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. Last Updated: 07/27/2016

China Missiles Rattle Taiwan Markets

LOS ANGELES -- China's stepped-up military threats against Taiwan have led to a sharp increase in the transfer of money from Taiwan to Southern California banks, put trans-Pacific business deals on hold and prompted a rush to book flights from Taiwan to the United States.

"I think a lot of people are nervous," said Nannen Xu, a senior adviser at Far East National Bank in Los Angeles.

In an effort to allay fears, the Taiwan government has dipped into its foreign reserves, among the largest in the world, to keep the Taiwan currency at 27.50 Taiwan dollars to the U.S. dollar. The government also released an emergency plan Monday designed to keep vital industries operating in the event of war.

Many Taiwanese and foreign banks were forced Monday to limit the sale of U.S. banknotes to $1,000 to $3,000 per day, after running out of the coveted currency.

It is too early to measure exactly how much economic damage has been done. The battered Taiwan stock market fell an additional 2 percent Monday, bringing it down a total of 30 percent since China launched its first missile tests last July.

Most observers remain convinced the Chinese government merely is trying to intimidate the Taiwanese people in the run-up to the March 23 presidential election, and would not endanger its own trade-dependent economy by launching an attack.

But many investors were taking no chances. Among them was Yu Hui-chen, who, upon hearing that more military exercises were taking place and that U.S. aircraft carriers were headed to the region, panicked and dumped every stock she owned.

"I know it wasn't smart, but it's terrifying," Yu said, her face flush with relief after completing her sale of $53,000 worth of stocks. "I feel so much better now."

The threats are exacting a toll not only in Taiwan, but also in Southern California's large Taiwanese community.

The Shine Group Inc., a travel agency with two offices in the Los Angeles area, reported that as many as 15 percent of its customers have recently canceled or delayed trips to Taiwan. The agency is waiving its regular fee for ticket changes and cancellations.

The flow of money from Taiwan into California began last summer when the Chinese launched their first round of missile tests, and by some estimates has totaled $10 billion. Bankers say the total is rising rapidly since the latest saber-rattling.

Dominick Ng, president of San Marino-based East West Bank, said his bank had seen a "significant" increase in funds from Taiwan during the past week although he said it is impossible to measure the overall amount. Other Chinese community banks also reported a rise in the past week in funds from Taiwan.

Eddie Chao, a real estate consultant with offices in Los Angeles and Taipei, said many of his friends and clients in Taiwan are transferring funds out of the country. "Most of the businessmen are very wary and they have put their capital on hold," he said.

It is too early to know how much U.S. trade will be affected. Taiwan's strategic ports of Keelung and Kaohsiung have remained open, although the government has rerouted 300 airline flights to avoid the missile target areas. Some predict shipping costs will rise as a result of the delays caused by changing routes.

Not everyone is running from the action.

Daniel Hsieh, a vice president with William Kent International, a Washington-based strategic consulting firm, said he hadn't heard of any U.S. companies canceling investment plans or making other drastic changes to their Taiwan game plans.

"Everyone's just waiting to see how things work out," he said.