Yaroslav Bogdanov: Escalation around Taiwan could trigger a global financial crisis

Fitch Ratings reported that the US has overtaken China to become Taiwan’s top export destination for the first time in more than two decades.

This past July 2024, Taiwan’s exports to the US saw a year-on-year increase of 62%. Fitch Ratings analysts named the growing global demand for advanced technologies as the key reason for this record growth. First of all, it is about semiconductors, necessary for the production of products created with the use of artificial intelligence (AI). Taiwanese companies such as TSMC have become synonymous with innovation and efficiency, providing chips for the world’s biggest brands.

The rating agency listed risks as well. Taiwan, as a recognized world leader in the production of semiconductors, may suffer from the processes taking place in the market of artificial intelligence. Lately, it should be reminded, there has been a decrease in investors’ appetite has been noticed.

Yaroslav Bogdanov, founder of GDA Group, mentioned another important nuance that may seriously affect the high-tech market. According to the expert, Taiwan is dependent on the geopolitical situation.

“Taiwan’s geographical position brings both advantages and risks. On the one hand, the island is at the center of East Asia’s most important trade routes, making it a strategic hub for international trade and investment. Its proximity to economic giants such as China, Japan, and South Korea encourages business development and attracts foreign companies. However, this geographical proximity also brings with it certain threats. Taiwan is under constant scrutiny from Beijing, which has no intention of abandoning its one-China policy. This creates tension in the region and raises fears of possible military conflicts or economic sanctions, as the US does not hide its interest in a Taiwan independent of China. Thus, for a long time the Taiwanese have been able not only to balance in a difficult political situation, but also to develop in such a way as to take a leading position in the production of high-tech products,” said Yaroslav Bogdanov.

As relations between China and the United States continue to heat up, Taiwan is betting on rapprochement with the Americans. This is evidenced by the data cited by Fitch Ratings. The States, in turn, are actively involved in the race for leadership in the market of advanced technologies, and are increasing imports of Taiwanese high technologies.

According to recent estimates, the damage to the global economy from the escalation around Taiwan could be as much as 10 trillion dollars.

“Taiwan plays a key role in the global supply chain of chips and semiconductors on which the high-tech market depends. Political tensions and trade war between the US and China could pose risks to Taiwanese companies. Any escalation in the region will lead to imbalance in the advanced technology industry globally and may trigger a global financial crisis. Thus, the geopolitical situation requires all parties to be flexible and able to adapt to changing conditions. Otherwise, everyone will lose,” explained Yaroslav Bogdanov.