Supply chain and cyber espionage risks sparked by China-Taiwan crisis

The fallout from the crisis between China and Taiwan may well see supply chain disruption in the region and will increase cyber and industrial espionage, while also showing that some companies need to rethink their crisis management plans, says a leading security intelligence firm. Dragonfly said in a briefing this week that the threat of China invading Taiwan following the recent flare up is “highly unlikely”. But it warns that there is a “likely” 60% chance relations between the two countries will enter a “new normal” period with China continuing to carry out military exercises around Taiwan. In the short term this could cause supply chain disruption in the region, the company’s analysts said. “We don’t see any sort of intended kinetic contact happening, but these kinds of exercises can cause disruptions and delays to logistics and supply chains in the region,” said a spokesperson for the company. “What we need to worry about in the coming days is miscalculation and exercises leading to a short-term crisis. Most immediately that means potential for freight shipping and air carriers having to reroute at quite a short time frame and knock-on effects for supply chains,” he added. This rising tension between China and US-backed Taiwan could see companies start to move their operations from China in a bid to protect their assets and maintain supply chains, said Dragonfly. It believes companies from countries including the US, Korea and Japan could start to relocate and move plants if they can. Companies may well be encouraged to move back home or set up in other Asian countries to make sure their supply chains remain strong, it continued. “These third countries include Indonesia, Thailand and Vietnam, and then bringing high tech business and vital industries back domestically, whether that’s to Korea, Japan or even the US,” the security intelligence firm said during the briefing. Dragonfly went on to explain that its multinational clients most at risk from deteriorating relations between China and Taiwan are broadly split into two groups. On the one hand there are companies that have people and assets in the two countries, and on the other those with wider strategic interests in the region. The former group are concentrating on potential evacuations and crisis management and the latter on the supply chain impact, said the risk experts. Dragonfly said the crisis, triggered by Nancy Pelosi’s Taiwan visit last week, has shown that some companies’ crisis management plans need updating. “I think if anything the crisis has alerted companies with fairly well-established crisis plans on how to get people out of the country and highlighted those that are going to need dusting down and updating to make sure they are ahead of the curve should this need come to pass,” said a spokesperson. He added that a Chinese invasion of Taiwan would pose “huge challenges from a security and crisis management point of view”. The security firm also warned risk managers that China is likely to ramp up industrial espionage to acquire key industrial or high-tech technologies using cyberspace, in order to future proof itself from potential sanctions by becoming self-sufficient. “China is the single most capable and threatening actor in cyberspace at the moment. This crisis will inevitably accelerate efforts to steal and capture its way towards sufficiency in what is considers to be its key sectors. As a result we are looking at areas such as pharma and tech companies, we are looking at AI and biomed. These areas where China is still significantly behind western countries are areas where it realistically has to accelerate, if it deems sanctions to be inevitable should it invade Taiwan,” it said. And Dragonfly pointed out that if China is ever hit with sanctions on the scale Russia currently faces for invading the Ukraine, there would be huge repercussions for the global economy. “The response to Russia has very much lifted the lid on what sanctions are and can do. But China is far more embedded in the international financial system than Russia could ever be and as a result, any sanctions on the scale brought on Russia would have far greater reciprocal impact on the US and global economy,” it said.

Supply chain and cyber espionage risks sparked by China-Taiwan crisis

Some crisis management plans need updating, says Dragonfly

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Want to read this article?

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