Business Continuity Concerns Amidst Taiwan-U.S. Meeting Part 2

Business Continuity Concerns Amidst Taiwan-U.S. Meeting Part 2
April 4, 2023 SDC Development 2
Business Continuity Concerns Amidst Taiwan-U.S. Meeting 2- TorchStone Global

Business Continuity Concerns Amidst Taiwan-U.S. Meeting Part 2

By TorchStone Senior Analyst, Ben West

While military conflict is a worst-case scenario outcome of the current U.S.-China tensions over Taiwan, companies are more likely to face subtler forms of disruption.

An upcoming meeting between Taiwan’s President and the U.S. Speaker of the House likely won’t prove as disruptive as the previous meeting in August 2022, but companies should be prepared for Beijing’s response.

Economic retaliation, disinformation, or even sabotage campaigns aimed at Taiwan and companies operating there are likely in the near future.

This is the second part of a two-part analysis.

The first installment, Business Continuity Concerns Amidst Taiwan-U.S. Meeting, examines the history of the conflict and outlines the current situation.

This installment discusses the array of tools China can use against Taiwan, and ways companies and organizations can protect themselves against those tactics.

Other Means of Interference

There are many other ways Beijing can undermine Taiwan short of war.

In the past, China has pressured commercial targets in Taiwan in an effort to make Taiwan less desirable to foreign companies and investments.

In the past three years, Beijing has banned imports of Taiwanese produce citing health regulation violations, but the intent was more likely politically motivated.

For example, the 2021 ban on Taiwanese pineapples appears to have been an effort to weaken President Tsai Ing-wen’s popularity among farmers, who rely upon the Chinese market for up to 90% of their sales.

In a similar move, Beijing banned imports of alcohol and beer from Taiwan in 2022, claiming Taiwanese companies had not been approved under a new law governing alcohol.

Beijing has also demonstrated its willingness to leverage access to its market to force international companies to follow its policies on Taiwan.

In 2018, Beijing threatened to restrict domestic Chinese access to websites for Marriott, American Airlines, United Airlines, and Delta if those companies did not remove references to Taiwan from their booking platforms.

Such ultimatums thrust companies into taking a stance on an issue that they would prefer to remain neutral on.

Abiding Beijing’s policies also puts companies at risk of alienating Taiwan.

After Marriott conceded to Beijing’s demands, some hotels in Taipei cut ties with the brand.

There is also growing concern over Beijing-backed acts of sabotage against Taiwanese critical infrastructure.

In February, Taiwan’s Matsu Island experienced disruptions to its internet service after two incidents several days apart cut two of the undersea cables connecting the island to mainland networks.

Repairs are likely to take months to complete.

An official with Taiwan’s National Communications Commission said that there were no indications that the cables were cut intentionally.

However, given the sensitivity of undersea cables and recent accusations that Russia has used sabotage to disrupt undersea infrastructure, many are speculating that China may have coordinated the outage.

The disruptions were caused by two Chinese ships that cut two separate cables connecting Matsu to China six days apart.

While it is common for ship traffic to damage undersea traffic, it is not usual for two separate incidents to occur so close together.

Matsu is an extremely strategic Taiwanese island just a few miles from mainland China.

It has been targeted by conventional Chinese military forces multiple times over the past 70 years and, along with the islands of Kinmen County, is a likely target for future attacks.

Finally, Beijing runs constant disinformation, offensive cyber, and espionage campaigns against Taiwan’s government, private sector, and the public.

Taiwanese national security authorities announced on Feb 4 that they discovered a coordinated Chinese effort to inundate Taiwanese official Facebook accounts with negative posts.

Authorities reportedly found 825 Facebook accounts linked back to China that posted large volumes of anti-government comments on the Facebook pages of Taiwan’s President Tsai Ing-wen and former premier Su Tseng-chang intended to undermine their credibility.

Preceding that, Google announced that it had shut down 50,000 accounts promoting Chinese disinformation in 2022 that focused on Taiwan, COVID-19 and U.S. politics.

The company claims to have shut down more than 100,000 since 2019 across its various platforms in a disinformation campaign described as a “highly centralized, inorganic social media operation.”

Check Point Cyber Technologies reported that organizations in Taiwan suffered an average of 3,118 attacks per week in 2022, a 10% increase over 2021.

The industries it found to be most vulnerable to such attacks include finance and banking, manufacturing, government agencies, and military organizations.

The increase was modest compared to the 38 percent increase recorded in 2021.

While most Chinese espionage campaigns have targeted Taiwanese political and military intelligence, Taiwan’s semiconductor sector is a major strategic target for Chinese economic espionage.

Any company operating in the sector should consider its trade secrets, ranging from engineering and technical specifications to market research, a target of Chinese espionage.

Impacts on Business Continuity in Taiwan

These disruptions, together with the threat of conflict in the area, have eroded commercial confidence in Taiwan and driven the prioritization of contingency planning by both the Taiwanese government and companies based there.

Despite the turmoil in Taiwan, only one company, UK bicycle maker Brompton, has blamed instability for reducing operations in Taiwan.

In January 2023 Brompton’s CEO said the company is planning to reduce its dependence on parts from China and Taiwan due to the increased risk of disruptions from conflict in the region.

However, many more companies are reevaluating their position in Taiwan amidst the risks associated with increased conflict.

The American Chamber of Commerce in Taiwan published a survey in February 2023 showing that 47% of its members are redrafting their contingency plans based on the increased political tensions between Washington and Beijing.

The survey revealed that one-third of respondents’ operations had been “significantly disrupted” by the increase in tensions, compared with 17% in August 2022.

Two-thirds of respondents said that tensions were deterring expansion or investment in Taiwan while one-third of respondents reported concerns over increased costs associated with shipping, insurance, finance, and staff anxiety.

Taiwanese officials have publicly encouraged foreigners to identify and use nearby bomb shelters in the case of an emergency, such as an attack from China.

Taiwan’s National Police Agency reports that there are approximately 105,000 designated bomb shelters across Taiwan that can hold 86 million people.

However, Taiwan’s population is only around 24 million (including foreign residents) so there should be surplus shelters for tourists and others in Taiwan.

Taiwan’s Interior Ministry has said anybody is welcome, including foreign nationals, and has an app that shows the location and capacity of shelters nationwide.

Taiwanese authorities and citizens have also signaled a shifting concern over the growing threat of conflict.

Considering the increased military threat from China, Taiwanese authorities increased the term of mandatory military service there from four months to one year.

Taiwanese families with the means to do so are hedging against disaster in Taiwan by establishing residences, bank accounts, and businesses in Singapore.

Singapore-based fund managers and bankers claim they have seen inquiries jump 400% over the past year.

Finally, the fear of Chinese sabotage has incentivized Taiwan to develop a satellite-based internet network that would serve as a command and communication backup in case of destruction to ground-based communication networks.

Taiwan anticipates that if a conflict begins with China (or any other belligerent state), some of the first targets of an initial strike would be communications and radar sites.

Taiwan’s National Security Council is overseeing the project that would rely on low-orbit satellites, like Space X’s Starlink network that proved crucial to Ukraine in its war against Russia.

Broader Regional Concerns

If a major military conflict over Taiwan does develop, it is likely to spread very quickly.

For its part, the United States has moved away from its official policy of “strategic ambiguity” towards outright support for Taiwan in the case of a Chinese attack.

U.S. involvement in a conflict would likely quickly draw in allies, specifically Japan and the Philippines, which host the nearest U.S. military bases to Taiwan and have recently indicated their support to the United States in the case of a conflict over Taiwan.

Japan and the Philippines share maritime boundaries with Taiwan and have islands less than 100 miles from Taiwan.

However, major population centers such as Manilla and Tokyo are 500 and 1,300 miles from Taiwan, respectively.

Japan and the Philippines’ involvement in a conflict would make them potential targets of Chinese attacks.

Several Japanese communities nearest to Taiwan and China have already held evacuation drills in the case of an attack on Taiwan.

Japan’s Okinawa prefecture (which hosts a major U.S. military base) has conducted drills on receiving evacuees from Taiwan by air and by sea.


There are no indications of an imminent Chinese invasion of Taiwan, but the geopolitical uncertainty will be a perennial concern there for years to come.

Companies operating there should make contingency plans for a worst-case scenario by identifying nearby bomb shelters and considering evacuation options.

However, in the short term, they are much more likely to experience subtler forms of disruptions.

Companies in Taiwan, especially American companies, should be aware that they are targets of Chinese aggression that could disrupt business operations.

Below is a basic checklist that companies operating in Taiwan should consider now to mitigate potential future disruptions.

  • Update business contingency and continuity plans, including the designation of essential staff and policies on staff repatriation and relocation to other locations.
  • Identify and designate nearby areas approved as bomb shelters and conduct emergency drills relocating staff into those areas in case of an emergency.
  • Review emergency communications plans and ensure multiple communication channels (e.g. email, emergency alert systems, phone trees, etc.).
  • Establish clearly defined tripwires to activate such measures, considering that China’s actions against Taiwan have tended to follow a very incrementalist approach.
  • Increase the pace of staff localization.
  • Identify other cities in the region (such as Singapore) to diversify towards and provide redundancy in case of disruptions in Taiwan.
  • Draft plans to support evacuations by air, land, and/or sea.