Tensions between China and Taiwan have moved into the spotlight, now showing up on financial risk radars.
Analysts say money managers are zeroing in on the threat of a Chinese invasion of Taiwan and factoring it into their investment decisions, while fund managers say they’re fielding client questions about the odds of a war.
Here’s why: Chinese leader Xi Jinping has repeatedly confirmed Beijing will pursue control of Taiwan, by force if necessary. Taiwan’s president, Tsai Ing-wen, pledges to uphold peace and avoid provocation but says the island will defend itself if attacked.
Analysts note that Russia’s invasion of Ukraine has made European investors especially wary, saying they can’t afford new losses if the conflict was to break out in Taiwan after the Russia situation.
A China-Taiwan war would also wreak havoc on global supply chains. The Taiwan Strait is a major shipping route from East Asia to the United States and Europe. What’s more, the island is a critical player in global microchip production.
Taiwan has long been a flashpoint in U.S.-China relations. Those ties are now further strained following the shootdown of a Chinese spy balloon that floated across the United States.