Launch of the OECD Economic Survey of the US


Launch of the OECD Economic Survey of the US


China’s Growing Strength, Taiwan’s Diminishing Options

Editor’s Note: In the third installment of the Taiwan-U.S. Quarterly Analysis, Yuan-kang Wang explains why, despite the improved atmosphere in cross-strait relations, strong Taiwan-U.S. military ties are important and can serve as a hedge against a change in Chinese intentions in the future.

As China grows stronger, its weight is felt increasingly around the world. In particular, China’s growing military, economic, and political capabilities are limiting strategic options for Taiwan, whose main security threat comes from the mainland. Strengthening Taiwan-U.S. relations can help the island better protect its security.

The Taiwan Strait, often considered one of the most dangerous flashpoints in international politics, appears stable at present. The last crisis took place some fifteen years ago in 1995-96, when China launched missiles which landed off Taiwan’s coast in an attempt to intimidate politicians and voters and sway the island’s presidential election. Cross-strait relations have improved significantly since President Ma Ying-jeou took office in 2008.  The two sides have signed a series of agreements on direct flights, financial cooperation, crime fighting, tourism promotion, and reduction of trade barriers. People-to-people contacts have intensified and economic links have strengthened. Beijing ceased to actively oppose Taiwan’s participation in some international organizations that do not require statehood for membership, such as the World Health Assembly. The infamous “checkbook diplomacy” in which each side tried to outbid the other in stealing diplomatic partners has been put on hold, replaced by a tacit “diplomatic truce.”

In Beijing, the Hu Jintao leadership has shown remarkable skill in dealing with Taiwan. Hu and other Chinese officials seemed to realize that the hardball tactics and harsh rhetoric of the past had driven Taiwan further away from China. To remedy this, they embarked upon a “hearts and minds” strategy aiming to win over Taiwan’s voters. The focus of this new strategy was on preventing Taiwan from drifting toward independence. Beijing muted the unpopular “one country, two systems” formula for unification and avoided reminding Taiwan that the use of force to deter independence or compel unification was still an option. To bring the island closer, Chinese leaders promised the benefits of closer economic, cultural, educational, and other ties for the Taiwanese people. For instance, Beijing opened the mainland market to agricultural products from southern Taiwan, an area traditionally unfriendly toward China; mainland universities meted out preferential treatment to Taiwanese students; academic scholars from both sides regularly held joint conferences; Taiwanese businesses received low-cost loans for investing on the mainland; daily direct cross-Strait flights helped revitalize Taiwan’s ailing airline industry and airports; and the influx of mainland tourists provided tangible gains to Taiwan’s domestic economy.

Enhanced military coercive capabilities

Despite the thawing of cross-Strait tensions, China passed an Anti-secession Law in 2005 and continues to deploy missiles targeted at Taiwan. The Pentagon’s 2010 annual report on Chinese military power estimates that China has deployed between 1,050 and 1,150 short-range ballistic missiles,[1] the same number as last year. This apparent pause, however, runs counter to China’s deployment of cruise missiles, which has increased by roughly 100 over the last year, totaling between 200 and 500. Quantity aside, the quality and accuracy of China’s missiles have consistently improved, thus enhancing Beijing’s coercive capabilities against the island.[2] Even more worrisome is China’s naval buildup that increases its anti-access and area-denial capabilities. The Chinese navy now boasts the largest force of principal combatants, submarines, and amphibious warships in Asia. The PLA Navy has constructed a new naval base on Hainan Island and has shown substantial interest in building aircraft carriers. Growing Chinese seapower can be used to deny foreign access to the “first island chain” off the East Asian mainland, which includes Taiwan. Overall, the 2010 Pentagon report reiterates the conclusion of past years that the balance of military forces in the Taiwan Strait continues to shift in China’s favor. Beijing’s sustained military buildup opposite Taiwan and its refusal to renounce the use of force demonstrate the high value it places on the utility of coercion in achieving unification. The fact that China is acquiring these capabilities does not mean it will necessarily use them; but it certainly creates unprecedented opportunities to do so. It seems that, in Beijing’s calculation, fear of war with the powerful mainland is the best deterrent against Taiwan independence. Polls in Taiwan suggest that an overwhelming majority would choose independence if it would not cause a war with China.[3]

But China’s military buildup opposite Taiwan strikes an inharmonious chord in the ongoing cross-Strait rapprochement. Contrary to China’s overarching strategy, the buildup is not winning the hearts and minds of the Taiwanese people. It also makes military confidence-building measures, which would be a major accomplishment in further stabilizing the situation, even more difficult, given the lack of trust between the two militaries.

The shifting cross-Strait military balance in China’s favor has negative consequences for Taiwan’s security. First, though unlikely at present, should Beijing decide to use military coercion in the future, Taiwan could be forced to sacrifice its interests and accommodate Beijing’s demands. Second, China’s increased anti-access and area-denial capabilities could delay or frustrate U.S. attempts to support Taiwan in case of conflict, raising the costs of U.S. intervention. Taiwan’s heightened sense of vulnerability and the increased uncertainty of U.S. support have the effect of reducing the island’s bargaining power with the mainland. In addition, China’s overall military rise might lead Taiwan’s allies to question the necessity of support. For instance, U.S. Senator Arlen Specter, describing Taiwan as “an irritant to mainland China,” suggested that Washington should revise its arms sale policy to Taiwan because even a reasonable increase in armaments sold to Taiwan “would not be sufficient to stem the tide” if China decided to invade the island.[4] The rising difficulty of defending against a mainland attack is likely to raise doubt about the utility of coming to Taiwan’s defense. Compounding the problem is the decline in Taiwan’s defense budget as a percentage of GDP over the years, leading some analysts to question Taiwan’s determination to defend itself.

A reassessment of U.S. arms sales to Taiwan, however, would have tremendous implications for Taiwan’s security. Over the decades, U.S. support has been the indispensible factor for the survival of the island. The U.S.-ROC Mutual Defense Treaty, in effect from 1954 to 1980, provided an alliance that guaranteed Taiwan’s security. U.S.-Taiwan security relations continued after Washington switched diplomatic recognition to Beijing, and sustained arms sales to Taiwan helped strengthen the island’s defense. The Taiwan Relations Act, enacted by U.S. Congress in 1979, stipulates that “the United States will make available to Taiwan such defense articles and defense services in such quantity as may be necessary to enable Taiwan to maintain a sufficient self-defense capability.” The arms sales, in addition to strengthening Taiwan’s defense, also indicate the level of political support from Washington. Beijing sought to restrict U.S. arms sale to Taiwan in the August 17, 1982 Communiqué. But before he formally agreed to the communiqué, President Reagan secretly sent an envoy to deliver what became known as the Six Assurances to Taipei affirming that Washington would not “set a date for ending arms sales to Taiwan.”[5] The pledge not to set a termination date, however, may be meaningless if Washington does not sell Taiwan the equipment that it needs.

Rising economic might

In 2010, China officially surpassed Japan as the world’s second largest economy, after the United States. China has become the largest trading partner of many countries in the world; in South Korea, trade with China is larger than the country’s trade with Japan and the United States combined. China is now ASEAN’s largest trading partner, bolstered by a free trade agreement. Chinese investments in Africa, Latin America and other parts of the world are gradually changing the international landscape. The Chinese model of development—economic liberalization with tight political control—has a certain appeal to autocrats of the world, as it provides an alternative to the Western model. The size of the Chinese economy has made it one of the key economic locomotives in the world. China quickly emerged from the economic slump following the 2008 global financial crisis, growing at 8.7 percent in 2009, and played a pivotal role in pulling the world economy out of the recession.

As Taiwan’s economy faced rising employment and sluggish growth in much of the first decade of the 21st century, the economic opportunity presented by China had a magnet effect on the island. Taiwanese businesses have invested heavily in China, and more than half a million Taiwanese people now live there permanently. Nonetheless, as East Asian countries pursued free trade agreements with each other, there were concerns that Taiwan risked being marginalized in the movement toward the region’s economic integration. The China-ASEAN Free Trade Agreement, which went into effect on January 1, 2010, expedited Taiwan’s decision to negotiate the Economic Cooperation Framework Agreement (ECFA) with China. For its part, Beijing hoped to use the lure of economic benefits to tie the island closer to the mainland. In the agreement signed on June 29, 2010 in the Chinese city of Chongqing, the “early harvest” list of tariff concessions covered 539 Taiwanese products, valued at $13.8 billion, and 267 mainland Chinese products, valued at $2.9 billion. Taipei hopes that the ECFA will help Taiwan negotiate free trade agreements with other countries. Of late, Singapore has shown interest in such an agreement.

Beijing’s strategy for engaging Taiwan’s leaders is to start with the supposedly easier area of economic issues, hoping that the benefits of economic integration will lead to political negotiation on the future status of Taiwan. The dynamics of Taiwan’s domestic politics, however, complicates the matter. The opposition Democratic Progressive Party (DPP) views the ECFA with suspicion, worrying that the trade deal will push Taiwan into China’s orbit and make the island vulnerable to economic coercion. The ruling KMT party, on the other hand, argues that the ECFA will help revitalize Taiwan’s sluggish economy and avoid being marginalized in the economic activities of East Asia. The dynamics of “Blue” and “Green” politics will likely create gridlock and constrain any movement toward cross-Strait political talks. Today, no leader in Taiwan can start political negotiations with China without first forming a consensus among the Taiwanese voters.

China’s rising economic capabilities also give Beijing extra leverage in its dealings with other countries, though it is not always used wisely. The recent fracas over the Diaoyu/Senkaku Islands, where a Chinese fishing trawler collided with a Japanese patrol boat, is a case in point. Beijing reacted angrily to the arrest of the Chinese captain, issuing a series of official denunciations. More importantly, China suspended shipment of rare earth minerals to Japan. Even when the Japanese government appeared to back down and released the captain, Beijing upped the ante by demanding an apology. Beijing’s hard-line tactics sent shockwaves throughout the region, prompting a rethinking of China’s role in Asia.

Increased diplomatic leverage

As a rising great power, China enjoys considerable diplomatic leverage in the world and is sought after as a partner in conflict management, climate change mitigation, economic cooperation, and other world affairs. On the Korean peninsula, China, the largest supplier of North Korea’s energy, was the host and a crucial actor in the Six-Party Talks attempting to denuclearize the country. In the Middle East, China is a key player in the international effort to monitor and to impose sanctions on Iran for its nuclear program. China is now an active participant in the G-20 summit meetings of leading economies. In the 2009 Copenhagen summit on global climate change, China illustrated how it can use its clout to counter initiatives of the U.S. and other countries as it helped derail a tougher accord to limit greenhouse gas emissions.

On the Taiwan issue, Beijing has successfully made most countries accept, recognize, or acknowledge its “one-China” position. Today only 23 out of the 194 countries in the world recognize the Republic of China on Taiwan. China is a permanent member of the UN Security Council and in the past Beijing has used its veto power to block, or threaten to block, UN peacekeeping operations in Haiti (1996), Guatemala (1997), and Macedonia (1999), ostensibly because of their diplomatic relations with Taiwan (Macedonia severed diplomatic ties with Taipei in 2000). Pressures and threats from Beijing force many countries not to have official contact with Taiwan and to oppose the island’s participation in international institutions. At one point, European officials commented that they would welcome Taiwan’s participation in international organizations once Beijing dropped its opposition.[6] This international deference to Beijing’s position on cross-strait issues reflects the power asymmetry between China and Taiwan: in most cases, the benefits of deferring to Beijing far outweigh the costs of shunning Taiwan.

As a result, there is a high correlation between Chinese acquiescence and Taiwan’s international space. When the DPP was in power from 2000 to 2008, disagreement over the “One China” position prevented both sides from negotiating, and China blocked Taiwan’s international activities. When the KMT came to power in 2008, the spirit of the “1992 Consensus” allowed China and Taiwan to resume dialogue, based on the tacit understanding that neither side would publicly challenge the other’s interpretation of what “One China” means. To maintain the momentum of reconciliation, Beijing relaxed its opposition to Taiwan’s participation in some international organizations that do not require statehood for membership. The risk for Taiwan, however, is that because of the cross-Strait power asymmetry, Beijing can easily take back what it gives out. Intentions can change.

Implications for Taiwan-U.S. relations

Recently, China has struck a more assertive tone in its foreign policy. The call to replace the dollar as the international reserve currency, Chinese resistance to a tougher climate change accord in Copenhagen, the reassertion of Chinese sovereignty in the South China Sea, and the hardball tactics against Japan in the East China Sea are all indications of an increasingly assertive China on the world stage. China had kept a low profile when it needed a stable international environment to accumulate economic and military power. Now, with the world’s second largest economy and increased military capabilities, China is in a better position to pursue its foreign policy interests.

China’s growing military, economic, and political capabilities make it ever more important for Taiwan to strengthen its relations with the United States. As the weaker power in cross-Strait relations, it makes good strategic sense for Taiwan to have the support of Washington in case Beijing changes its intentions. In truth, Taiwan cannot rest its security on the goodwill of China. Taiwan needs allies. To deter China and to preserve Taiwan’s political autonomy and survival, Taiwan must strengthen its self-defense capabilities. In the midst of cross-Strait dialogues, Taiwan should negotiate from a position of strength rather than from a position of weakness. With strengthened defense capabilities, Taiwan would more likely get favorable terms in cross-Strait negotiations and not be forced to accommodate Beijing’s demands. In early 2010, the Obama administration authorized a $6.4 billion arms sale to Taiwan. As the cross-Strait military balance continues to shift in Beijing’s favor, the arms sale can help Taiwan beef up its defense and boost confidence on the island. There is still room for growth in Taiwan-U.S. military exchanges and defense cooperation. Building strong military to military ties with the United States is the best hedge against a change in Chinese intentions in the future.

[1] Office of the Secretary of Defense, “Military and Security Developments Involving the People’s Republic of China 2010,” U.S. Department of Defense Annual Report to Congress, (August 2010).

[2] Richard Bush, “Taiwan Faces Growing Threat: Communist China Undermines Rapprochement,” The Washington Times (September 8, 2010).

[3] Brett V. Benson and Emerson M. S. Niou, “Public Opinion, Foreign Policy, and the Security Balance in the Taiwan Strait,” Security Studies 14, no. 2 (April-June 2005): 274-289.

[4] William Lowther, “US Senator Not Convinced on F-16 Bid,” Taipei Times (September 23, 2010).

[5] Nancy Bernkopf Tucker, Strait Talk: United States-Taiwan Relations and the Crisis with China (Cambridge, Mass.: Harvard University Press, 2009), 148.

[6] Dennis V. Hickey, “Beijing’s Evolving Policy toward Taipei: Engagement or Entrapment,” Issues & Studies 45, no. 1 (March 2009): 31-70 at 48.