Indian Defence Review

Reunification of Taiwan with mainland China has been the generation long ambition of the present lot of leaders of the Chinese Communist Party. During many Congresses of the Communist Party this issue has been discussed. Sometimes as a goal for the 100^th year of the foundation of the PRC and at other as the agenda for the 100th year of the founding of the Communist Party.

Therefore, it came as no surprise when President Xi Jinping reiterated his much cherished ‘China Dream’ during his new year eve address, in 2021, to the Chinese people. He said, “The complete reunification of our motherland is an aspiration shared by people on both sides of the Taiwan Strait. I sincerely hope that all the sons and daughters of the Chinese nation will join forces to create a brighter future for our nation”^[1].

Year 2021-2022 was also the centenary celebrations of the Chinese Communist party. Therefore, reading into these speeches and pronouncements many analysts and China experts had predicted that Xi may be pressured into taking an unprecedented decision regarding Taiwan. During the 20th Congress of the Chinese Communist Party held in October this year, Xi again reiterated, ”we will continue to strive for peaceful reunification with the greatest sincerity and the utmost effort, but we will never promise to renounce the use of force, and we reserve the option of taking all measures necessary”. However, in the same breath, he also stated that this option of using force was directed at outside forces attempting to interfere in a purely domestic issue.

US House of Representatives Speaker Nancy Pelosi led a delegation of US Representatives to Taiwan in August 2022. China waited for the visit to end and thereafter conducted protracted military drills aimed at Taiwan. This can be seen as rejuvenational politics by US. It may have been aimed to draw out a response from China. The military drill can then be seen as China falling into the US trap and giving an expected response.

From China’s perspective the drills, which continued well into October, can also be seen purely as muscle flexing to coincide with the grand session of 20th Congress of the Communist Party reemphasizing China as a military super power capable of standing up to the US. Another reason and purely related to domestic politics could be that Xi wanted to project a strongman image before his re-election. Still another reason for China initiating these prolonged military drills in protest of Nancy Pelosi’s visit to Taiwan could be the political signalling to coax the US to accept China as an equal global power.

Many China watchers say that most of this One China and Taiwan dream is aspirational and symbolic rhetoric directed at the ideologically charged domestic lobby and international players siding with Taiwan. The Communist Party of China doesn’t want to stress on the issue of Taiwan. There are numerous reasons for this.

Firstly, Communist Party leaders feel China is still developing its economy. It has achieved moderate success economically but there is a lot more to be done. China’s economy has exhibited a downward trend since 2016, when it grew at seven percent. This decline has been further exacerbated by the Covid pandemic as the growth rate has come to hover around an unimpressive 3 percent between 2020 to 2022.^[2] And the effect of Covid in China is still not over; there are frequent upsurges across various cities preventing resumption of economic activity.

In the meanwhile, there has been a global awareness of the extraordinary dependence on China for manufacturing, raw materials, components as well as a large variety of finished products. This global realisation has initiated a move of the global supply chains away from China to elsewhere which is not good news for China’s economy. While China has, since 1980s made praiseworthy progress in reducing poverty among its citizens, China still has about one fourth of its population living under poverty line for the middle income countries (China has been classified as an upper middle income country by the world bank since 2015)^[3].

The pandemic would have certainly affected and further increased the proportion of this below poverty line population as it has done elsewhere globally. Therefore, the Communist Party’s vision of ensuring a moderate prosperity for all Chinese citizens still remains unrealized.

It is hoped that China has learnt the rights lessons from the Russia – Ukraine conflict. First and foremost, Russia had expected the special military operation to last just a few weeks; the operation is in its eleventh month, without an end in sight. This should be the most important takeaway for China. With US and Western backing, Taiwan could hold out for an infinitely agonising duration against a Chinese invasion. A prolonged military operation will not only have significant economic implications for China, but it could also have the potential of riling up internal dissent and rebellion in provinces such as Xinjiang, Inner Mongolia^[4] and Tibet.

While Xi Jinping has been able to get re-elected during the 20th Congress, there had been opposition to his leadership by another faction of the CCP through an open letter. If the invasion of Taiwan once launched doesn’t culminate into a swift and sure victory, this dissidence could become a political nemesis for Xi Jinping. An indefinitely prolonged military operation is a clear certainty given West’s avowed predilection to support democracies.

China would have seen how the entire western world limbered up in support of Ukraine, how the sanctions were applied almost unanimously despite the dependence of Europe on energy supplies from Russia, how the European Union planned to diversify its sourcing of energy at great inconvenience to its economy and torturous pain to its citizen through the agonizing winters. The series of sanctions have isolated Russia from the international economic system, but the impact was gradual as Russia has been facing western sanctions since 2014.

The decoupling of China, however, from the international economy would have devastating effect on China, far more than it was in the case of Russia. The confiscation of overseas assets held by private Russian citizens mostly in Europe, UK and US by western nations has already set alarms bell ringing in Beijing^[5]. The value of overseasassets held by Chinese government backed entities is upward of $ 900billion^[6].In fact, China already seems to be worried on this account and is mulling actions to prevent this situation^[7].

A conflict over Taiwan could lead to seizure of some of these assets. The possibility of this event however remote has already initiated flight of capital from China. While China has the world’s largest foreign currency reserves amounting to USD 3 Trillion^[8], it could become worthless if the US led western nations impose sanctions on China’s central bank and other financial institutions like it happened with Russia^[9].

China, with the aim to emerge as an economic superpower, has made efforts to dedollarize its economy by fielding its own alternative to SWIFT called the CIPS in 2015. The CIPS is presently being used for trade between China, Russia and few other countries. Given the scales of China’s trade and economy soon others could be expected to join CIPS expanding its reach and chipping at the power of both the SWIFT and dollar.^[10] I am sure China’s strategic planners appreciate that an armed conflict involving China and US, even by proxy, has the potential to draw in many other nations and spiralling into a much wider conflict.

While the outcome of such conflict can’t be clearly predicted, it well might help indefinite perpetuation of the US biased Bretton Woods system and the continued US economic hegemony based on Dollar, something that China may not desire.^[11]

While unification of Taiwan remains an ideological aspiration for the Chinese Communist Party and it may well also be a legacy goal for Xi Jinping to bequeath before he demits office,the present geopolitical, economic and geostrategic environment provides more disincentives than incentives for him to undertake this mission. Unification also has little resonance with the common Chinese peoples on the streets.

Therefore, there is no domestic compulsion for the Communist Party and the political leadership to implement this. The takeaways from the Russia Ukrainian conflict would also shape the thought process of the strategic policy planners in Beijing. Given the background of the domestic economic trends, the geopolitical developments and emerging groupings and alliances in the Indo Pacific, planners in Beijing would rein in any precipitous Chinese decision on Taiwan.

While the pronouncement by President Biden, during the Quad summit in Tokyo in May 2022, on his nations commitment to militarily defend Taiwan in case of a Chinese invasion has certainly ratcheted up the US strategic ambiguity with respect to the it’s stand on Taiwan by quite a few notches^[12].The shrewd politician that Xi is would certainly understand that under the prevailing geopolitical headwinds Beijing might not gain anything but stands to lose much by precipitating a conflict across the straits. Thus the best option would be just to keep the pot simmering and turn on the heat only when the winds turn fair.