We must not let all the goals of the transfer be achieved," she exhorted.
China Sanctions and Trade War Today
The US and its allies imposed technology sanctions during the Trump presidency in order to stifle China's advanced weapons development, and they remain in place under President Biden. Some barriers have also been applied to the trade of Chinese companies operating in security sensitive sectors like telecoms, especially where it is seen that the Chinese business has strong military links.
Actions like the above have spurred China to try and become technologically self-sufficient, for both hardware and software. We have reported on numerous China developed CPUs, GPUs and computer systems in recent months and such developments seem to be accelerating due to the tech trade restrictions imposed on China. However, the privately owned and highly competitive businesses that have fought to become the best in their fields (e.g. AMD, Apple, Arm, IBM, Intel, Nvidia, Samsung, Qualcomm, TSMC, etc.) continue to research and invest. They won't be easy to catch, as they are moving targets.
China's latest rhetoric suggests there's a growing faction that's not interested in catching up through normal means, instead hoping to close the gap via a hostile takeover of Taiwan. That could be disastrous for many of the companies just mentioned, not to mention the global technology landscape.
For this strategy to be effective for China, they have to do it BEFORE TSMC builds fabs in other parts of the worlds like USA. But if I were TSMC, I would personally sabotage the plant if China tried to take over. It would be a pyric victory at best. If China knows ahead a time that a majority of Taiwan's value will be lost in an invasion, they may think twice.
But invasion will not be China's strategy. They are likely planning a blockade with a massive naval fleet backed with anti shipping warfare. Thus the plan is based on starving Taiwan into submission, thus not requiring them to fire a shot, and reducing world outcry. It's the most logical conclusion based on massive military spending on the navy and anti ship missile systems.
China has the upper hand in all of this because pretty much everything is made in China these days. IIRC even Samsung uses China's manufacturing base for many of it's products.
I have examined 3 economic videos if China lost the west as a trading partner. They reach a similar conclusion: Both sides would suffer massively. Eventually both would recover, but the USA would recover better/faster. China has no social safety net for economic downturn. And the majority of trading partners China would have left would be much smaller in terms of trade. While things like wheat and oil from Russia would benefit China, the overall net loss would be staggering.
I do agree that there are no clear winners but in the end the East will just dust themselves off and start over and do business amongst themselves which is already been happening.
Well then I wish you the best of luck as you suffer. But the east isn't as strong as it seems. A very large percentage of China's economic growth is based on construction. And thanks to the 3 red line rule, their economy is collapsing hard because it was a Ponzi scheme.
As to Russia's natural resources, they have oil, gas, wheat, some Uranium deposits, and titanium. But the russian infrastructure has been stuck in the early 90's. It is running at near capacity. It's growth (1/3rd) was fueled by sales of raw materials to Europe. Like I said it will take time to build new infrastructure to countries like China. Their east west railroad is limited in size, and most of the power and materials are in western Russia.
Make no mistake, both sides will suffer greatly. And I were the Chinese government, dealing with a billion plus hungry starving Chinese is a big problem. They panicked during 2007 housing crisis global recession. People were jumping to their deaths as they had no safety net. And this will make it look like a picnic.
Goverment leaders instead of thinking about that, and thinking what to do to help the citizen go back to thier normal life + re-think this new global weakness, are as always, looking for the next drama plot and next power move.
Its seems they haven't learn anything after +2000 years of history.
What a real pitty.
I agree. Personal ambitions of pride & power seem to always outweigh the needs of the people.
Now, If their economy begins to tank for other less clear reasons (like, real estate bubbles bursting or debt market implosion), then all bets are off and I'd say the odds become quite high. They'll probably blame the west for the economic issues in this scenario to get public support. Once they have the public angry, they won't be able to stop.