With war risk in the Taiwan Strait at an all-time high, the strip of water separating China and the self-governing island of Taiwan has been dubbed by The Economist as “the most dangerous place on earth”. Some in Washington no longer see armed conflict as a distant possibility. President Xi has reportedly called on the People’s Liberation Army (PLA) to be ready to develop the capability to take Taiwan by 2027. More disturbing, Admiral Mike Gilday, US chief of naval operations, says that such an action could take place as early as 2023.
Other analysts, however, are more sceptical. “We can’t rule out anything but stating that there is a 2022 or 2023 window is sheer speculation. I think it’s irresponsible,” said Bonnie Glaser, director of the Asia Program at the German Marshall Fund in a Financial Times article. Derek Grossman, senior defence analyst at the Rand Corporation, says that Xi prefers “peaceful reunification” and has sought to reduce social media speculation that China was gearing the country up for reunification through military force.
“The policies of peaceful reunification and One Country, Two Systems are the best way to realise reunification across the Taiwan Strait; this best serves the interests of Chinese people on both sides of the Strait and the entire Chinese nation,” declared Xi in his report to the 20th Party Congress. He announced that his administration would strive for peaceful reunification with “the greatest sincerity and the utmost effort” despite not renouncing the use of force. He took care to clarify that forceful measures would be aimed solely at “interference by outside forces” and “separatists” and not at “our Taiwan compatriots”.
Jacques deLisle, director of the Asia Program at the Foreign Policy Research Institute, says it is notable that Xi’s report omitted earlier warnings that the Taiwan question “could not be passed on from generation to generation”. That said, he perceives China’s decision to amend the “resolutely oppose and restrain ‘Taiwan independence” as signs of a sharpening in Xi and the CPC’s tone towards Taiwan. Xi’s reference to “separatists” and “foreign interference” heads off against a potentially more hawkish successor to Taiwanese president Tsai Ing-Wen after its 2024 presidential elections.
Complicating the situation is a shift in US defence policy towards Taiwan. Traditionally, the US has adopted a policy of strategic ambiguity, where it does not take a clear position about whether or not it would actually defend Taiwan in case China tries to take the island militarily. The goal is to deter China from resorting to force by raising the prospect of war with the US, while at the same time deterring Taiwan from unilaterally declaring independence in the belief that the US will protect them should it do so.
Biden, however, has revised this policy by repeatedly telling the media that he would commit US troops to defend Taiwan should China resort to force. While the White House has moved to walk back these statements, it suggests that the commander-in-chief favours a more interventionist policy to defend the island.
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“A public commitment to defend Taiwan … will spike anxiety among Asian countries and garner little support, it will undermine US-China deterrence (which rests on uncertainty, not fixed consequences), it will destroy any possible path to a peaceful resolution of the dispute, and it will speed up China’s determination to annex Taiwan,” Manjari Chatterjee Miller, senior fellow at the Council on Foreign Relations, told Foreign Affairs. She says it will harden Chinese conviction that the US wishes to contain its rise in areas where it has “long-standing, internationally acknowledged claims”.
Supporters of tougher commitment say that strategic ambiguity has proven insufficient. Tiffany Ma, senior director at BowerGroupAsia, told Foreign Affairs that “increasing PRC military coercion against Taiwan” suggests that a clearer conditional deterrent is required. This condition, says Charles Glaser, professor at George Washington University in the same article, should be that the US should only intervene if China takes an unprovoked action. If Taiwan were to “provoke” a response from Beijing by declaring unilateral independence, the US should not get involved.
A multitude of other experts, including Stephen Walt from the Harvard Kennedy School, Drew Thompson from the Lee Kuan Yew School of Public Policy, and Jude Blanchette, Freeman Chair in China Studies at the Center for Strategic and International Studies, contend in Foreign Affairs that China has already “priced in” US intervention if it should try to retake Taiwan militarily. Former Indian National Security Advisor Shivshankar Menon notes that “demonstrated capability” to defend Taiwan is a far better deterrent than any statement or pledge Washington makes.
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A Chinese invasion of Taiwan would be devastating for global markets. Thomas Torgerson, co-head of sovereign ratings, DBRS Morningstar, says that manufacturers in countries outside Asia would be badly hurt by increased demand for security spending, weakened global growth outlook and significant disruption to global trade. Nichola James, co-head of sovereign ratings at DBRS Morningstar, projects downward pressure on sovereign ratings, particularly those in China, countries economically close to China and other Asian economies. James also sees advanced economies facing supply chain problems.
But how worried should businesses be about a possible invasion? “Beijing is highly unlikely to attempt taking Taiwan by force any time soon. Its strategists may doubt the US’s resolve to fight for Taiwan but must take the possibility very seriously. It would risk a major conflict that could threaten decades of Chinese development, prosperity and global influence gains, and possibly even domestic political stability,” says Andrew Gilholm, principal and director of analysis at Control Risks. He adds that Russia’s war in Ukraine does not increase the likelihood of invasion due to a lack of direct trigger or link between the two conflicts.
John Culver, a non-resident senior fellow with the Atlantic Council’s Global China Hub, says that Russia’s disastrous invasion of Ukraine would warn Beijing against military action vis-a-vis Taiwan. In a Carnegie Endowment op-ed, he writes that the PLA would have to undertake a far riskier amphibious invasion to reach Taiwan — the largest and farthest in modern history. An attempt to invade Taiwan would not be secret for months before any military operations got underway, allowing the US to assemble sufficient troops to make China’s invasion all the more challenging and expensive.
Gilholm warns that the absence of all-out war does not suggest that conflict in the Straits poses no risk to businesses. More limited scenarios, he warns, including a potential air or naval incident in the Straits, an attack on Taiwan’s outlying islands or a major cyberattack, could pose significant business risks. He adds that such events will have not only implications for Taiwan operations but those in China too, necessitating businesses to consider this larger picture when forecasting geopolitical risks from a crisis in the Straits.
