The recent explosion in tensions between Taiwan, China and the U.S. is already rippling out into high profile business relationships, with Apple reportedly asking Taiwanese suppliers to label products bound for China as made in either “Taiwan, China” or “Chinese Taipei.” That gesture is designed to appease Beijing by following rules that are already in place more strictly, but as the situation develops, pressure will likely be applied from all sides, and Taiwanese business may well find itself caught in an increasingly tough position.
One company whose situation might prove instructive for anyone trying to predict how this all plays out is Evergreen. A few months ago, the Taiwanese shipping giant was accused of inadvertently helping to fund China’s navy, with capital from its purchases of ships in China being directed toward the same shipyards that also build Chinese warships, according to a report by the Washington-based Center for Strategic and International Studies (CSIS).
The basic case made against the company is that it has purchased at least 44 vessels from China State Shipbuilding Corporation (CSSC) since 2018, with all but two of these ordered from shipyards known to produce ships for the People’s Liberation Army Navy. Satellite imagery suggests there is “direct sharing of resources between military and civilian operations at China’s key shipyards,” and the report posits that there are two possible advantages to this dynamic for the Chinese navy. First, “Foreign capital can be used to offset research and development costs of military assets,” ultimately lowering the cost of upgrading the Chinese navy. Second, “Access to foreign commercial technology and know-how may inadvertently help China innovate in the military realm,” with the same effect.
Post-Pelosi, this obviously looks bad. But it’s also not straightforward. Most high end shipbuilders around the world produce a mixture of commercial and military vessels, so in effect it’s very difficult to build ships and be geopolitically neutral. What’s more, cutting ties with the Chinese military may not be seen as too controversial, but if it’s seen as a precursor to demands for more wide-ranging attempts to cut ties with the Chinese economy, it’s a harder sell.
In short, there is a debate to be had.
CSIS’s position is clear: China is both a security threat to Taiwan and increasingly assertive more widely, and this necessitates picking a side. Speaking by email, report co-author Matthew Funaiole explains: “CSSC is a major player in advancing China’s naval modernization” and “China is, and will continue, to use its growing naval might to project power and challenge the U.S. position in the Indo-Pacific. Other major shipbuilders, like Japan and South Korea, not only provide greater transparency into their operations but are also U.S. allies.”
Others might not see it in such black and white terms. And more practical areas of contention also muddy the issue. In a statement cited by Taiwan’s Central News Agency, Evergreen noted that all of its containership projects undergo international bidding and pointed out that it has “entrusted South Korean companies to build 58 vessels with a combined capacity of more than 730,000 TEU, surpassing shipbuilding from China which has supplied 35 vessels with an aggregate capacity of about 240,000 TEU.” What this highlights is that if Evergreen is already building more ships in South Korea than China, then it has financial and logistical reasons for doing so (Funaiole acknowledges that “It’s a leading shipbuilder for a reason.”) And once it is accepted that any divestment will come at a cost, then the issue becomes whether the rewards are worth it.
Symbolically, it is a bad look to be helping to pay for the navy of a country threatening to invade you. But practically, to what extent does China benefit from offsetting the costs of building its navy with foreign capital? Would Beijing not be able to simply swallow any loss and continue to build at the same rate? Similarly, what are the technology transfers which would theoretically be halted, and are they truly valuable to an advanced military like China’s? What do commercial shipping firms have to offer the largest navy in the world that it doesn’t already have?
By email, Funaiole says these questions don’t have answers yet. And that’s where that debate sits right now. On pause. Awaiting further details. Concrete proposals. New movements. New demands and counter demands.
But if that’s unsatisfying, then it is also broadly representative of a million other equivalent debates that are about to be opened up over the rights and responsibilities of companies that straddle Chinese, Taiwanese and U.S. markets. These are still early days.
Image credit: Evergreen
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