Summary by Geopolist | Istanbul Center for Geopolitics:
Recent U.S. legislation mandates that American companies with substantial operations or interests in Taiwan prepare for potential conflict scenarios involving the island. The law aims to bolster resilience and ensure business continuity amid rising geopolitical tensions between the U.S. and China over Taiwan.
Key points from the legislation include:
- Contingency Planning: Companies must develop and implement detailed contingency plans for operations in Taiwan, including risk assessments and strategies to mitigate disruptions.
- Supply Chain Adjustments: Firms are required to evaluate and adjust their supply chains to reduce dependency on Taiwan, aiming to minimize the impact of any potential conflict on global operations.
- Government Coordination: Businesses are expected to coordinate with U.S. government agencies to align their preparedness plans with national security objectives and receive guidance on managing risks.
- Reporting Requirements: Companies must regularly report on their preparedness measures and any adjustments to their operations or supply chains as a result of the new legislation.
This legislation reflects increasing concern over Taiwan’s strategic importance and the potential economic and security impacts of a conflict in the region.
Read more below.
Legislation forces US firms to prepare for a Taiwan war
Some American legislators have proposed a bipartisan legislative bill that will require United States-listed firms to disclose their assets and businesses in the People’s Republic of China (PRC) and estimate the economic losses they will suffer if China invades Taiwan.
The PRC Risk Transparency Act, if passed and implemented, will amend the Securities Exchange Act of 1934 to require US-listed firms to annually disclose the percentage of total revenue, profits, capital investment and supply chain involvement in China and perform security analysis related to their exposures.
The Act will require US-listed firms to make plans for a sudden loss of market access in China if the country invades Taiwan, a self-governing island over which Beijing claims to have sovereignty and has vowed to “reunite” with the mainland.
These firms need to consider different case scenarios including a more than 80% decline in bilateral trade between the US and China, a complete cessation in the trade of goods with military end-use or dual-use applications and an extreme situation in which Beijing seizes all China-based assets of American companies that could be repurposed for military production.
The bill was jointly introduced by the House Financial Service Subcommittee on National Security, Illicit Finance and International Financial Institutions chairman Blaine Luetkemeyer and the Select Committee on the Chinese Communist Party chairman John Moolenaar on July 25.
The bill needs approval from both the US House of Representatives and Senate and the US president’s signature in order to become law.
A spokesperson of Luetkemeyer’s office told the media that another way to push the legislation is to add this Act, together with the previously proposed Chinese Military Aggression Act, to House Speaker Mike Johnson’s coming legislation package, which aims to restrict US investments in China and punish the Chinese firms that provide material support to Russia and Iran.
Johnson said in early July that Congress targets to pass a significant legislation package by the end of this year to curb China as the country now leading an “axis” of adversaries that includes Russia, Iran, North Korea, Venezuela and Cuba.
John Aquilino, head of the Indo-Pacific Command, said in March that he believes China’s military will be prepared to invade Taiwan by 2027.
In April, Luetkemeyer introduced the Chinese Military Aggression Act, which will direct the Treasury Department’s Financial Stability Oversight Council (FSOC) to analyze, study and report on market implications and vulnerabilities related to a Chinese invasion of Taiwan.
The PRC Risk Transparency Act was proposed two days before US State Secretary Antony Blinken met with Chinese Foreign Minister Wang Yi on the sidelines of the ASEAN Foreign Ministers’ meeting in Laos on July 27.
During the meeting, Blinken expressed concerns over China’s support for Russia’s war in Ukraine and provocative actions against Taiwan.
Wang countered that Taiwanese separatists are the ones creating trouble in the Taiwan Strait and that China will not hesitate to take countermeasures. He said the US has been trying to alienate Beijing and Moscow since the Russian-Ukrainian conflict broke out but China will not back down under external pressure.
A Shanxi-based Chinese columnist says in an article published on Monday that Wang has already seen through Blinken’s tricks – Washington wanted to increase communications with Beijing but would not stop suppressing China.
He says it was probably the last time for Blinken to visit Asia with the title of US State Secretary. He says Blinken may not be able to stay in his position after the US presidential election in November.
Wider coverage
The PRC Risk Transparency Act covers several more sectors than the Executive Order signed by President Joe Biden last August. The latter only restricts and monitors US investments in Chinese semiconductor, quantum computing and artificial intelligence companies for national security reasons.
The Act’s restrictions are also much wider than similar bills introduced by other US lawmakers.
Last November, US Senators Bob Casey and Rick Scott introduced the Disclosing Investments in Foreign Adversaries Act to provide transparency in investments made by American hedge funds and private equity firms in countries of concern like China and Russia.
The legislation would require these private investment funds to annually disclose any assets invested in countries like China to the Securities and Exchange Commission (SEC). Casey said it is vital to know if any US money is being used to boost the economies of some foreign adversaries who steal technological know-how and jobs from America.
In March this year, Congresspeople Victoria Spartz and Brad Sherman introduced four bills that aim to mitigate the strategic, commercial and national security threats posed by China to the American economy and financial markets.
Among the four, the China Risk Reporting Act requires US-listed firms to disclose annually the degree to which they are dependent upon China and the risks China poses, such as supply chain disruptions, intellectual property theft or nationalization of assets.
“If China invades Taiwan, Congress should be able to impose sanctions, knowing American companies have insulated themselves from the rupture,” Spartz and Sherman said in a press release. “Hopefully, this will deter such an invasion.”
The newly proposed PRC Risk Transparency Act demands more details, such as US-listed firms’ capital investment in China and their joint ventures’ revenues and profits.
In recent years, many US companies have already started cutting their investments in China.
China’s foreign direct investment fell 8% to 1.13 trillion yuan (US$156 billion) in 2023 from a year ago, according to the Ministry of Commerce. The figure dropped 29.1% year-on-year to 498.9 billion yuan in the first half of this year. Chinese officials said it’s normal to have some fluctuations as FDI had grown during 2013-2022.
‘US$1.6 trillion loss’
Before the US can estimate its economic losses from a potential Chinese invasion of Taiwan, Beijing has already made an estimation and used it to warn of the consequences of US decoupling from China.
“Statistics show that ending the permanent normal trade relations with China would lead to a $1.6 trillion-economic loss for the US,” Xie Feng, Chinese Ambassador to the US, said in a speech at the Symposium in Commemoration of the 45th Anniversary of China-US Diplomatic Relations on July 27.
He said over 70,000 American companies are benefiting from China’s development while their exports to China have supported 930,000 American jobs.
“To our two countries, respective success means mutual opportunities, not challenges, and the two sides should help each other succeed, not undermine each other,” he said. “We need to make the list of cooperation longer and the negative list shorter.”
Xie’s speech was posted on the website of the Chinese Embassy in the US on Tuesday.
By: Jeff Pao
Source: Asia Times
