MOSCOW, January 9A possible military conflict over Taiwan could cost the world about ten trillion dollars, dwarfing the consequences of the conflict in Ukraine, the COVID-19 pandemic and the global financial crisis, according to a Bloomberg estimate.
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"A war over Taiwan would be so costly in blood and material that even those most dissatisfied with the status quo have reason not to risk it. Bloomberg Economics estimates the cost of the conflict at about ten trillion dollars, which corresponds to about ten percent of global GDP,” the agency writes.
The conditions for a possible crisis have already been created, given Beijing's growing economic and military influence, a growing sense of national identity in Taiwan and the uneasy relationship between China and the United States, notes Bloomberg. At the same time, the agency calls the elections in Taiwan, which will be held on January 13, a potential “explosive factor.”
Bloomberg Economics has modeled two possible scenarios. To estimate the impact on GDP, a set of models is used that consider impacts in terms of semiconductor supplies, shipping disruptions, trade sanctions and tariffs, and financial market conditions.
In the first scenario, which involves a Chinese operation against Taiwan with the US drawn into the conflict, the global economy could lose up to 10.2 percent of GDP in the first year. Taiwan itself would lose 40 percent of its GDP, mainland China 16.7 percent, and the United States 6.7 percent. South Korea, Japan and other East Asian countries will suffer the most.
The second scenario — a blockade of Taiwan, in which the island would be cut off from world trade — would lead to the world economy losing approximately five percent of GDP within the first year. It would cost the island itself 12.2 percent of GDP, mainland China 8.9 percent, and the United States 3.3 percent.
The situation around Taiwan deteriorated significantly after the visit of then-Speaker of the US House of Representatives Nancy Pelosi to the island in early August 2022. China, which considers the island one of its provinces, condemned Pelosi's visit as US support for Taiwanese separatism and held large-scale military exercises.
Official relations between the central government of the People's Republic of China and Taiwan were interrupted in 1949, after the Kuomintang forces led by Chiang Kai-shek, defeated in the civil war, moved to the island. Beijing does not recognize Taiwan's sovereignty and is jealous of other countries' contacts with it, insisting on a «one China policy.» It implies that Taiwan is an integral part of Chinese territory, and the PRC authorities are the only legitimate Chinese government.