ANALYSIS: The 1260H list: how Beijing is arming the economic war for Taiwan

ANALYSIS: The 1260H list: how Beijing is arming the economic war for Taiwan

Introduction: A list that says everything about Beijing's strategy

The "1260H list" and the Chinese response

On June 26, 2026, the Institute for the Study of War (ISW) published its update on the China-Taiwan situation with information of considerable strategic importance: the People's Republic of China retaliated against the American expansion of the "1260H list" — the list of Chinese entities linked to the military-industrial complex — by imposing export controls and banning Chinese government entities from conducting business with American companies designated on that list.

To put it plainly: the United States expanded their blacklist of Chinese companies considered vectors of armaments or dual-use technologies that could serve a military operation against Taiwan. China responded in kind, by designating American companies and imposing its own restrictions. This is a declared economic war, conducted below the threshold of armed conflict, with control over the technological and industrial capacity that will determine the outcome of any potential military conflict.

The logic of "preemptive economic war"

What is at stake with these crossed blacklists is a preemptive economic war. Before a single shot is fired, both powers are seeking to degrade the adversary's industrial and technological capabilities. The United States want to cut China's access to advanced technologies — semiconductors, artificial intelligence, precision equipment — that would allow it to produce the weapons systems needed for an invasion of Taiwan. China seeks to do the same, while making itself independent of American supply chains.

This preemptive logic is in reality the dominant strategic doctrine in the Taiwan Strait for several years now. And the events of June 2026 mark a significant acceleration of this dynamic.

The 1260H list: an American tool of economic deterrence

What the 1260H list is and how it works

The "Section 1260H list" is a designation created by the U.S. Congress under the National Defense Authorization Act. It targets Chinese entities considered to be operating in the defense sector or having ties to the Chinese military — the People's Liberation Army (PLA). Companies designated on this list face commercial restrictions: American companies must obtain special licenses to trade with them, and certain transactions are simply prohibited.

The expansion of this list in 2026 means that the American administration has identified new Chinese entities considered linked to the potential military effort against Taiwan. These designations typically include companies in advanced technology, semiconductors, artificial intelligence, aeronautics, and communications systems. The message is clear: the United States is seeking to slow Chinese military modernization by cutting its technological access.

The effectiveness of export controls: results and limits

The American policy of export controls toward China, intensified since 2020, has produced tangible but uneven results. The embargo on advanced semiconductors has delayed the upgrading of China's chip industry. Companies like Huawei have experienced significant difficulties accessing the most advanced components. Chinese ambitions in cutting-edge artificial intelligence have been constrained.

But China has also accelerated massive investments in domestic semiconductor champions — SMIC and others — to reduce its dependence. It has developed alternative supply circuits through third-party countries. And it has benefited from technology transfers through informal channels. The embargo is not watertight. But it imposes a real cost and delays capabilities that would be decisive in an armed conflict.

The Chinese retaliation: symmetry and escalation

Chinese export controls: a structural response

The Chinese response to the expansion of the 1260H list is symmetrical in form but asymmetrical in content. Beijing imposed its own export controls on technologies and materials in which China holds a dominant position — notably rare earth elements and certain materials critical to the American defense industry. This countermeasure exploits a genuine dependency in Western supply chains.

China controls a massive share of global rare earth production — elements indispensable for manufacturing electric motors, guidance systems, and advanced weapons. Chinese controls on these exports directly affect the American, European, and Japanese defense industries. This is a strategic lever that Beijing is deploying with increasing precision.

The ban on government entities dealing with designated American companies

The newest measure described by ISW of June 26, 2026 is the ban placed on Chinese government entities from conducting business with American companies designated on the 1260H list. This measure has both symbolic and practical reach. Symbolically, it institutionalizes reciprocity and normalizes the logic of economic war. Practically, it creates complications for American companies that still had contracts or partnerships with Chinese public entities.

This decision is part of a broader strategy of accelerated "economic decoupling" between China and the United States. This decoupling, long described as a theoretical option, is now being concretely implemented. The two economies are preparing to operate with increasing independence — and this decoupling process is itself a preparation for the possibility of conflict.

Taiwan at the center: the military exercises of June 2026

Five days of tanks in the streets of Taipei

The economic dimension of the Sino-American confrontation is accompanied by an increasingly explicit military dimension. The Washington Post of June 22, 2026 reported that Taiwan conducted a five-day "immediate combat readiness" military exercise, with tanks patrolling the streets, in response to what was described as a PLA "toward real war" drill. Armored vehicles in the streets of Taipei — it is a striking image.

These exercises are set against a backdrop of growing Chinese military pressure around Taiwan. The regular incursions of Chinese military aircraft into Taiwan's Air Defense Identification Zone (ADIZ), naval exercises around the island, encirclement simulations — all of this creates continuous psychological and operational pressure on Taiwan's armed forces.

RIMPAC 2026 and Valiant Shield: the American counter-presence

Facing this pressure, the American response is visible in the massive military exercises deployed across the Pacific. RIMPAC 2026 — the world's largest multinational naval exercise — began on June 24, 2026, with approximately 40 ships, 25,000 personnel, and 31 participating nations, according to ThinkChina. The Valiant Shield 2026 exercise took place on June 22.

These exercises are not rhetoric. They represent a concrete demonstration of American power projection capability in the Western Pacific. They send Beijing a precise message: the United States is present, its allies are too, and any military operation against Taiwan would encounter a coordinated and powerful resistance. The question — which remains open — is whether this message is sufficient to deter Xi Jinping.

The European warning on China and Taiwan

European powers take a position

A notable development of the week of June 21–27, 2026: European powers issued a "rare warning" about the Chinese threat to Taiwan, according to Yahoo News of June 24, 2026. It is rare for European governments to position themselves this explicitly on an Indo-Pacific security question. This fact, in itself, is an important strategic signal.

Europe has long sought to separate its economic relations with China from security questions tied to Taiwan. That posture is becoming increasingly difficult to maintain. Chinese support for Russia in the war in Ukraine — via dual-use components, technologies, and trade — has made plain the interweaving of the European and Indo-Pacific fronts. What China does in Ukraine foreshadows what it could do in the event of a conflict over Taiwan.

The interweaving of fronts: Ukraine and Taiwan, the same struggle

It must be said plainly: the war in Ukraine and the question of Taiwan are two faces of the same challenge to the international order. Russia is testing whether territorial conquest by force is possible in the contemporary world. China watches, evaluates, draws lessons. If Russia obtains an agreement that validates its conquests, China concludes that the window for Taiwan is open. If Russia is pushed back, China recalibrates its risk calculations.

The Europe that is now issuing warnings about Taiwan has integrated this logic. This is not an altruistic impulse for Taiwanese democracy. It is an understanding that geopolitical precedents have global consequences. A victory for Putin would be an invitation to Xi. A successful defense of Ukraine is a deterrent for Taiwan.

The "quarantine" tabletop exercise: when Taiwan prepares for the worst scenario

Simulating a maritime quarantine in order to prepare for it

Bloomberg of June 25, 2026 reports that Taiwan conducted a simulation exercise — a "tabletop exercise" — simulating a maritime "quarantine" by Chinese forces. This scenario — distinct from a full blockade or an amphibious invasion — is considered the most likely near-term Chinese course of action. A maritime quarantine would allow China to exert maximum pressure on Taiwan without triggering an open war that would immediately mobilize American forces.

By simulating this scenario in a tabletop format, Taiwanese authorities are preparing their response protocols, identifying their logistical vulnerabilities, and testing the coordination between civilian and military institutions. This is serious preparation for a scenario one hopes will never materialize. But the preparation itself is a deterrent message: "we have anticipated your preferred scenario, and we have a response."

Taiwan's logistical vulnerability: dependence and resilience

Taiwan is an island dependent on imports for its food, energy, and many industrial components. Even a partial maritime quarantine would quickly test the island's logistical resilience. Its strategic reserves — oil, food, medicines — are limited. Its capacity to withstand prolonged economic pressure is a recognized weak point.

This is precisely why tabletop exercises are essential. They allow bottlenecks to be identified, emergency protocols to be developed, and the civilian population to be prepared for the constraints of a crisis situation. Finland and Switzerland developed such strategic reserves over decades. Taiwan is accelerating this preparation — perhaps decades behind, but with renewed urgency.

Semiconductors as the decisive front in the war for Taiwan

TSMC and the world's dependence on Taiwanese chips

Taiwan produces approximately 90% of the world's most advanced semiconductors, primarily through TSMC (Taiwan Semiconductor Manufacturing Company). This industrial concentration creates a global dependence — from smartphones to weapons systems — that gives Taiwan unprecedented strategic importance in the global economy. Even a temporary disruption of Taiwanese semiconductor production would trigger a global economic crisis of unprecedented scale.

This reality cuts both ways: it makes Taiwan a strategic asset that no one wants to see fall under Chinese control — including countries like Japan, South Korea, the European Union, and the United States that are massively dependent on these chips. But it also creates a vulnerability: a Chinese military operation that destroyed or paralyzed TSMC factories would inflict a global economic damage that could change the calculus of certain actors.

The diversification strategy: reducing vulnerability without abandoning Taiwan

Facing this risk, major powers have accelerated the diversification of their semiconductor production. The United States adopted the CHIPS Act to stimulate domestic production. The EU launched its own Chips Act. Japan is attracting massive investment in its semiconductor capabilities. These initiatives aim to reduce critical dependence on Taiwan — not to abandon it, but so that its defense is not the sole protection for a critical supply chain.

China is seeking on its side to develop its own domestic semiconductor capabilities to reduce its dependence on Taiwanese and American chips. This is a massive effort, partially hampered by American export controls, but one that is progressing. The central strategic question is whether China will achieve semiconductor self-sufficiency before or after a potential military action against Taiwan. The answer to that question could determine the timing of Beijing's decisions.

India between two fires: strategic partner or free rider?

India buying Russian oil and selling to the world

India occupies a strategically ambiguous position in the Sino-American competition. It has been massively buying Russian oil since 2022 — taking advantage of the discounts forced by Western sanctions to build an economic advantage. Simultaneously, it is a privileged partner of the United States within the QUAD framework (Quadrilateral Security Dialogue), which aims precisely to counterbalance China in the Indo-Pacific.

This dual posture — profiting from gaps in the Western sanctions regime while benefiting from American security guarantees — is uncomfortable for Washington. The United States has chosen not to push too hard on India regarding its Russian oil purchases, prioritizing the strategic partnership against China. This is a debatable calculus: India is helping to finance the Russian war while claiming to be an ally of democracies.

India's position on Taiwan: a neutrality with limits

On the question of Taiwan, India officially maintains a "One China Policy" — recognizing the Chinese position on Taiwanese sovereignty — while developing economic and cultural relations with the island. This ambiguous position reflects the deep competition and mutual distrust between India and China, particularly following the border clashes of 2020 in the Himalayas.

In the event of an armed conflict over Taiwan, India's position would be critical. A neutral India would leave China free to concentrate its forces without fearing a second front. An India actively opposed to Chinese aggression would considerably complicate Beijing's strategic calculations. Investing in the partnership with India — including accepting its Russian oil purchases as a political price — is therefore a debatable but understandable American strategic decision.

Conclusion: The 1260H list is only the beginning of a long economic war

Economic escalation as a prelude to what?

The economic war between the United States and China over Taiwan will continue to intensify. The crossed blacklists, the export controls, the technological restrictions — all of this creates a new economic reality in which both powers are preparing for an eventuality that neither should want. The question is not whether this economic war will have strategic consequences. That is inevitable. The question is whether deterrence will hold.

The semiconductor story is central to this equation. If the United States and their allies manage to keep China out of the most advanced chip generations, they delay its ability to deploy precision weapons systems in sufficient quantity for an operation against Taiwan. This delay is precious — it buys time for deterrence to solidify, for Taiwan to strengthen itself, and for the international community to consolidate its support for the island.

What the West must do to support Taiwan

Supporting Taiwan means maintaining technological export controls despite economic pressures. It means participating in military exercises like RIMPAC and sending presence signals in the Pacific. It means issuing clear warnings — as European powers have just done — about the consequences of Chinese military action. It means building alternative supply chains for critical Chinese materials.

The 1260H list is a tool in this arsenal. Imperfect, contested, but real. And the Chinese retaliation shows that Beijing is taking it seriously. That is already a result.

By Maxime Marquette, columnist

Columnist's transparency note

My position on China and Taiwan

I consider China under Xi Jinping to be the greatest strategic threat to the liberal international order. I support the defense of Taiwan as a central stake for democracies. This positioning shapes my analysis. I own it and invite comparison with different perspectives.

Readers who hold different views on Chinese governance or Taiwan's status are encouraged to verify the factual claims I make against the primary sources cited.

Sources and limits

Information on the 1260H list and the Chinese retaliation comes from ISW of June 26, 2026. Military exercises are documented by the Washington Post of June 22, ThinkChina of June 25, and Bloomberg of June 25, 2026. European warnings come from Yahoo News of June 24, 2026. I do not have access to the classified details of the designation lists or to American or Chinese internal deliberations.

The details of export control implementation and company-level impacts are partly drawn from secondary reporting, as primary regulatory documents are not always publicly accessible in full.

Sources

Primary sources

ISW — China-Taiwan Update: PRC retaliation against the 1260H list — June 26, 2026

Washington Post — Taiwan: five-day immediate combat readiness exercise — June 22, 2026

Bloomberg — Taiwanese tabletop exercise simulates maritime quarantine by China — June 25, 2026

Secondary sources

ThinkChina — Why the Pacific is filling with warships: RIMPAC 2026 — June 25, 2026

Yahoo News — European powers issue rare warning about Chinese threat to Taiwan — June 24, 2026

The Straits Times — Taiwan says warning time for any Chinese attack is shortening — June 24, 2026