How China Could Take Control of the World

The Biggest Pressure Point in the Global Economy

For today’s thought experiment, we go to Maryland and a maker of widgets… not just any widgets, but widgets that are so important that if the widget maker retired and closed the shop, the world would plunge into a recession or, more likely, a depression.

Now, replace Maryland with Taiwan (both are about the same size) and replace widgets with computer chips.

And with that, you have the ingredients for one of the biggest disasters that could befall global society—particularly the U.S. economy—over the next few years.

In yesterday’s dispatch, I wrote to you about the financial nuclear bomb China possesses in its vast holdings of U.S. debt paired against what is most likely the world’s largest hoard of gold bullion.

China could literally ransack the American economy without ever firing a single bullet. All it would take is for the People’s Bank of China to dump the U.S. debt that it owns and refrain from buying more Treasury paper in America’s weekly debt sales.

In today’s dispatch, I share with you a darker cloud overhanging the U.S. and global economy: A single company known as Taiwan Semiconductor Manufacturing Co.

I share this not to be that little boy who cried wolf, but to show where very real risks exist in the world so that you might play the role of Financial Boy Scout and “be prepared.”

TSMC, as it’s known, is the world’s single-most important maker of computer chips. It’s also the world’s most advanced maker of computer chips. These chips go into more than 12,000 products sold globally by nearly 550 companies.

If you’re reading this on an iPhone, thank TSMC.

The graphics cards on your laptop or desktop… likely powered by TSMC.

Those “Intel inside” chips… many are made by TSMC.

The F-35 fighter jets America is relocating to Europe and NASA’s Perseverance Rover roaming around Mars… yep, TSMC chips.

Bingeing the latest Netflix series… TSMC powers many HD and OLED TVs.

Just how important TSMC is hides in plain view. The company collects more than $13 billion in annual chip sales. The next nine competitors gather up about $9 billion combined. Overall, TSMC controls about 54% of the global chip market, while Taiwan’s semiconductor industry as a whole has a more than 60% stranglehold on the world’s computer chip needs.

And now: Why this is important.

Taiwan, as you very likely know, is the epicenter of military tension in Asia.

Sure, there’s North Korea, but that problem seems more bark, less bite, given how insignificant that hermit nation really is. China’s desire to bring the island nation of Taiwan under mainland control, however, is an entirely different kettle of chips.

China is a pit bull on a postman’s leg when it comes to the issue of Taiwan, a capitalist, democratic island that has operated independently for more than 70 years. And China is not about to let go of the postman under any circumstance.

The U.S., meanwhile, is Taiwan’s biggest protector.

Though D.C. officially abides by a “One China” policy that officially recognizes the government in Beijing and not in Taipei, the unofficial reality, as voiced by President Biden himself, is that America would come to the aid of Taiwan if the mainland attacked.

And a Chinese attack on Taiwan could very well be the spark that ignites America’s next great war, and the world’s next great global crisis.

One would hope that diplomacy would find a way to navigate the Taiwan/One China issue in a hot crisis.

But history is one, never-ending story of failed diplomacy and idiotic wars that ultimately mean jack-all to the societies ravaged by bloodshed and destruction. So, you know, not really convinced diplomacy would work in Taiwan simply because of all the other underlying tensions that exist between Uncle Sam and the Middle Kingdom.

The primary tension here is simply that China is a rising power, with vast wealth, a middle class 2x the size of America’s entire population, and a clear desire to unseat the U.S. economically through soft power and hard.

Just last summer, for instance, China and Russia announced plans to create a reserve currency to compete with the dollar. As I wrote about in the January issue of Global Intelligence Letter , that’s not a trifling matter. It has been in the works for more than a decade, and such a reserve currency could do very real damage to the dollar and the U.S. economy.

As for TSMC… well, if war did envelop the island, the company’s plants would obviously shutter, assuming they weren’t destroyed in early attacks.

The U.S. and the world would absolutely feel that earthquake.

Prices for consumer goods would explode higher simply because a primary input is gone, like trying to make popcorn without the corn.

Not just TV and smartphones, mind you. TSMC chips populate all kinds of other production facilities that make food and medicines and medical supplies and engines and such.

Global GDP would retreat. Deeply.

Global stocks (aside from energy and metals) would plummet.

And if the plants survived the war, and China managed to gain control of them, it would give China’s leaders massive leverage over the global economy.

So, there you have it—a new risk to our world that you might wish you didn’t know about.

But better to know where those risks are so that we can better prepare.

Oh, and I guess I should say here: Buy assets that are going to protect you just in case the worst happens: Gold, silver, Swiss francs, and a healthy bit of bitcoin should do the trick.

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