The incredible £7.5tn secret weapon stopping China - for now

Taiwan has a weapon to deter China - at least for now (Image: Getty)

China’s president, Xi Jinping used his annual New Year’s Eve speech to vow to reunify his country with Taiwan. His comments came as the superpower concluded a large five day exercise in which it rehearsed plans for an invasion and naval blockade of its smaller neighbour.

During his New Year’s Eve address broadcast on Wednesday evening by state media, Mr Xi praised the country’s advancements in key sectors including military tech and space exploration. Images ranging from humanoid robots performing kung fu to new hydropower projects were shown on the screen as he spoke.

“We sought to energise high-quality development through innovation,” Mr Xi said while thanking Chinese people for contributing to the country’s economic growth over the past five years.

Xi Jinping has vowed to reunify the two countries (Image: Getty)

Taiwan is a global leader in semiconductor production - vital to electronics worldwide (Image: Getty)

But for all of China’s evident military might, Taiwan possesses a secret weapon that is likely to deter any invasion in the near future.

Taiwan is currently responsible for producing approximately 60 to 70% of all the world’s semiconductors and more than 95% of the advanced chips. The chips are present in almost every electronic device in use today, from mobile phones to washing machines.

For all of China’s cutting-edge technology and dominance in world markets, the country still imports nearly half of the island’s semiconductors.

Economists believe that a war between Taiwan and China could cost the global economy as much as £7.5trillion, a significantly higher sum than seen following Russia’s invasion of Ukraine or the Covid-19 pandemic.

China recently held large-scale naval exercises close to Taiwan (Image: Getty)

Such an impact means on China and other global superpowers is perhaps Taiwan’s greatest defensive weapon as it seeks to maintain its independence.

Tsai Ing-wen, Taiwan’s former president, described the so-called “silicon shield”, due to its resemblance to Silicon Valley in the US, as allowing “Taiwan to protect itself and others from aggressive attempts by authoritarian regimes to disrupt global supply chains”.

Despite China’s hostile rhetoric and provocative military displays, the island has been able to demonstrate to its larger neighbour what the impact could be if attempts to take control by force.

Kharis Templeman, a Taiwan-focused research fellow at the US-based Hoover Institution, said the Covid-19 pandemic exposed how vulnerable companies were to their dependence on Taiwanese semiconductors, forcing many to react quickly when supplies were disrupted. He said the episode also illustrated the potential consequences of a Chinese attack on Taiwan, which could permanently sever global chip supplies.

He told the Telegraph: “Generally the idea of having over-concentration from one supplier located in one location is a big problem for your business model in this new world.

“They want at least some supply or some production that’s closer to the ultimate customers.”