A conflict involving Taiwan could impose enormous economic costs on China, with a blockade or military action disrupting one of the country’s most important trade corridors, according to a report by the Center for Strategic and International Studies (CSIS).
In its report titled “Troubled Straits: Analyzing Trade Chokepoints in the South China Sea”, published last week, the Washington-based think tank said a conflict over Taiwan poses the greatest threat to regional trade.
The report said that while Chinese officials have frequently highlighted the country’s “Malacca dilemma”, the Taiwan Strait has become even more strategically important.
In 2024, nearly US$1.3 trillion worth of Chinese trade passed through the Taiwan Strait, about 33 percent more than the volume transported through the Strait of Malacca.
Disruption could severely affect China’s economy
According to the report, the Taiwan Strait is not only a vital lifeline for Taiwan but also an essential artery for China’s economic stability.
It said military action disrupting the waterway could inflict even greater economic damage on China than a disruption of the Malacca Strait.
The Strait serves as a key route for China’s imports of oil, coal, natural gas, ores and metals from resource-rich countries.
In 2024, about 33 percent of China’s total imports and 58 percent of its maritime imports transited the Taiwan Strait.
The report also noted that the waterway is crucial for China’s domestic shipping network, transporting goods from manufacturing centres in Shenzhen and Guangzhou to eastern cities such as Shanghai and Ningbo, as well as northern cities including Tianjin.
If shipping through the Strait were disrupted, China could move cargo overland. However, transporting goods from Guangzhou to Tianjin by land would cost about three times more than shipping by sea.
A complete shift from sea to land transport could also create bottlenecks in China’s inland logistics network, with wider economic consequences, the report said.
Regional economies also face significant risks
Although only 3 to 4 percent of US trade passes annually through the Luzon, Malacca and Taiwan straits, the report said the waterways are far more important to key US allies in Asia.
Japan, South Korea and the Philippines shipped goods worth US$755 billion through the Taiwan Strait in 2024.
The Strait accounted for 28 percent of Japan’s total trade, with semiconductors making up one-quarter of Japanese imports transported through the route.
The report also noted that Japanese Prime Minister Sanae Takaichi and Philippine President Ferdinand Marcos Jr have warned that any Chinese military action in the Taiwan Strait could draw their countries into the conflict.
According to the report, a blockade imposed by Beijing could disrupt trade routes carrying 16 percent of China’s exports and 58 percent of its maritime imports, while also affecting critical domestic shipping routes and potentially paralysing large parts of the country’s economy.
