Taipei, Taiwan – As the Chinese military conducted unprecedented live-fire drills that surrounded Taiwan over the past two weeks, Taiwanese largely shrugged their shoulders.
On August 6, at the height of the exercises, revelers on Dongyin – a Taiwanese-controlled island in the Matsu archipelago just 50 km (30 miles) from China’s Fujian Province – danced the night away.
Lii Wen, head of Taiwan’s ruling Democratic Progressive Party (DPP) chapter in Matsu, said the “EDM bubble party is continuing” amid the “4th Taiwan Strait crisis”.
For many multinational firms, which are vital to the health of Taiwan’s economy, the heightened tensions may be harder to ignore.
Although it remains to be seen whether China’s increased military activity will negatively affect Taiwan’s foreign investment, some foreign firms operating on the island have already begun to explore the possibility of moving elsewhere.
Several foreign business leaders who spoke to Al Jazeera on condition of anonymity said recent tensions over the democratically-ruled island that Beijing claims as its territory have prompted them to consider relocation.
One executive, who has been based in Taiwan for more than a decade with an international consumer goods company, said the scale of China’s live-fire drills served as a “wake-up call”.
“In the past, when China threatened Taiwan, I was dismissive because the threats were all verbal. This time, it looks more like the real thing,” he told Al Jazeera.
Major investors in the company feel the same way, the executive said, and have asked him to explore the possibility of setting up new company operations — both a manufacturing facility and an office — in Thailand that would become the firm’s regional headquarters. The executive said he is considering moving there with his family next year.
Investors “don’t want to wait for the situation to deteriorate further” to the point where it poses a “serious risk to company personnel and supply chains,” he said.
An executive at a Fortune 500 company based in Taiwan for several years said he is exploring relocating to Singapore because he lacks confidence that Taiwan can adequately handle the increased military threat from China.
“The biggest concern for me is that of security, and this is related to the theme of the government and the sclerotic military not responding to business as usual,” he told Al Jazeera. “If what happened last week didn’t wake them up, I don’t know what will.”
The executive added: “It’s a classic frog in the boiling pot. They don’t understand how hot the water is.”
Their concerns appear to be widely shared in the island’s foreign business community.
In a survey released by the American Chamber of Commerce in Taiwan on Friday, 43 percent of respondents said they were either in the process of reviewing or planning to review contingency plans for dealing with a serious crisis on the island.
Of the 126 participants in the survey, which was conducted from August 8-17, 77 percent reported that their business had not been significantly affected by recent military activity in the Taiwan Strait, while 17 percent said they had experienced disruption.
Overall, on a scale of 1-5, survey respondents’ average level of concern about serious action against Taiwan occurring in the next 24 months was 2.8.
“China’s recent military exercises are a reminder to multinationals that investments in factories and equipment in Taiwan, holding shares in Taiwan-listed companies, or employees in the country, are not immune to blockade or the risk of war,” Ross Darrell Feingold, a Taipei. based lawyer and political risk analyst, told Al Jazeera.
Regular Chinese military exercises near Taiwan could have serious implications for commercial air and sea traffic routes, given the island’s position along one of the world’s busiest shipping lanes. Roughly 50 percent of the world’s container ships and 88 percent of the largest such ships passed through the Taiwan Strait in the first seven months of the year, according to Bloomberg.
After suspending exercises prompted by US House Speaker Nancy Pelosi’s visit to Taiwan on August 2-3, Beijing resumed its exercises this week following a surprise trip to the island by a new delegation of US lawmakers.
“Indications are that exercises that could disrupt maritime shipping or civilian air travel are likely to become a regular occurrence,” Feingold said. “Not only will this hamper the shipment of goods from Taiwan, but it could hamper inbound shipments of raw materials, food and energy.”
The added risk Taiwan faces from China’s aggression is self-imposed isolation stemming from the Taiwanese government’s reluctance to relax some of the strictest pandemic-related border restrictions in the world. Taiwan maintains a mandatory four-day quarantine for all arrivals and has yet to resume normal issuance of business and tourism visas.
Critics say the border controls, which have no parallel outside China, are of dubious benefit to public health. As of Jan. 1, 99.5 percent of COVID-19 cases have been mild or asymptomatic, according to Taiwan’s health authorities. Among the island’s 23.5 million inhabitants, 86.2 percent have had two doses of a vaccine and 71.8 percent have grown up.
Taiwan, however, has struggled to transition from its former de facto zero-Covid strategy, which was hugely popular with voters, to a new normal. Although the government officially lifted the policy in April, authorities are widely seen as fearing political fallout from a surge in cases linked to overseas travel.
“Unfortunately, Taiwan’s government has been in place keeping these controls in place for longer than most countries in Asia, and the window to lift these controls before local elections on November 26 is closing fast,” Feingold said.
Taiwan continues to host political dignitaries, with a US congressional delegation led by Senator Ed Markey landing less than two weeks after Pelosi and this week announcing the start of talks on a bilateral trade and investment agreement with the US.
Business leaders, however, argue that the occasional high-profile trip cannot make up for two and a half years of regular business exchanges lost.
“Business relationships are very fragile,” Frederic Rocafort, a lawyer at Seattle-based law firm Harris Bricken, which works with Taiwanese manufacturing clients, told Al Jazeera.
“If you don’t have that ability to network and maintain your existing customers, all it takes is a year or two and you can find someone else.”
Andrew Wylegala, president of the American Chamber of Commerce in Taiwan, said the island should welcome foreign business and investment with open arms, given its long-term strategic goal of reducing its economic dependence on China.
China, including Hong Kong, accounted for more than 40 percent of Taiwan’s exports last year.
“If there was ever a place and time to change the old saying ‘keep friends close and enemies closer’, it would be Taiwan in August 2022,” Wylegala told Al Jazeera. “The circulation of goods, talents and money with friendly partners is the best means of strengthening Taiwan, and this still requires the movement of people.”
PJ Broodbakker, Netherlands-based vice president of sales and marketing for Dutch firm Haiku Tech, a maker of equipment for the production of multilayer ceramic devices, said his company has considered increasing the number of Taiwanese suppliers. However, he has not visited Taiwan in more than three years, citing the mandatory quarantine as the main reason.
Although the current quarantine is only four days, “it’s still extremely inefficient, especially if the trip involves several team members,” Broodbakker told Al Jazeera.
“For us, we are always keen to collaborate with Asian suppliers for technical projects and Taiwan seems to be the most logical place to go. Unfortunately, with the current restrictions in place, and no visibility of a solution, we find ourselves looking elsewhere more and more,” he said.