The world simply can’t afford the catastrophe of a mainland attack on Taiwan

For more than three decades, I have engaged in public discussions and think-tank brainstorms on a prickly question: will Beijing attack Taiwan? The conclusions were the same: however fiercely Beijing huffs and puffs, the consequences would be so politically and economically catastrophic that China’s leaders would never take the risk.

One assumption underpinned this: that meticulous diplomatic exchanges between China and the United States can make clear Beijing’s “red lines” and enable well-linked US diplomats to signal to even the most hot-headed advocates of Taiwanese independence to pull back.

In declaring national reunification part of China’s grand rejuvenation, the core of his political agenda to be achieved by 2049, President Xi Jinping is seen to be setting a deadline for reunification. As anxieties surge afresh, especially with Beijing deploying steadily strengthening military forces in exercises around Taiwan, it is timely to ask whether the danger of an attack has risen.

The short answer is yes, though I strongly believe China does not intend to resort to force.

Xi’s so-called 2049 deadline for reunification has set an inflammatory stopwatch ticking. By linking reunification to national rejuvenation, potentially dangerous nationalistic forces have been unleashed. A steady expansion of China’s military capabilities around Taiwan and across the South China Sea has convinced US hawks that China has the ability and intention to reclaim Taiwan by force.

As a result, trust in that fundamental assumption of carefully moderated triangular diplomatic dialogue has evaporated, enabling misunderstandings, a lack of clarity over red lines and dangers that Taiwan’s pro-independence hothead minority may escape the leash – especially ahead of the island’s presidential elections next January.

As an Asia Society paper noted, “rising tensions and changed conditions have made the state of mutual deterrence fragile”. The careful balance of credible threats and assurances that no extreme measures would be taken so long as red lines were not crossed has been thrown awry.

That a new Washington consensus seems to be emerging that China intends to attack Taiwan, justifying anti-Chinese measures that Beijing interprets as efforts to contain its growth, has prompted three of the US’ leading China scholars – Richard Bush and Ryan Hass at the Brookings Institution and Bonnie Glaser at the German Marshall Fund – to call for moderation and calm in a new book US-Taiwan Relations: Will China’s Challenge Lead to a Crisis?

Hass said in a podcast: “Taiwan is not a problem with an American solution. Neither side of the Taiwan Strait seeks our mediation or our imposition of a solution on them.” Further, Bush noted, “it’s the US position that this should be resolved by the two parties themselves”, peacefully and “with the assent of the people of Taiwan”.

To the hotheads in the US and Taiwan, the authors remind us that most Taiwanese remain pragmatic, quoting a poll that shows just 6.4 per cent believe Taiwan should seek independence now, while only 7.1 per cent favour reunification – and a commanding 60.4 per cent saying the status quo should be maintained. It seems, like Deng Xiaoping, they will wait for the “wisdom of future generations” to resolve the problem.

At the Washington-based Centre for Strategic and International Studies, war game simulations drew depressing conclusions: Taiwan would probably remain unconquered, but heavily damaged. Outcomes would be bleak for China, but also for everyone else.

The economic consequences would be even more devastating. The Rhodium Group said “the scale of economic activity at risk of disruption from a conflict in the Taiwan Strait is immense”, that “disruptions would be felt immediately and would be difficult to reverse”.

The greatest concern is for the semiconductors at the heart of most manufactured consumer products. Taiwan accounts for 92 per cent of the world’s most sophisticated chips and 30-50 per cent of the rest. The “full social and economic impacts of a chip shortage of that scale are incalculable, but they would likely be catastrophic,” said Rhodium.

Rest of the world may need to step in to pull US and China back from brink

The impact on China would be direct and huge. More than 42 per cent of Taiwan’s exports flow to the mainland, mostly microchips destined for manufactured goods intended for export. Mainland exporters account for 22 per cent of Taiwan’s imports.

Taiwanese companies have invested US$194 billion in over 44,000 projects on the mainland, many of which are at immediate risk in the event of an attack. Whatever their political differences, these are economies joined at the hip.

Rhodium considers a long list of disastrous economic consequences, ranging from the suspension of trade finance (disrupting over US$270 billion in trade) to a global sell-off of Chinese securities (foreigners hold more than US$1 trillion in onshore bonds and US$775 billion in offshore US-listed equities) and collateral damage for countries across the globe. For example, 14 per cent of Vietnam’s exports rely on components imported from China.

An attack would also immobilise the estimated 240 container ships that daily cross the South China Sea into and out of Shanghai, Dalian and Tianjin, and the 1 million barrels of oil that pass the Taiwan Strait every day. As British former diplomat Charles Parton wrote in the Financial Times, an attack “would reduce Beijing’s exports by trillions” of dollars, with appalling implications for companies and consumers across the world.

Parton insists the mainland is extremely unlikely to attack Taiwan. “But if it did,” he said, “it would be a global economic and political disaster.”

We have had enough disasters over the past three years to last a lifetime. Moderate voices in the ear of Beijing and Washington are needed, quietly and now.