Worrying About Taiwan
No, war isn't imminent, yes we should all still be worried
The specter of military conflict in the Taiwan Strait is raising alarm bells in the C-suite. From the FT:
Company executives are increasingly concerned about the possibility of war over Taiwan, according to consultants who have seen a sharp rise in demand for briefings following the invasion of Ukraine.
Eric Sayers, head of the Indo-Pacific practice at Beacon Global Strategies, said China’s crackdown on democracy in Hong Kong coupled with the Ukraine invasion had “rapidly accelerated” the fears.
“A year ago Beacon would occasionally be asked a question or two about Taiwan from our clients,” said Sayers.
“We are now being asked to brief CEOs directly on Taiwan politics and the military situation [and to] organise meetings with senior US officials or retired military leaders to understand how they view the situation.”
Nothing about this should come as a surprise: the Russia-Ukraine conflict, warnings from high-level US officials over China’s intentions vis-a-vis Taiwan, and President Biden’s repeated implication that the US would defend the island in the event of a PLA attack have sharply focused corporate attention on the risks to global commerce posed by a revanchist great power. Driving those concerns has been Beijing’s escalatory behavior—the militant unification rhetoric, the PLA’s multi-decade modernization drive, a sharp escalation of aerial sorties into the island’s ADIZ, the choking off of Taiwan’s international recognition, the millions of daily cyberattacks and flood of Chinese-language disinformation, and the weaponization of trade and tourism—since the election of President Tsai Ing-wen, from the anti-unificationist Democratic Progressive Party (DPP), in 2016.
Clearly, the trend lines are moving in an ominous direction and have been for some time. To wit:
China is more repressive, nationalistic, impatient, and comfortable throwing its weight around the international arena than in decades past. It’s widely understood President Xi expects to resolve the “Taiwan Question” during his time in power.
Taiwanese emphatically oppose any form of unification; a sentiment that’s only grown with the country’s younger generation who prioritize their unique national identity and democratic institutions. The Hong Kong crackdown strongly reinforced that sentiment.
China’s bet on deploying economic inducements and soft power—encouraging Cross-Strait commerce, travel, and cultural exchange—to build public support for peaceful unification has been an utter failure to this point.
Across the Pacific, the Sino-American relationship is faring no better. The bilateral relationship is now largely defined by mutual mistrust and strategic competition. Actions taken in Washington to shore up Taiwan’s defensive capabilities are interpreted in Beijing as unacceptable provocations designed to move the island towards an outright declaration of independence. Layered on top of that is the economic reality: semiconductor shortages afflicting major sectors of the global economy have showcased Taiwan’s absolute centrality to the ICT value chain. TSMC, based on the island but with an extensive production footprint across the region, is arguably the world’s most important company given its leading-edge fabrication capabilities.
This is important to bear in mind as tensions ratchet up; blockading, bombing, and occupying Taiwan would impose disruptions on the global economy orders of magnitude greater than the (very costly) Russia-Ukraine conflict. Any conflict, however, brief, would cripple the semiconductor supply chain—with ripple effects hitting everything from cars, computers, and iPhones, to AI software, military hardware, and complex industrial systems. Dense supply chains undergirding the global economy would go up in smoke overnight. As FBI Director Chris Wray put it:
“The danger China poses to companies isn’t just complex. It’s also getting worse. That’s in part because, as you all know, there’s been a lot of discussion about the potential that China may try to forcibly take over Taiwan. Were that to happen, it would represent one of the most horrific business disruptions the world has ever seen.”
Of course, the risks presented by a kinetic conflict breaking out over Taiwan go far beyond business. Forcibly changing the status quo would prompt the single greatest challenge to the liberal international order in decades, bring about a global recession, and increase the risk of all-out nuclear warfare. Given that ominous backdrop, it’s certainly wise for any business operating in either Taiwan or China to prepare for the worst.
However, with all that ominous context out of the way, I am relatively sanguine about the prospect of a military conflict over the next few years. In my read, while none of the parties to the China-Taiwan-US trilateral are particularly thrilled with the “status quo,” the risks of breaking with it remain extremely high. If the overriding goal is avoiding a mutually catastrophic military conflict, then the existing arrangement, wherein Taiwan operates as a de facto sovereign state officially known as the Republic of China (ROC) while refraining from pursuing de jure independence, has proven remarkably durable and will likely endure awhile longer.
Taiwan is pragmatic
Given the massive power imbalance, Taiwan has (in my view) been remarkably pragmatic in managing the China threat. Here is my thinking behind that assertion:
While most Taiwanese ideally prefer to live in a de jure independent state, they realize that’s not currently possible. Moving towards an outright declaration of independence would be a recipe for devastating military conflict. Taiwanese voters instead prioritize stability; polling data indicates a robust consensus around maintaining the status quo for now.
I take Beijing at its word that if backed into a corner, its leaders would opt to forcibly subjugate Taiwan and risk all-out war rather than accept the massive regime legitimacy that would flow from letting it permanently slip away.
President Tsai, more than most, seems acutely aware of the need to project technocratic competence, moderation, and stability in managing China—both to avoid triggering Beijing and reassure her own constituents.
Yes, the Tsai government is widely mistrusted and loathed across the Strait for its perceived pro-independence leanings, close relations with DC, and refusal to accept the PRC’s interpretation of the “1992 Consensus,” but it’s wholly misleading to suggest Tsai and her allies are actively destroying the status quo or moving Taiwan in the direction of de jure independence. Lev Nachman and Brian Hioe, in an article for The Diplomat several years ago, do an excellent job clarifying this misperception.
There’s also a healthy amount of propaganda and narrative warfare emanating from across the Strait. Regardless of the underlying reality, Chinese officials and state media will reflexively depict Taiwan’s government as an American cat’s paw and anti-status quo provocateur to a) justify their own actions towards the island as “defensive” in nature and b) discredit Tsai and the ruling DPP in the eyes of Taiwanese voters by casting them as illegitimate American puppets more interested in causing trouble than looking out for the island’s best interests.
My key point here is this: Taiwan understands the gravity of the challenge it faces and has exercised considerable restraint to avoid giving China a convincing pretext for drastically escalating its coercive behavior.
In both rhetoric and action, there is all manner of provocative things the Tsai government could be doing that would telegraph a determination to upend the status quo. Broadly speaking, they have not done so.
Unlike many of its democratic peers across the Western world, Taiwan is not governed by inflammatory, conflict-minded populists.
Taiwan’s citizenry could democratically choose to be governed by a different set of leaders much further along the pro-independence spectrum. Across successive election cycles, they have refrained from doing so.
I’m betting that will continue to be the case past the duration of President Tsai’s second term ending in 2024.
China’s calculus
Now of course, outside of China most of the growing concern is about Beijing’s actions rather than what’s coming out of DC or Taipei. I am firmly of the view that the ruling Communist Party is less tolerant of the status quo than the other two members of the geopolitical triangle. There are a handful of reasons for this: under Xi, a potent strain of grievance-based, insular PRC hyper-nationalism increasingly pervades China’s political discourse; Beijing’s frustration at the lack of political progress between the two sides has been growing for years, tracing back to the later stages of KMT governance back in 2016; and the simple reality that “unifying Taiwan with mainland China is a key element of Chinese President Xi Jinping’s “Chinese dream.” The decision to break with it, should it happen, will almost assuredly come from President Xi or one of his successors.
Having said that, I don’t think Beijing’s calculus has fundamentally shifted. I expect strategic patience to prevail over drastic action for at least the next several years. There are several reasons behind my thinking: risk of failure, international blowback, China’s domestic woes, and perceptions of the future balance of power in Asia.
Risk of Failure
For starters, I do not buy the idea that Beijing can compel Taiwan’s surrender via economic blockade, occupation of the outlying islands, or an extensive bombing campaign. Taiwanese nationalism is too strong a force and punitive measures would likely reinforce Taipei’s resolve to fight.
Much more likely, taking Taiwan would necessitate a prolonged, boots-on-the-ground occupation. Landing soldiers on the island would be a monstrous task unto itself given Taiwan’s unforgiving geography, defense infrastructure, and the inherent difficulties of an amphibious invasion.
China would almost assuredly lack the element of surprise, giving Taiwan a window of opportunity to fortify its defenses. Taiwanese soldiers would be fighting an existential battle for survival on familiar home territory whereas PLA soldiers—virtually none of whom have relevant combat experience—would be pressing forward in unfamiliar and hostile enemy terrain.
Ian Easton, author of The Chinese Invasion Threat, writes:
The Chinese military almost certainly could not prosecute a full-scale invasion of Taiwan today and succeed. Nor would any sane chairman of the CCP want to make the attempt. Even if a few hawkish generals were prepared to roll the dice, the costs and risks entailed by the war would be enormous and potentially fatal for the regime. PLA strategists know they still have a long way to go before they will be able to achieve their objective.
The key point, per Easton, is this: PLA’s military planners are highly uncertain of victory regardless of whether or not the US, Japan, and their allies decided to intervene. Although Easton has become more pessimistic over Taiwan’s chances since publication, I maintain PLA officials understand that an invasion remains an (extremely) high-risk undertaking with a significant probability of failure and domestic political blowback.
The Hong Kong Red Herring
Allow me a bit of a digression here. For an abundance of reasons, Hong Kong features prominently in any discussion of cross-strait affairs. The “One Country, Two Systems” governance framework delineating the relationship between Hong Kong and Beijing has long been dangled in front of Taipei as an enticing template for unification. More recently, China’s crackdown on the city, which focused global attention following the outbreak of mass protests in 2019 in response to public discontent over growing PRC encroachment, and then gained steam with the passage of the 2020 National Security Law (NSL), has justifiably drawn the ire of Taiwanese citizens and authorities alike.
While Taiwan and Hong Kong share numerous attributes, to my mind little about the city’s present circumstances serves as a particularly relevant analogy for any China-Taiwan contingency. The comparison obscures a lot more than it illuminates. Here’s why:
Since 1997, Hong Kong has been governed as a Special Administrative Region within the People’s Republic. The HK government’s loyalties flow upwards to Beijing not downwards to its citizenry. While afforded some (shrinking) level of autonomy, the political system is engineered to ensure the Chief Executive and Legislative Council are populated with PRC loyalists.
National defense is handled by the PLA, not an independent force loyal to the local population. Following the outbreak of mass demonstrations against an unpopular extradition treaty in 2019, Hong Kong’s police force—following directives from the Beijing-backed local government—violently suppressed the protest movement.
The NSL has been enforced through local proxies in the political class, judiciary, and police force (with considerable support from local media and business elites) not via PLA occupation.
To state the obvious: none of those conditions apply to Taiwan. China would struggle to impose its will on the island in a similar manner to HK. Successfully occupying Taiwan and crippling its defenses (hardly assured) only constitutes phase one. Phase two would necessitate an extensive purge of the existing political leadership, bureaucracy, media, education system, and large swaths of the business elite. Unlike HK, virtually every major institution within Taiwanese society would require a violent, root-and-branch overhaul.
I think these distinctions matter tremendously. A PLA attack causing massive levels of property damage and civilian casualties, followed by an armed occupation and the gutting of virtually every major institution on the island, may offer up a recipe for guerilla-style insurgency. Facing a legitimacy crisis in the eyes of an enraged population, Beijing would run the risk of getting bogged down in a highly militarized occupation rather than being able to exert coercive influence primarily via local proxies, as is (mostly) the case in Hong Kong.
International blowback
Whatever happens between China-Taiwan will not play out in a vacuum. A conflict would be intimately shaped by the behavior of other actors—namely the United States and Japan. Obviously, deterrence matters; US military intervention would decisively impact China’s chances of success and drastically escalate the level of economic and political risk facing the People’s Republic. To be clear: PLA strategists have long assumed America would step in to defend Taiwan and planned accordingly—a critical backstop against Chinese aggression so far.
We now see a growing movement within some DC foreign policy circles to end America’s policy of strategic ambiguity (not definitely disclosing whether or not the US would step in to defend Taiwan) in favor of strategic clarity. That clarity entails an ironclad guarantee of support of American military assistance. Biden has repeatedly hinted at this change in tact, most notably when visiting Japan in May.
It’s also noteworthy that Japan’s political leadership is telegraphing greater resolve in deterring China. Per Ryan Ashley at War on the Rocks:
Once reluctant to join all but the most anodyne of pro-Taiwan statements with the United States, Japanese officials now increasingly state their desire to “protect Taiwan as a democratic country.” While no formal changes in security policy or diplomatic legalities are likely, Tokyo is signaling that it is willing to support Taiwan’s sovereignty, up to and including joining a military defense of the island against Chinese attack.
I get that Biden’s back-and-forth messaging on this issue has been frustratingly unclear, especially when layered on top of worries in foreign capitals over fading US power and the president’s own senility. However, I maintain his statements—when coupled with strong gestures of bipartisan support for Taiwan coming out of the US Congress—have, if anything, likely bolstered Beijing’s view that the US military would engage in the event of a crisis. Put differently, I doubt China’s political elite are more confident that the Biden admin would abstain from defending Taiwan than they were 12 months ago.
Of course, even short of a militarized response, it’s a virtual certainty the US and its allies would impose extremely punitive financial costs on Beijing for any act of aggression, even if they refrained from pursuing kinetic action. Standing by and doing nothing as the People’s Republic forcibly attempted to unify a sovereign democratic partner—against the expressed wishes of the US—would provoke moral outrage and turbocharge perceptions, both at home and around the globe, that America’s feckless political class had ceded control of the 21st Century to an authoritarian rival. In my view, the pressure to act in those circumstances would be overwhelming. The political risks of inaction would outweigh the severe blowback that would come from attempting to isolate and short-circuit China’s economy.
Of course, the playbook for hitting the PRC economically—comprehensive sanctions, export controls, freezing the country out of the global banking system, a mass exodus of foreign multinationals—has been laid out in the American and European response to Russia’s invasion of Ukraine earlier this year. That response also flags another red herring: the argument, especially prominent in the early months of the Russia-Ukraine conflict, that with the US and EU preoccupied in Eastern Europe, now would be a perfect time for China to move against Taiwan. That argument has been bolstered by the view that the Biden administration’s failure to respond militarily to Russian aggression signals a similar absence of will regarding China-Taiwan.
I find this argument to be unconvincing. While Beijing has refused to condemn the Russian invasion, and parroted Moscow’s line that NATO expansion is primarily to blame for current hostilities, I suspect China’s political elites see the Ukraine conflict not as a green light but as a cautionary tale. It’s increasingly clear that Putin severely underestimated both Ukrainian resolve and the West’s punishing response while overestimating the capabilities of his own armed forces.
China’s full inbox
On the domestic front, China’s leadership is currently managing a staggering volume of governance challenges:
Financial: the collapse of several banks in Henan Province earlier this year—resulting in mass protests from angry depositors—has raised questions over the health of China’s banking and real estate sectors and renewed concerns the country could be heading toward a systemic financial crisis.
Social: China’s draconian zero-COVID policy, while effective in quelling the spread of the virus, has imposed wrenching economic and human costs on China’s urban population and frayed the social compact between state and citizenry.
Economic: as confirmed by the release of official statistics last week, China’s economy narrowly avoided contraction in Q2 and is at risk of missing its 2022 growth target. In the absence of democratic accountability, performance legitimacy—in the form of a stable, growing economy—undergirds the CCP’s hold on power. Against that backdrop, the party’s overarching focus is on ensuring economic stability over the short/medium term, not pursuing military adventurism.
Political: all of this feeds into the all-important, once-every-five-year National Congress of the Chinese Communist Party to be held later this year. While President Xi will almost assuredly secure a third term as General Secretary and further reinforce his control over the party, that reality obscures the tremendous degree of backroom politicking between rival party factions in the run-up to the conclave. Given recent reports of growing elite dissatisfaction over Xi’s strongman governance style and commitment to zero-COVID, the president and his allies will proceed with utmost caution in the months ahead to avoid further alienating rival factions.
The key point here is this: despite myriad challenges, I’m not buying the idea that President Xi’s grip on the party, or the party’s grip on society, is currently under threat. However, layering a kinetic military conflict—especially one that goes awry—on top of the party’s aforementioned governance challenges would severely test those assumptions. That’s not a risk that I expect Xi and co. to take at this moment.
The arc of history
Ultimately, China’s calculus is contingent on a set of assumptions about the present and future. If Xi believes his hold on power is slipping, that Taiwan’s decisively past the point of peaceful unification, or China’s geostrategic position will erode in the years ahead, there may be an irresistible temptation to take action on an expedited timeline.
It’s here I agree with the argument laid out by scholar Andrew Nathan in a recent Foreign Affairs article:
China’s leadership sees history on its side. While aware of the serious governance issues the country faces, they believe that their political system is better equipped to deal with the challenges of the 21st Century than Western ideological rivals “in decline, hobbled by ill-managed and slow-growing economies, social divisions, and weak political leaders.”
Assuming China expects its relative position vis-a-vis both Taiwan and the United States to improve over time, then it makes sense to kick the can down the road regardless of whether the endgame is peaceful or coercive unification.
Given America’s well-documented shortcomings—Congressional gridlock, hyper-partisan politics, the endless culture war, rampant misinformation flows, extreme levels of income inequality, gun violence, populism, nativism, etc.—I can see how China’s political elites, socially conditioned to buy into the inherent superiority of their authoritarian political model, conclude their country is in the ascendancy while their greatest rival disengages internationally and heads for terminal decline.
As Nathan writes: “When Washington comes to understand that the cost of defending Taiwan is beyond its means, and Taiwanese officials realize that Washington no longer has the appetite for a clash with China, Taiwan will pragmatically negotiate an arrangement that Beijing can accept. In the meantime, China needs only to deter Taipei and Washington from attempting to lock in formal Taiwanese independence.”
Perception is what matters here…not an accurate analysis of geopolitical realities. Regardless of the underlying reality, as long as senior Chinese officials believe that time is on their side, they’ll likely continue to tolerate strategic patience.
My bottom line is this: absent a (highly unlikely) “crisis” in the form of Taiwan declaring independence, the most likely outcome, for now, remains continuity. China will play for time as it improves its balance of power position, refines its military capabilities, seeks to avoid Russia’s fate by better “sanction-proofing” its economy, and looks to exploit divisions both within Taiwanese society and between a “declining” America and its allies and partners throughout Asia.