China blocks some Taiwanese imports, but not microchips

China blocked imports of citrus, fish and other foods from Taiwan in retaliation for a visit by a top American lawmaker, Nancy Pelosi, but has avoided disrupting one of the world’s most important technology and manufacturing relationships.

The two sides, which split in 1949 after a civil war, have no official relations but multibillion-dollar business ties, especially in the flow of Taiwanese-made processor chips needed by Chinese factories that assemble the world’s smartphones and other electronics.

Cannot function without chips

They built that business while Beijing threatened for decades to enforce the ruling Communist Party’s claim to the island by attacking. Two-way trade soared 26% last year to $328.3 billion. Taiwan, which produces half the world’s processor chips and has technology the mainland can’t match, said sales to Chinese factories rose 24.4% to $104.3 billion.

“The global economy cannot function without chips that are made in either Taiwan or China,” Carl B. Weinberg of High-Frequency Economics said in a report.

On Aug. 3, Beijing blocked imports of citrus and frozen hairtail and mackerel from Taiwan after Pelosi, speaker of the House of Representatives, arrived on the island. China has not disrupted the flow of semiconductors and other industrial components, a step that would send shock waves through the shaky global economy.

No sign of Chinese military action

Beijing also announced four days of military exercises with artillery fire in waters around Taiwan. That might delay or disrupt shipping to and from the island, one of the biggest global traders.

The potential disruption adds to concerns over weakening global economic growth, but Asian stock markets rose Wednesday after there was no immediate sign of Chinese military action.

Taiwanese companies have invested nearly $200 billion in the mainland over the past three decades, according to the island’s government. Entrepreneurs, engineers and others have migrated to the mainland to work, some recruited by Chinese chipmakers and other companies that want to catch up with Taiwan.

Taiwan plays big in chip biz

A 2020 census found 158,000 Taiwanese living on the mainland, according to the police ministry. Taiwan plays an outsized role in the chip industry for an island of 24.5 million people, accounting for more than half the global supply. Its producers including Taiwan Semiconductor Manufacturing Corp. make the most advanced processors for smartphones, tablet computers, medical devices and other products.

Beijing has invested billions of dollars in developing its own industry, which supplies low-end chips for autos and appliances but cannot support the latest smartphones, tablet computers, medical devices and other products. Semiconductors are China’s biggest import at more than $400 billion a year, ahead of crude oil.