Page 9 - ISQ October 2022

INVESTMENT STRATEGY QUARTERLY

World Trade
World Trade
(2010=100 Index)
(2010 = 100 Index)
140

120

100

80

60
2000 2004 2009 2013 2017 2022
Source: FactSet, as of 20/09/2022

THE FOURTH TAIWAN STRAIT CRISIS components that were developed and manufactured in Taiwan.
Natural disasters, cyberattacks, or simple accidents are daily However, what’s less known is the importance of its waterways for
occurrences that can temporarily disrupt supply chains. However, global trade, as one-third of the world’s seaborne traffic passes
the potential for a long-lasting conflict between Taiwan and China through the Taiwan Strait. While there are alternative routes around
could develop into a cataclysmic supply chain disruption. Taiwan is the channel, the Taiwan Strait can be described as the gateway to
only just bigger than the state of Maryland, and it contributes ~1% access all the important ports in Northeast Asia.
to global GDP. So, how can a country so small, that contributes so From an economic standpoint, a blockage of the Taiwan Strait or
little to global GDP, be so important to China, the US, and the world Taiwanese airspace for an extended period of time would likely
economy? Taiwan is renowned worldwide for its semiconductor result in worse consequences than those which the world
industry, being responsible for manufacturing almost two-thirds of experienced during the COVID-19 pandemic in terms of supply chain
global microchips and over 90% of high-value integrated circuits. disruptions. Additionally, due to its small size, it is fair to assume
Essentially, most electronics we use every day have at least some

BEIJING
TIANJIN ASIA’S GATEAWAY

SEOUL TO THE WORLD
TOKYO TO NORTH
OSAKA AMERICA
DAILY AVERAGE TRANSIT:

240 ships
SHANGHAI
1 million
CHINA barrels of oil

TAIWAN
STRAIT YEAR-TO-DATE TRANSIT:
HONG KONG TAIWAN
50% of the world’s
container ships
88% of the largest 10% of

TO ASIA, AFRICA, global container fleet
AND EUROPE

Source: Bloomberg, as of 09/2022

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