Small, but Incredibly Significant: Taiwan in the Spotlight
Tensions around Taiwan are escalating, even as it might seem they can't go any further. Yet, amidst the war in Ukraine, the confrontation between Washington and Beijing over the "Taiwan question" has reached a new level. It's no secret that the US is deeply frustrated with China's lack of a clear stance on the Russo-Ukrainian war. Hence, the US is attempting to exert pressure on China through Taiwan, which is fervently asserting its right to independence.
Publicly, the US adheres to the "One China" policy. However, President Joe Biden personally has warned that he is ready to safeguard Taiwan. To demonstrate this commitment, the Biden administration announced that the US would provide Taiwan with a $345 million military aid package.
China's opinion isn't given much consideration
High-ranking US officials visiting Taiwan serve as another reminder to the Chinese authorities that Washington continues to maintain direct relations with Taipei, bypassing Beijing.
Former Speaker of the US House of Representatives, Nancy Pelosi, recalled her "historic visit to Taiwan" in August 2022. On August 1 this year, she posted a statement on her official website, declaring that "America continues to stand with Taiwan, which defends itself and its freedom." Some media also reported that Pelosi, during her future tour of Asian countries, intends to visit Taiwan again. However, the White House has not officially confirmed these plans.
Taiwanese representatives also regularly visit the US. On August 12, Taiwan's Vice President William Lai arrived in New York. Commenting on his trip, he mentioned his intention to participate in events related to New York's transportation programs. Just a while ago, in April 2023, Taiwan President Tsai Ing-wen met with the Speaker of the US House, Kevin McCarthy, in California. During this meeting, Ing-wen emphasized the "strong and unique" partnership between the two countries.
Photo: Vice President of Taiwan, Lai Ching-te, in New York was greeted by Representative of Taiwan to the U. S., Bi-khim Hsiao (left of him), and Director of the American Institute in Taiwan, Ingrid Larson. Source: @ChingteLai, Twitter
Beijing's Response
Naturally, China doesn't overlook the contacts between the US and Taiwan and responds with tough rhetoric. For instance, after William Lai's visit, the Chinese Ministry of Foreign Affairs announced that Beijing opposes any visits by "Taiwanese separatists" to the US. In April, China's Ministry of Foreign Affairs stated that Tsai Ing-wen's visit to the US contradicts the principle of the "One China" policy that the United States formally upholds.
China doesn't just limit its actions to statements. Beijing consistently demonstrates its readiness to address the "Taiwan question" with force. In August 2022, following Nancy Pelosi's visit to Taiwan, the People's Liberation Army of China conducted massive military exercises in the waters off the eastern province of Fujian, which is separated from the island by a strait. The Chinese side warned that similar maneuvers would be regular.
In August 2023, China premiered a documentary film titled "Chasing the Dream" on the state-run CCTV channel, commemorating the 96th anniversary of the People's Liberation Army of China (PLA). However, the film is heavily laden with narratives of China's military preparations for an invasion of Taiwan. Some soldiers participating in the film's shooting pledge to give their lives in the struggle for China's sovereignty. Sovereignty over Taiwan, it seems?
IPhoto: Beijing sends signals with a film about NOAK, actually dedicated to the readiness to attack Taiwan. Source: screenshot CCTV
The Global Hub of the IT Industry
As tensions escalate around Taiwan, a landmass that may seem small but holds significant importance, the situation has reached a new level against the backdrop of the Ukraine conflict. While the United States and China are engaged in a geopolitical showdown, Taiwan finds itself at the heart of this matter, presenting not only a challenge for Sino-American relations but also a potentially devastating blow to the global economy.
Foreign Minister of Taiwan, Joseph Wu, recently highlighted the island's vital role in semiconductor manufacturing and its strategic importance for global shipping. Over 50% of all maritime containers worldwide pass through the 180-kilometer strait separating Taiwan from mainland China. Wu's assessment warns that in the event of conflict with China, crucial logistical chains could be severed, disrupting up to 40% of global trade.
According to the International Monetary Fund (IMF), Taiwan, with a land area of just over 36,000 square kilometers, ranks 21st in the world in terms of GDP. Industry contributes around 24-25% to Taiwan's economy, and within that, the high-tech sector holds a dominant share of approximately 30%. Moreover, Taiwan supplies more than 90% of the world's microchip and motherboard production.
Notably, both the United States and China have equal dependencies on Taiwan. The U.S. ranks second to China in terms of trade volume. Taiwan Semiconductor Manufacturing Company Limited (TSMC), a major chip provider, plays a crucial role for American manufacturers like Qualcomm and Nvidia. Additionally, Foxconn, the largest iPhone assembly plant, is located in Taiwan. Tesla, the electric vehicle manufacturer, sources 75% of its components from Taiwan.
For China, Taiwan stands as a primary trading partner. In 2022, the trade volume between the island and mainland China approached $320 billion, with approximately 75% of that being imports from Taiwan to China. Both China and the U.S. primarily purchase high-tech products from Taiwan, including chips, portable electronics components, various equipment, and optical devices.
However, Taiwan's economy is also deeply linked with both the U.S. and China. Mainland China, along with Hong Kong, accounts for over 20% of Taiwan's imports, while the U.S. contributes around 10%.
Will There Be a War?
Currently, the situation surrounding Taiwan appears more like a display of power competition between the United States and China, an attempt to establish dominance on the geopolitical stage. Actual warfare, however, would not be beneficial for either country.
Direct involvement of the US (not just in words, but in action) in the confrontation between Taiwan and China could work against the Biden administration. This wouldn't bode well in the lead-up to the 2024 presidential elections. Former President Donald Trump criticized Joe Biden for actions that likely escalated tensions between China and Taiwan. Moreover, the US economy has already felt the repercussions of this escalation. For instance, Taiwan Semiconductor Manufacturing Company Limited (TSMC) shelved plans to build a second facility in Arizona, reducing its American investments from $40 billion to $12 billion.
The US recognizes the significance of Taiwan's contribution to the global supply chains of the IT industry. During Joseph Wu's visit to the US, he met with Keith J. Krach, a former high-ranking diplomat in the Trump administration, known venture capitalist, and founder of The Krach Institute for Tech Diplomacy at Purdue. The message sent was quite strong. Keith Krach, reflecting on the negotiations, stated that " Tech is at the heart of the contest between freedom and authoritarianism. As a democracy on the front lines of that battle, Taiwan plays a leadership role in harnessing technology to secure not just its own freedom but all of ours ."
Photo: Minister of Foreign Affairs of Taiwan (ROC), Joseph Wu Jaushieh, holds talks with board member of The Krach Institute for Tech Diplomacy at Purdue, Keith J. Krach, on August 12, 2023. Source: @MOFA_Taiwan, Twitter.
Keith Krach is a lobbyist, businessman, and former diplomat, but he doesn't currently hold official positions. Therefore, he articulated what current American policymakers might not express for understandable reasons. He conveyed a message that Beijing needs to hear.
For China, direct involvement in a military conflict would necessitate a forced shift in rhetoric concerning the war between Russia and Ukraine. If Beijing deliberately resorts to using force to reclaim territory it considers its own, China will have to pick sides between Ukraine, which is defending its sovereignty, or Russia, as Moscow attempts to seize Ukraine, which was once part of the Russian Empire and the USSR.
Yet, China is even more apprehensive about the consequences for its economy, which is currently facing challenges. The trade war with the US and the European Union's efforts to reduce dependence on Chinese manufacturers are undermining China's industrial sector.
According to the latest data, China's imports and exports in July dropped by 14.5% and 12.4%, respectively. The volumes of external trade reached the lowest point in the past three years. In the same vein, shipments from Taiwan to mainland China and Hong Kong decreased by 16.3% year-on-year in July. This is a clear indicator of worsening relations between major trading partners. This is without accounting for the heightened exchange of harsh statements between Beijing and Taipei.
It's quite evident that if an open military confrontation were to occur, the trade and business ties between Taiwan and China would be completely severed, which neither side clearly desires.
Photo: The Dunyin Command of Taiwan Army conducted joint anti-landing exercises in early August. Source: The R.O.C. Army FB page.