China will wreck its economy with attack on Taiwan: VP William Lai

Taiwan’s Vice-President William Lai says any attack by Beijing on the island would have a devastating impact on China’s economy.

William Lai addresses the forum in Taipei on Thursday. Picture: AFP

Taiwan’s Vice-President William Lai says any attack by Beijing on the island would have a devastating impact on China’s economy.

In his first public outing since nominating as a presidential candidate and addressing an audience of executives from Taiwan’s semiconductor industry and dozens of diplomats based in Taipei, the ruling Democratic Progressive Party candidate spoke of the gloomy geopolitical environment hanging over the upcoming presidential race.

After noting the war in Ukraine, Mr Lai said Taiwan’s central role in the world semi­conductor supply chain meant that were Beijing to ever follow through on its military threats, it would wreck economic catastrophe on the international economy and on China itself.

“It’s not in its interests,” he said on Thursday.

The comments were made hours after he had registered as a candidate, promising to boost the domestic economy and “safeguard peace”.

Taiwan’s election – to be held in January 2024 – will have outsized international significance, as the island’s 23 million people cast their ballots during unprecedented geopolitical tension between China and America.

Mr Lai, 63, has indicated he wants to follow the foreign policy approach of outgoing President Tsai Ing-wen, who has worked to harden Taiwan’s defences and strengthen unofficial ties with the US and other “like-minded” countries, after Beijing cut off all political contact in 2016 and ramped up coercive measures and military intimidation.

China’s efforts to isolate Taiwan internationally had a coup this week when Honduras President Xiomara Castro said her government had begun planning to officially recognise Beijing.

Taipei has lost eight diplomatic allies since 2016, after Beijing has pledged huge investment projects and promised favourable trade access to Taiwan’s diminishing number of formal allies.

Mr Lai was speaking at an event hosted by business publication Commonwealth Magazine focused on the indispensable role of Taiwan’s semiconductor industry in the global economy, particularly its dominant player, Taiwan Semiconductor Manufacturing Company.

“It’s almost impossible for anyone anywhere in the world to live a single day of their lives without touching a semiconductor produced by TSMC,” said Chris Miller, author of Chip War, a speaker at the event.

More than one-third of the new computing power in the world added each year comes from Taiwan, according to Dr Miller, an associate professor at Tufts University.

Some analysts have called Taiwan’s integral role in the chips industry a “silicon shield” that helps deter a possible military attack from Beijing, which has long sought to take control of the island.

TSMC founder Morris Chang said Taiwan’s integral role in the industry during a period of rising geopolitical tension had also become a “dilemma”. Taiwan’s most respected business figure told the forum he was concerned about aspects of the Biden administration’s “CHIPS Act”.

“Part of the policy is to slow down China’s position. I really have no problem with that. In fact, I support it,” he said.

But the businessman who revolutionised the industry said some of America’s efforts to “friend shore” the semiconductor supply chain to partners and allies was taking place at Taiwan’s expense, as US cabinet officials repeatedly warned against further concentration of production in the geopolitical hotspot.“That, I think, is Taiwan’s dilemma,” he said.

Taiwan’s opposition Kuomintang party has indicated it will campaign on a peace platform in the upcoming presidential campaign, positioning itself as Beijing’s preferred dialogue partner.

“Vote for the KMT, and there will be no battlefield across the Taiwan Strait,” said former president Ma Ying-jeou at a campaign rally earlier in the year.

The KMT’s three leading presidential nominees are party chairman Eric Chu, popular New Taipei mayor Hou You-yi and billionaire Terry Gou, the founder of Foxconn, an electronics business with a huge presence in mainland China.

Polls suggest both major parties have a path to victory, but much will depend on the state of the Taiwanese economy and the international environment in the lead-up to January.