German businesses in Taiwan impacted by cross-strait tensions, highlighting importance of energy resilience

Misha Lu, DIGITIMES Asia, Taipei 0


The German Trade Office Taipei has released its Business Confidence Survey Report 2023/2024. The survey, conducted between November 15, 2023, and January 12, 2024, had a response rate of 39% out of the 251 contacted German businesses in Taiwan. "Even though a high degree of continuity in economic policy can be expected after January's elections, increased cross-strait tensions are seen as a growing burden," according to the report's assessment.

The latest survey is the 12th conducted since 2012. Out of 20 selectable challenges, cross-strait relations remain the third largest concern among German businesses in Taiwan, as it was in 2022, with 54.1% of respondents considering it an issue. In 2021, the figure was still 45%. Global and Taiwanese economic growth are respectively deemed the first and second biggest challenges.

As indicated by the survey, 36.8% of respondents see the cross-strait relations negatively impacting their supply chains in Taiwan, an increase of 12.3% compared to 2022 (24%). 39% of respondents have no opinion, and 24% see no effects. Meanwhile, 34.7% expect their business activities to be affected in the following 12 months, compared to 28.1% in 2022. Regarding future business operations and investments, 40.2% of surveyed German businesses see negative effects, compared to 28.1% in 2022.

Amid the ongoing US-China trade war, 24.5% of the surveyed German businesses see the sanctions and export restrictions adopted worldwide to hurt the local operations in Taiwan.

Despite the myriad of challenges, the report deems supply chain disruptions to have eased up in Taiwan, even though 40.8% of German companies remain negatively impacted by supply chain bottlenecks, compared to 66.7% in 2022. As indicated by Eun Choong Kim, President and CEO of Mercedes-Benz Taiwan, the automotive industry has observed a gradual supply improvement from manufacturing to logistics in 2023. However, geopolitical tensions and other overarching uncertainties may change the state again. All in all, as revealed by the report. 96.9% of German businesses in Taiwan have no intention of relocating their investments abroad - the figure remains mostly unchanged between 2021- 23.

Energy resilience as vital as green energy generation

Notably, Taiwan's energy transition is deemed the fourth biggest challenge, with 25% of German businesses concerned about it. Speaking at the GTO Economic Outlook 2024 event, Erdal Elver, Siemens Taiwan President and CEO, noted that even though Taiwan has made progress in renewable energy development, such as offshore wind power and solar energy, the entire energy chain must be addressed. "Energy consumption operation is as important in the energy transformation, and we should also look and invest and drive more energy efficiency in the operations - be it manufacturing, transportation, or in the building," said the CEO. Elver also highlighted the importance of grid resilience, another topic linked to energy transformation. "Grid needs to be resilient - and that would be something where we would also expand," he said, referring to emergencies such as war.

The remark echoes a war game conducted by the Taiwan Center for Security Studies (TCSS) in October 2023, which factored in the resilience of Taiwan's economic and energy supply chains during Chinese military aggression. In the aftermath of the wargame, the TCSS published a report that recommended thoroughly re-examining the Taiwanese government's current energy policy, including its energy storage strategy and grid distribution, to reduce the risk of energy shortage during wartime. The TCSS report also recommended exploring the possibility of reintroducing nuclear power and developing hydrogen power while realistically examining the limits and proportion of solar and wind energies.

As Admiral Samuel Paparo, the current commander of the US Pacific Fleet, stated in a recent US Senate Testimony, a Chinese naval blockade of Taiwan is also possible, and that if one only prepares for an invasion, "we're leaving a wide range of military options unplanned for."

Credit: German Trade Office Taipei

Credit: German Trade Office Taipei